Problem 2: A company is considering the purchase of a generating set to supply the electrical needs of his office during brownouts. The generating set costs P 70,000 with a life of 10 years with a salvage value of P 10,000. The daily operating cost is P 50 per hour. During a brownout, the office operation will be delayed which cause a loss of P 150 per hour. At 18% interest rate, how frequent( in number of hours per year ) is the brownout to justify the purchase of the generator set?

Problem 2: A company is considering the purchase of a generating set to supply the electrical needs of his office during brownouts. The generating set costs P 70,000 with a life of 10 years with a salvage value of P 10,000. The daily operating cost is P 50 per hour. During a brownout, the office operation will be delayed which cause a loss of P 150 per hour. At 18% interest rate, how frequent( in number of hours per year ) is the brownout to justify the purchase of the generator set?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

See similar textbooks

Similar questions

Consider a machine that costs $1000 to purchase. The machine creates an annual operating expense of $500 at the end of first year, which is going to increase by $50 in each year thereafter. The salvage value of this machine is $200, independent of the usage period. Find the economic life of this machine under nominal MARR 25%, compounding annually. A 8. B. 6.
Problem 2: A company is considering the purchase of a generating set to supply the electrical needs of his office during brownouts. The generating set costs P 70,000 with a life of 10 years with a salvage value of P 10,000. The daily operating cost is P 50 per hour. During a brownout, the office operation will be delayed which cause a loss of P 150 per hour. At 18% interest rate, how frequent( in number of hours per year ) is the brownout to justify the purchase of the generator set? Problem 3. ABC Cornoration manufactures a certain product that sells for P5. 000 each
A snow cone machine at an ice cream shop costs $15,000. The machine is expected to generate profits of $2,500 each year of its 10-year useful life. At the end of the 10 years the machine will have a salvage value of zero. Within what interest rate range does the IRR fall? a. Less than 10% b. 10% to 12% c. 12% to 14% d. Greater than 14%.
A machine can be purchased at t=0 for $20,000. The estimated life is 15 years, with an estimated salvage value of zero at that time. The average annual operating and maintenance expenses are expected to be $5,500. If MARR =2.54%, what must the average annual revenues be in order to be indifferent between purchasing the machine and doing nothing? $7,120 $3,880 $6,969 @$7,213 $7,175
Q. XYZ Builders need to acquire the use of a crane for construction business, and are considering buying or leasing a crane. The crane costs Rs. 1,000,000, and is subject to the straight-line method of depreciation to a zero salvage value at the end of 5 years. In contrast, the lease rent is Rs 220,000 per year to be paid at the end each year for 5 years. XYZ Builders can raise debt at 14% payable in equal annual instalments, each instalment due at the end of the year. The company is in the 50% tax bracket. Should it lease or buy the crane? kindly solve this
Q. XYZ Builders need to acquire the use of a crane for construction business, and are considering buying or leasing a crane. The crane costs Rs. 1,000,000, and is subject to the straight-line method of depreciation to a zero salvage value at the end of 5 years. In contrast, the lease rent is Rs 220,000 per year to be paid at the end each year for 5 years. XYZ Builders can raise debt at 14% payable in equal annual instalments, each instalment due at the end of the year. The company is in the 50% tax bracket. Should it lease or buy the crane?
A factory asset has a first cost of $100,000, annual costs of $15,000 the first year and increasing by 7.5% per year, and a salvage (market) value that decreases by 20% per year over its 5-year life. The minimum cost economic life of the asset is what value? Interest is 10%. (a) 2 years (b) 3 years (c) 4 years (d) 5 years?
The data associated with operating and maintaining an asset are shown below. The company manager has already decided to keep the machine for 1 more year (i.e., until the end of year 1), but you have been asked to determine the cost of keeping it 1 more year after that. At an interest rate of 10% per year, estimate the AW of keeping the machine from year 1 to year 2. Operating Cost, $ per Year Market Value, $ 30,000 25,000 14,000 10,000 Year 0 1 2 3 -15,000 -15,000 -15,000
A// A civil engineer wants to invest $ 72000 in a new loader, if the income from temporary leasing of loader in expected to be 14000$ per year. The length of time required to recover the investment at an interest rate 14% per year in closet to?
A company purchased a small equipment for $70000. Annual maintenance costs are expected to be $1850, but extra income will be $14000 per year. How long will it take for the company to recover its investment at an interest rate of 10% per year? Select one: a. n is between 9 and 10 b. n is between 5 and 6 c. n is between 8 and 9 d. n is between 6 and 7
A company is considering purchasing a machine for $26,500. The machine will generate income of $3,400 per year. Annual depreciation expense would be $1,600. What is the payback period for the new machine? Multiple Choice 3.3 years. 5.3 years. 7.8 years. 16.6 years. 14.7 years.
1. A remotely situated fuel cell has an installed cost of BD2,000 and will reduce the existing expense by BD350 per year for eight years. The company's MARR is 10% per year. a) What is the minimum salvage value after eight years that makes the fuel cell worth purchasing? b) What is the fuel cell's IRR if the salvage value is negligible?