A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26, 020.00 to install, $5,016.00 to operate per year for 7 years at which time it will be sold for $7, 101.00. The second, RayCool 8, costs $ 41, 173.00 to install, $2, 171.00 to operate per year for 5 years at which time it will be sold for $8, 967.00. The firm's cost of capital is 6.19%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26, 020.00 to install, $5,016.00 to operate per year for 7 years at which time it will be sold for $7, 101.00. The second, RayCool 8, costs $ 41, 173.00 to install, $2, 171.00 to operate per year for 5 years at which time it will be sold for $8, 967.00. The firm's cost of capital is 6.19%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.

Name: A firm is considering replacing the existing industrial air conditioni
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26, 020.00 to install, $5,016.00 to operate per year for 7 years at which time it will be sold for $7, 101.00

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,654.00 to install, $5,060.00 to operate per year for 7 years at which time it will be sold for $7,020.00. The second, RayCool 8, costs $41,774.00 to install, $2,009.00 to operate per year for 5 years at which time it will be sold for $9,022.00. The firm’s cost of capital is 6.27%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,164.00 to install, $5,072.00 to operate per year for 7 years at which time it will be sold for $7,041.00. The second, RayCool 8, costs $41,329.00 to install, $2,088.00 to operate per year for 5 years at which time it will be sold for $9,047.00. The firm's cost of capital is 6.68 %. What is the equivalent annual cost of the AC360? Assume that there are no taxes. Submit Answer format: Currency: Round to: 2 decimal places.
In a bio-based material recycling company, the operation managers are considering a twin-screw extruder with a price of 12,000 OMR and another 2,000 OMR will be spent for shipping and installation of the extruder. The estimated net income generated from this machine is 3,500 OMR per year. The extruder will be used for 5 years, and then it will be sold for an estimated market value of 2,500 OMR. The extruder MARCS property class is 5 years. If the effective income tax rate (t) is 40% and the after-tax MARR is 10%. (a) What is the after-tax IRR for this project? (use trial and error procedure and GDS) (b) Should this extruder be purchased by the company?
A tool and die company in Hanover is considering the purchase of a drill press with fuzzy - logic software to improve accuracy and reduce tool wear . The company has the opportunity to buy a slightly used machine for $ 15,000 or a new one for $ 21,000 . Because the new machine is a more sophisticated model , its operating cost is expected to be $ 7000 per year , while the used machine is expected to require $ 8200 per year . Each machine is expected to have a 25 - year life with a 5 % salvage value . Using ROR method , calculate which one is more profitable for the company MARR is 10 %.
ces Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $69,000. It will last 10 years with annual maintenance costs of $2,200 per year. After 10 years the machine can be sold for $7,245. Machine B could be purchased for $57,500. It also will last 10 years and will require maintenance costs of $8,800 in year three, $11,000 in year six, and $13,200 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar…
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $22,000. It will last 10 years with annual maintenance costs of $800 per year. After 10 years the machine can be sold for $2,310. Machine B could be purchased for $20,000. It also will last 10 years and will require maintenance costs of $3,200 in year three, $4,000 in year six, and $4,800 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round…
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $48,000. It will last 10 years with annual maintenance costs of $1,000 per year. After 10 years the machine can be sold for $5,000. Machine B could be purchased for $40,000. It also will last 10 years and will require maintenance costs of $4,000 in year three, $5,000 in year six, and $6,000 in year eight. After 10 years, the machine will have no salvage value.
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following:Machine A could be purchased for $48,000. It will last 10 years with annual maintenance costs of $1,000 per year. After 10 years the machine can be sold for $5,000.Machine B could be purchased for $40,000. It also will last 10 years and will require maintenance costs of $4,000 in year three, $5,000 in year six, and $6,000 in year eight. After 10 years, the machine will have no salvage value.Required:Determine which machine Esquire should purchase. Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations.
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $11,000. It will last 10 years with annual maintenance costs of $400 per year. After 10 years the machine can be sold for $1,155. Machine B could be purchased for $10,000. It also will last 10 years and will require maintenance costs of $1,600 in year three, $2,000 in year six, and $2,400 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase
For your new laboratory, you plan to purchase energy efficient freezers. There are two models in the market: Model X costs $100,000, and you need two units of model X for your project. Maintaining costs would be $50,000 and decreasing by $10,000 for each unit per year. Each freezer can be used for four years. At the end of which time, you estimate that the salvage value will be $70,000 for both freezers. Model Y costs $250,000 each. The maintaining cost of this model would be $10,000 per year and it would be decreasing by $5,000 starting in year 4. The salvage value of both model Y at the end of seven years is $60,000. Once again, two units of model Y is required for your project. Since you must complete your project in two years, you estimated that, the model X could be sold for $50,000 each and the model Y for $125,000 each after two years. Find the present worth difference between two models using MARR=10%. Question 3 options: a) Between $35,640 and $37,800…
For your new laboratory, you plan to purchase energy efficient freezers. There are two models in the market: Model X costs $100,000, and you need two units of model X for your project. Maintaining costs would be $50,000 and decreasing by $10,000 for each unit per year. Each freezer can be used for four years. At the end of which time, you estimate that the salvage value will be $70,000 for both freezers. Model Y costs $250,000 each. The maintaining cost of this model would be $10,000 per year and it would be decreasing by $5,000 starting in year 4. The salvage value of both model Y at the end of seven years is $60,000. Once again, two units of model Y is required for your project. Since you must complete your project in two years, you estimated that, the model X could be sold for $50,000 each and the model Y for $125,000 each after two years. Find the present worth difference between two models using MARR=10%. a) Between $52,640 and $54,800 O b) Between $35,640 and $37,800 c) Between…
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $15,000. It will last 10 years with annual maintenance costs of $500 per year. After 10 years the machine can be sold for $1,575. Machine B could be purchased for $12,500. It also will last 10 years and will require maintenance costs of $2,000 in year three, $2,500 in year six, and $3,000 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase? Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use…