A company buys a machine that costs $50,000.It has an estimated useful lifetime of 10 years with no scrap value.It produces 5000 units of output per period.Annual maintenance costs are $2000.The cost of capital is j1 = 10%.The capitalized cost is $101,372.70.What is the maximum amount the company should spend on increasing the machine's production by 60%? (If done so,there will be no change to the estimated lifetime or the annual maintenance costs;Answer to the nearest dollar)

A) $60,824 B) $38,164 C) $37,373 D) $13,358 A) $60,824 B) $38,164 C) $37,373 D) $13,358

Equipment that was purchased three years ago has a depreciation expense in year 3 of R3 = $735 assuming the constant percentage method and d = 15%.Determine the original cost of this equipment,C.(Answer to the nearest dollar)

A) $7979 B) $6782 C) $5765 D) $5635 A) $7979 B) $6782 C) $5765 D) $5635

Exam 7: Business Decisions, Capital Budgeting and Depreciation

A machine costing $5000 is estimated to have a useful lifetime of 5 years and a scrap value of $500.It is expected to run for 20,000 hours.You are given that the actual production hours in the first three years are: 5000 in year 1,4400 in year 2,and 4000 in year 3.What is the book value of this machine at the end of three years?

(Multiple Choice)

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Question 21

A machine is purchased for $100,000 and has a salvage value of $12,000 in 25 years.What is the total depreciation for the first 3 years,assuming the constant percentage method? (Answer to the nearest dollar)

(Multiple Choice)

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Question 22

A machine costs $15,000 and has an estimated lifetime of 8 years after which it could be sold for $3000.Annual maintenance costs are M.If the cost of capital is j₁ = 8%,the capitalized cost is $40,914.72.What is the value of M? (Answer to the nearest dollar)

(Multiple Choice)

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(72)

Question 23

A company buys a machine that costs $50,000.It has an estimated useful lifetime of 10 years with no scrap value.It produces 5000 units of output per period.Annual maintenance costs are $2000.The cost of capital is j₁ = 10%.The capitalized cost is $101,372.70.What is the maximum amount the company should spend on increasing the machine's production by 60%? (If done so,there will be no change to the estimated lifetime or the annual maintenance costs;Answer to the nearest dollar)

(Multiple Choice)

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(76)

Question 24

23. Which of the following statements is (are) true? (NPV = net present value, IRR = internal rate of return; in both (I) and (II), the cost of capital > 0) a. If the NPVs are same for two different projects (using the same cost of capital and same initial investment), they must also have same IRR. b. If an investment ends up with an IRR < 0, then the NPV must also be less than 0.

(Multiple Choice)

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Question 25

A machine costs $500,000 new.It has a useful life of 20 years,at the end of which it can be sold for $S.Maintenance costs are $15,000 at the end of each year.If the cost of capital is j₁ = 12%,the capitalized cost of the machine is $675,000.What is the value of S?

(Multiple Choice)

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Question 26

A machine costs $10,000,has no scrap value at the end of 10 year estimated lifetime.Maintenance is $500 per year.How much can be spent on increasing the machine's productivity by 50%,if the salvage value remain same? If this is done,the annual maintenance cost would increase to $800 per year and the machine's lifetime would decrease to 8 years.The cost of capital is j₁ = 10%.

(Multiple Choice)

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Question 27

An investment of $724 will produce estimated cash flows of $250 at the end of each of the next four years.Which of the following would be reported as the internal rate of return (IRR)?

(Multiple Choice)

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Question 28

You are given: F₀ = initial investment,F₁,F₂,…,F_n are the future net cash flows (where each is > 0).You are told that the sum of the future cash flows exceeds the initial investment.That is, (F₁ + F₂ + … + F_n)> F₀.Which of the following statements is (are)true? (I)IRR must be greater than 0. (II)NPV must be greater than 0.

(Multiple Choice)

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Question 29

An airplane costing $5 million is expected to be flown 800,000 miles over its lifetime of 8 years,at which time it can be sold for $400,000.After 6 years,the total depreciation using the physical service method is $3.8 million.How many miles is the airplane flown in total over its last 2 years (years 7 and 8)? (Answer to the nearest mile)

(Multiple Choice)

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Question 30

A machine is purchased for $10,000 and has an expected life of 8 years,at which time its salvage value is $500.What is the book value at the end of six years using the constant percentage method of depreciation?

