• Smalltown, PA currently has a $38,000/year contract with a private company to transport students to their school and back. Smalltown can buy a bus for $40,000 that will be adequate for the next 5 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 5 years, the bus will have an estimated salvage value of $5,000. Their MARR is 10%/year.
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- Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
- Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $30,000 per year. Nancy can buy a used truck for $10,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $3,000. Nancy’s MARR is 24%/year. Solve, a. What is the present worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on present worth? c. Should Nancy buy the truck?Nancy's Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $36,000 per year. Nancy can buy a used truck for $8,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $27,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $2,000. Nancy's MARR is 24%/year. a. What is this investment's internal rate of return? IRR = % Do all calculations to 5 decimal places and round final answer to the whole number. The tolerance is +/- 1.Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $30,000 per year. Nancy can buy a used truck for $10,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $3,000. Nancy’s MARR is 24%/year. Solve, a. What is the annual worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on annual worth? c. Should Nancy buy the truck?
- Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Shipping costs are $30,000 per year. Nancy can buy a used truck for $10,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $25,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $3,000. Nancy’s MARR is 24%/yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Should Nancy buy the truck?RJR Logistics needs a new color printer. The cost of the printer is $2,025, plus $380 per year in maintenance costs (the first maintence cost would occur in 1 year). The color printer will last for five years. Alternatively, a local company offers to lease the printer to RJR and do the maintenance as well. If the discount rate is 5.7%, what is the most RJR would be willing to pay per year to lease the color printer (the first lease payment would be due in one year)? The most RJR would be willing to pay per year to lease the color printer is closest to: O A. $897 B. $857 C. $884 D. $777The Culinary Institute is considering a classroom remodeling project. The cost of the remodel would be $350,000 and will be depreciated over six years using the straight- line method. The model will acoomoodate five extra student per year. Additional information related to the project follows:Cost of the remodel project: $350,000 Useful life of project in years: 6 Annual number of extra students: 5 Annual tuition per student: $22,000 Before- tax incremental cost of a student: $2,000 Company's income tax rate: 20% Required rate of return: 12% Assuming a six- year time horizon, what is the internal rate of return of the remodeling project? Calculate using both present value factors and separately using Excel's IRR function. Please include formulas to show how you arrive at each solution! A) Annual cash flow: Revenue ? Less costs:Other than depreciation ? Depreciation ? Income before taxes ? Income tax expense ?…
- A local county government is considering purchasing some dump trucks for thetrash pickups. Each truck will cost $55,000 and have an operating and maintenance cost that starts at $18,000 the first year and increases by $3,000 per yearthereafter. Assume the salvage value is $12,000 at the end of 5 years and theinterest rate is 10%. The equivalent annual cost of owning and operating eachtruck is most nearly(a) $35,974 (b) $32,600(c) $6,956 (d) $37,939A company is considering replacing a machine that was bought six years ago for $50,000. The machine, however, can be repaired and its life extended by five more years. If the current machine is replaced, the new machine will cost $44,000 and will reduce the operating expenses by $6,000 per year. The seller of the newmachine has offered a trade-in allowance of $15,000 for the old machine. If MARR is 12% per year before taxes, how much can the company spend to repair the existing machine? Choose the closest answer. Solve, (a) $22,371 (b) $50,628 (c) $7,371 (d) −$1,000 Machine A was purchased three years ago for $10,000 and had an estimated MV of $1,000 at the end of its 10-year life. Annual operating costs are $1,000. The machine will perform satisfactorily for the next seven years. A salesperson for another company is offering Machine B for $50,000 with an MV of $5,000 after 10 years. Annual operating costs will be $600. Machine A could be sold now for $7,000, andMARR is 12% per year.…The Bob's company is considering some new equipment for its bookstores. The project details are as follows: The upfront cost of $400,000 will last for 3 years. At the end of 3 years, Humber can sell the equipment for $200,000. The equipment will generate an extra $40,000 in revenue in the first year, $800,000 for year 2, and then increase by $15,000 for the next three years. Humber can borrow at 5%. Based on above calculate the project’s NPV IRR Profitability Index Payback Discounted Payback
