Uses straight-line depreciation to zero book value

Assignment Help Financial Management

Reference no: EM131077916

Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent rate of return and uses straight-line depreciation to a zero book value over the life of its equipment. Machine A has a cost of $892,000, annual operating costs of $28,200, and a 4-year life. Machine B costs $1,118,000, has annual operating costs of $19,500, and has a 5-year life. Whichever machine is purchased will be replaced at the end of its useful life. Which machine should Precision Tool purchase?

Reference no: EM131077916

Questions Cloud

What is the value of the short forward contract : A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for three-month forward contract is $42. The three month risk-free interest rate (with continuous compou..

Income statement columns for all revenue and expense account : Once you have your adjusted trial balance, you can move the totals to the Income Statement columns for all revenue and expense accounts and to the Balance Sheet and owners’ equity columns for all asset, liability, and equity accounts. Please be sure ..

Zero book value over the life of its equipment : Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent rate of return and uses straight-line depreciation to a zero book value over the life of its equipment. Whichever machine is purchas..

Net present value of installing the donut makers : The owners of a chain of fast-food restaurants spend $3600000 installing donut makers in all their restaurants. This is expected to increase cash flows by $1300000 per year for the next 6 years. The discount rate is 9%. What is the net present value ..

Uses straight-line depreciation to zero book value : Precision Tool is analyzing two machines to determine which one it should purchase. The company requires a 15 percent rate of return and uses straight-line depreciation to a zero book value over the life of its equipment. Whichever machine is purcha..

Fixed-rate mortgage to buy new home : You need a 30-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend you the money at a 7.5 percent APR for this 360-month loan, with interest compounded monthly. What will be the amount of the balloon payment if you a..

The quoted price of bond with an actual : It is May 1. The quoted price of a bond with an Actual/Actual (in period) day count and 12% per annum coupon in the United States is 105. It has a face value of 100 and pays coupons on April 1 and October 1. What is the cash price?

Planning to save for retirement : You are planning to save for retirement over the next 15 years. To do this, you will invest $1,100 a month in a stock account and $500 a month in a bond account. How much can you withdraw each month during retirement assuming a 20-year withdrawal per..

Deciding whether to sponsor racing team for cost : An auto-parts company is deciding whether to sponsor a racing team for a cost of $3500000. The sponsorship would last for 4 years and is expected to increase cash flows by $760000 per year. If the discount rate is 9%, what will be the change in the v..

User Account

All Pages