Total cost of ownership for a personal vehicle

Compare the total cost of ownership for the purchase of two personal vehicles of your choice (use two that are currently for sale!). One vehicle should be a new car, while the second should be a used car that would serve as a reasonable substitute for the new car (i.e. don’t compare a Civic and Tahoe… you don’t have to compare the same exact vehicle model, but make sure they are in the same ‘class’).

What costs should you include?Maintenance/repairs, motor vehicle taxes, insurance, fuel… plus anything else you believe is relevant. This is going to require extra research, including things such as miles per gallon calculations, typical maintenance/repair needs, average insurance costs, and local motor vehicle tax information.

Also consider how long you expect your ownership period to be… will you drive the vehicles until they fall apart? Or will you trade it in after several years? Regardless of which you choose, you should estimate a salvage value at the end of your ownership period (again, this salvage value estimate will require some research into expected resale values).

1. Provide a description of vehicle #1, a new car. Calculate its total cost of ownership, being as detailed as possible in your costs.

Calculate the Net Present Value of this series of cash flows using a discount rate of 4%.

Calculate the Net Present Value of this series of cash flows using a discount rate of 7%.

The revenue and cost functions for a particular product are given below. The cost and revenue are given in dollars, and x represents the number of units .

R(x) = −0.8x² + 704x

C(x) = 264x + 57120

(a) How many items must be sold to maximize the revenue?
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(b) What is the maximum revenue?
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(c) Find the profit function.
P(x) = ___________

(d) How many items must be sold to maximize the profit?

_______________

(e) What is the maximum profit?

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(f) At what production level(s) will the company break even on this product? (Enter your answers as a comma-separated list.)
units

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Explain the concept of a weighted average cost of capital and a minimum cost level of leverage. Contrast the equilibrium theory and pecking order theory approaches to explaining a firm’s capital structure. How applicable are these theories to agricultural finance?

Assume that the paperclip industry is a monopoly and marginal cost is equal to average cost. The average and marginal cost of paper clip production is 125, and the interest rate is 10 %. Demand for paperclips is equal to Q=100-2/3 P. What is the optimal quantity, per period CS, and per period license revenues?

1. The weighted average cost of capital (WACC) is calculated as the weighted average of cost of component capital, including debt, preferred stock and common equity. In general, debt is less expensive than equity because it is less risky to the investors. Some managers may intend to increase the usage of debt, therefore increase the weight on debt (W_d). Do you think by increasing the weight on debt (W_d) will reduce the WACC infinitely? What are the benefits and costs of using a lot of debt?

2. Do you think it is necessary for a firm to adjust its overall WACC according to the risk of each individual project? Why? If a firm insists that it will use only one WACC to evaluate all its projects, what would be the consequence in the long term?

What is a sunk cost? Why is it not considered a relevant cost in differential analysis? Explain in your own words, feel free to use examples, metaphors, etc.

In detail please! Thank you.

Crono Clocks is looking at a Clock Machine with an installed cost of $900,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the Clock Machine can be scrapped for $111,000. The clock system will save the firm $299,000 per year in pretax operating costs, and the machine requires an initial investment in net working capital of $67,000.

If the tax rate is 34 percent and the discount rate is 8 percent, what is the NPV of this project? (Round answer to two decimal places)

If the cost object is a manufactured product, what are the three major cost categories to accumulate? Explain each.

How would you answer these questions with this topic:

The opportunity cost is the cost of next best alternative use. It is calculated in terms of other good. On the other hand, the sunk cost is the money spent on the goods which cannot be recovered i.e payment for rent, advertisement expenses etc.

Question - 4: Statement: The gap between average cost curve and average variable cost curve increases as production increases.

Argument:

I. Yes, the law of variable proportion applies.

II. No, It is because the average fixed cost decreases as the production increases.

Option: I. Argument I is correct.

II. Argument II is correct.

III. Both arguments are correct.

IV. Neither argument is correct.

Question -5: Statement: The average variable cost is minimum when marginal cost is equal to it.

Argument:

I. Yes, it is because the marginal cost curve cuts the average cost at its minimum point.

II. Yes, it is because the marginal cost is ratio of change in total variable cost and change in output.

Option:

I. Argument I is correct.

II. Argument II is correct.

III. Both arguments are correct.

IV. Neither argument is correct.