(Multiple Choice)

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Question 31

A machine,with an original cost of $28,000,depreciates to $4000 over 20 years.If the constant percentage method of depreciation is used,what is the earliest year end where the machine will be depreciated to less than half of its original value? (Round up the answer to the nearest whole number)

(Multiple Choice)

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(80)

Question 32

Machine X and Y each sell for $1,000 000 and each has a life of 17 years.Machine X produces 5000 units per year,has an annual maintenance expense of $10,000 and a salvage value of $33,750.Machine Y produces U units per year,has an annual maintenance expense of $11,000 and no salvage value.If the interest rate is j₁ = 8%,what does the value of U have to be for the two machines to be equivalent?

(Multiple Choice)

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Question 33

A plot of land is purchased for $1.5 million.It is said to contain 300,000 tons of ore.It will take five years to mine all the ore after which the land will be worth $300,000.They expected to mine 60,000 tons of ore in each of the first two years.What is the book value of the mine after two years?

(Multiple Choice)

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(84)

Question 34

Plastic trays last 8 years and cost $20 each.Metal trays last 24 years and cost $X.There is no salvage value for either type of tray.Trays need to be purchased today and are assumed to be needed forever.If the interest rate is j₁ = 6%,what value of X will the buyer be indifferent to purchasing plastic or metal trays?

(Multiple Choice)

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(80)

Question 35

Equipment that was purchased three years ago has a depreciation expense in year 3 of R₃ = $735 assuming the constant percentage method and d = 15%.Determine the original cost of this equipment,C.(Answer to the nearest dollar)

(Multiple Choice)

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(75)

Question 36

A delivery van costing $24,000 has an estimated lifetime of 12 years at which time it will cost $1200 to dispose of it.Annual maintenance costs are $900.If the interest rate is j₁ = 9%,what is the capitalized cost of the van? (Answer to the nearest dollar)

(Multiple Choice)

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(85)

Question 37

You are given 3 investments,each costing $100,000: (I)Government of Canada 10-year bond with a yield of j₂ = 5% (II)An annuity paying $12,960 a year for 10 years (III)A lump sum of $163,000 due in 10 years Rank the above investments from highest net present value to lowest net present value.

(Multiple Choice)

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(77)

Question 38

An airplane costing $5 million is expected to be flown 800,000 miles over its lifetime of 8 years,at which time it can be sold for $400,000.After 6 years,the book value of the plane using the physical service method is $1.2 million.How many miles is the airplane flown in total over its first 6? (Answer to the nearest mile)

(Multiple Choice)

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(81)

Question 39

A town is putting a new roof on its arena.A standard roof cost $600,000 and has an expected lifetime of 20 years with no salvage value.Another company has stated that they can add a preservative to the roof which will increase the lifetime of the roof by 10 years.Ignoring maintenance costs,what is the maximum amount the town should be willing to pay for the preservative if money is worth j₁ = 7%? (Answer to the nearest dollar).

(Multiple Choice)

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(77)

Question 40

Showing 21 - 40 of 66

A machine is purchased for $100,000 and has a salvage value of $12,000 in 25 years.What is the total depreciation for the first 3 years,assuming the constant percentage method? (Answer to the nearest dollar)

A machine costs $15,000 and has an estimated lifetime of 8 years after which it could be sold for $3000.Annual maintenance costs are M.If the cost of capital is j₁ = 8%,the capitalized cost is $40,914.72.What is the value of M? (Answer to the nearest dollar)

A machine costs $500,000 new.It has a useful life of 20 years,at the end of which it can be sold for $S.Maintenance costs are $15,000 at the end of each year.If the cost of capital is j₁ = 12%,the capitalized cost of the machine is $675,000.What is the value of S?

An investment of $724 will produce estimated cash flows of $250 at the end of each of the next four years.Which of the following would be reported as the internal rate of return (IRR)?

