Annual worth that the company can expect from the machine

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Reference no: EM131933585

1. A company would like to purchase a machine at a cost of $325,000 with a life of 5 years. Their bank is ready to finance 90% of the machine at a rate of 8% per year compounded weekly if they agree to a payment of $5,000 per month and the remaining as a balloon payment at the end of the machine life. What is the balloon they will have to pay?

A $69,890 B $68,638 C $53,328 D $46,063

2. A company is considering a new piece of equipment for a project lasting 10 years with details as shown below. The costs and benefits are expected to keep increasing with the inflation rate even when a new machine is put into operation. Taking these into account, what is the annual worth that the company can expect from the machine? Initial cost $145,000 MARR 18% p y c y Inflation rate 4% p y c y Life 7 years Project life 10 years Machine value today with life of 3 years $64,500 Machine value today with life of 7 years $33,500 First year costs $62,200 First year benefits $96,800

A $3,260 B $2,969 C $1,779 D $985

Reference no: EM131933585

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