A machine that costs $5000 is to be replaced in 5 years by a new one....

A machine that costs $5000 is to be replaced in 5 years by a new one. The old machine at that time would be worth $500. How much should the periodic payments be so that there will be enough money to buy a new machine (at the same price) if equal payments are made at the end of each semi-annual period at an annual interest rate of 6% compounded semi-annually? R= Answer Suppose an annual interest rate of 8% compounded semi-annually is used. What is the decreased semi-annual payment?

Expert Solution

milcah answered 2 years ago

Machine X costs £20,000 when bought new and can be replaced every year, two years, three...

Machine X costs £20,000 when bought new and can be replaced every year, two years, three years or four years. The following information is available. Year Realisable value when sold (£) Maintenance costs for the year (£) 1 17,500 1,200 2 14,000 1,500 3 9,000 1,900 4 7,000 2,300 Cost of capital is 10%. What is the optimal replacement policy? A Replace every year B Replace every two years C Replace every three years D Replace every four years

Assume a machine costs $548,000 and lasts eight years before it is replaced. The operating cost...

Assume a machine costs $548,000 and lasts eight years before it is replaced. The operating cost is $109,600 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 14 percent? (Hint: the EAC should account for both initial investment and annual operating costs) $227,732.37 $235,885.17 $244,608.94 $251,835.43 $266,744.08

Assume a machine costs $404,000 and lasts four years before it is replaced. The operating cost...

Assume a machine costs $404,000 and lasts four years before it is replaced. The operating cost is $47,000 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 12.5 percent? (Hint: the EAC should account for both initial investment and annual operating costs) $163,297 $174,825 $181,414 $195,637 $202,118

A machine has no maintenance costs the first 5 years of operation. At the end of...

A machine has no maintenance costs the first 5 years of operation. At the end of years 6-10, the annual cost is $1000/yr. For years 11-15, the annual cost is $2000/yr. What is the equivalent annual cost for all of this maintenance if the interest rate is 10%?

"Machine A costs $39,000 to purchase and is worth $10,000 in 5 years at the end...

"Machine A costs $39,000 to purchase and is worth $10,000 in 5 years at the end of its service life. Machine B costs $13,000 to purchase and is worth $2,000 in 3 years at the end of its service life. Assume that these machines are needed for 15 years (required service period). Each machine can be repurchased at the same price in the future, and assume the annual maintenance cost of each machine is negligible. Use 13% annual interest rate....

The ABC company is considering the purchase of a new machine that will last 5 years...

The ABC company is considering the purchase of a new machine that will last 5 years and cost $100,000; maintenance will cost $12,000 per year. If the interest rate is 10% per year, compounded quarterly, a. how much money should the company set aside for this machine b. what is the future value, at the end of year 5, of the given cash flows

Assume an equipment costs $325,000 and lasts five years before it is replaced. The operating cost...

Assume an equipment costs $325,000 and lasts five years before it is replaced. The operating cost is $37,800 a year. Ignore taxes. What is the equivalent annual cost if the required rate of return is 14 percent? (Hint: Find the NPV of the equipment cost and annual operating cost, then solve for the EAC)

A machine costs Rs. 10,000 with useful life of 5 years. It has a salvage value...

A machine costs Rs. 10,000 with useful life of 5 years. It has a salvage value of Rs. 2,000 at the end of its useful life. The machine is expected to generate the following cash flows; Year Cash Flow (PKR) 1 5,000 2 6,000 3 8,000 4 6,500 5 4,000 Calculate Accounting Rate of Return? Tax is applied at 30% per annum. Why Accounting Rate of Return is not among the favorite methodology to evaluate a project? In what circumstances...

A unit of welding machine costs P48,500 with an estimated life of 5 years. Its salvage...

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A firm is considering a new project that costs $10,000 that will last 5 years and...

A firm is considering a new project that costs $10,000 that will last 5 years and will have no salvage value. The project would save $3,000 per year in salaries and would be financed with a loan that will accrue interest costs of 15% per year. The firm’s tax rate is 40%, its cost of capital is 20%, and the firm will use the straight-line method of depreciation. What is the NPV of the project? Should the firm invest in...

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