Options for purchasing a new vehicle

Assignment Help Finance Basics

Reference no: EM13788788

1. A public transit authority is evaluating whether to purchase new high-speed railcars from Siemens AG or General Electric. The Siemens AG cars cost $275,000 each, are expected to last ten years and have anticipated annual maintenance costs of $10,000 each. The General Electric cars cost $195,000, are expected to last six years and have anticipated annual maintenance costs of $15,000 each. If the transit authority's cost of capital is 8%, and the cost is spread evenly over each year, which manufacturer should they chose? (Hint: Annualize the cost using the PMT function in Excel.) Does your conclusion change if General Electric guarantees that annual maintenance on their railcars will not exceed $10,000 each?

2. The code enforcement unit of a public safety department has two options for purchasing a new vehicle: a $23,000 four-cylinder sedan that averages 26 mpg or a $28,000 hybrid that averages 47 mpg. Assuming that gasoline will cost $4.00 per gallonthat the vehicle will be driven for 15,000 miles per year and will incur annual maintenance costs of $200, which vehicle should the unit purchase? Further assume the vehicle will be kept for five years with no salvage value and a discount rate of 5%. Does your recommendation change if the vehicle is kept for six years?

Please provide an answer together with an excel file.

Reference no: EM13788788

Questions Cloud

What are the underlying causes of gang violence-drug trade : What are the underlying causes of gang violence-drug trade, poor immigration enforcement, or bad upbringing? What are the top two or three key elements of any successful law enforcement or police strategies in dealing with gang activity

Challenges associated with lower forms of biometrics : What are some of the challenges associated with lower forms of biometrics, such as facial recognition, and acceptance as evidence in court?

What is jower cost of capital : The target capital for Jower Manufacturing is 52% COMMON STOCK, 14% PREFERRED STOCK, AND 34% DEBT. iF THE COST of common equity for the firm os 20.6% the cost of preferred stock os 12.2%, and the beforetax cost of debt is 9.8% What is Jower cost o..

Health care system in turmoil : Health Care System in Turmoil

Options for purchasing a new vehicle : The code enforcement unit of a public safety department has two options for purchasing a new vehicle: a $23,000 four-cylinder sedan that averages 26 mpg or a $28,000 hybrid that averages 47 mpg.

Disaster-preparedness technology issues : What types of Web resources monitor the phenomena and provide up-to-date information about them?

Determine a strategy so fruit can minimize the expected tota : Fruit computer company Fruit Computer Company manufactures memory chips in batches of ten chips. From past experience, Fruit knows that 80% of all batches contain 10% (1 out of 10) defective chips, and 20% of all batches contain 50% (5 out of 10) def..

How these centers may be abused to violate citizen rights : Take a definitive stand, with explanations, for or against the use of fusion centers as a local law enforcement tool. Discuss how these centers may be abused to violate citizen rights

Reimbursement component of health care : Identify 3 tools from the CMS Web site that are helpful to achieving the goals set forth by your organization.

User Account

All Pages