A machine is purchased for $10,000 and has an expected life of 8 years,at which time its salvage value is $500.What is the book value at the end of six years using the constant percentage method of depreciation?

A machine,with an original cost of $28,000,depreciates to $4000 over 20 years.If the constant percentage method of depreciation is used,what is the earliest year end where the machine will be depreciated to less than half of its original value? (Round up the answer to the nearest whole number)

A plot of land is purchased for $1.5 million.It is said to contain 300,000 tons of ore.It will take five years to mine all the ore after which the land will be worth $300,000.They expected to mine 60,000 tons of ore in each of the first two years.What is the book value of the mine after two years?

Equipment that was purchased three years ago has a depreciation expense in year 3 of R₃ = $735 assuming the constant percentage method and d = 15%.Determine the original cost of this equipment,C.(Answer to the nearest dollar)

A delivery van costing $24,000 has an estimated lifetime of 12 years at which time it will cost $1200 to dispose of it.Annual maintenance costs are $900.If the interest rate is j₁ = 9%,what is the capitalized cost of the van? (Answer to the nearest dollar)

You are given 3 investments,each costing $100,000: (I)Government of Canada 10-year bond with a yield of j₂ = 5% (II)An annuity paying $12,960 a year for 10 years (III)A lump sum of $163,000 due in 10 years Rank the above investments from highest net present value to lowest net present value.

Simple Interest and Simple Discount

Compound Interest

Simple Annuities

General and Other Annuities

Repayment of Debts

Bonds

Contingent Payments

Filters

Exam 7: Business Decisions, Capital Budgeting and Depreciation

A machine is purchased for $100,000 and has a salvage value of $12,000 in 25 years.What is the total depreciation for the first 3 years,assuming the constant percentage method? (Answer to the nearest dollar)

A machine costs $15,000 and has an estimated lifetime of 8 years after which it could be sold for $3000.Annual maintenance costs are M.If the cost of capital is j1 = 8%,the capitalized cost is $40,914.72.What is the value of M? (Answer to the nearest dollar)

A machine costs $500,000 new.It has a useful life of 20 years,at the end of which it can be sold for $S.Maintenance costs are $15,000 at the end of each year.If the cost of capital is j1 = 12%,the capitalized cost of the machine is $675,000.What is the value of S?

An investment of $724 will produce estimated cash flows of $250 at the end of each of the next four years.Which of the following would be reported as the internal rate of return (IRR)?

A machine is purchased for $10,000 and has an expected life of 8 years,at which time its salvage value is $500.What is the book value at the end of six years using the constant percentage method of depreciation?

A machine,with an original cost of $28,000,depreciates to $4000 over 20 years.If the constant percentage method of depreciation is used,what is the earliest year end where the machine will be depreciated to less than half of its original value? (Round up the answer to the nearest whole number)

A plot of land is purchased for $1.5 million.It is said to contain 300,000 tons of ore.It will take five years to mine all the ore after which the land will be worth $300,000.They expected to mine 60,000 tons of ore in each of the first two years.What is the book value of the mine after two years?

Equipment that was purchased three years ago has a depreciation expense in year 3 of R3 = $735 assuming the constant percentage method and d = 15%.Determine the original cost of this equipment,C.(Answer to the nearest dollar)

A delivery van costing $24,000 has an estimated lifetime of 12 years at which time it will cost $1200 to dispose of it.Annual maintenance costs are $900.If the interest rate is j1 = 9%,what is the capitalized cost of the van? (Answer to the nearest dollar)

You are given 3 investments,each costing $100,000: (I)Government of Canada 10-year bond with a yield of j2 = 5% (II)An annuity paying $12,960 a year for 10 years (III)A lump sum of $163,000 due in 10 years Rank the above investments from highest net present value to lowest net present value.

Simple Interest and Simple Discount

Compound Interest

Simple Annuities

General and Other Annuities

Repayment of Debts

Bonds

Contingent Payments

Filters

A machine costs $15,000 and has an estimated lifetime of 8 years after which it could be sold for $3000.Annual maintenance costs are M.If the cost of capital is j₁ = 8%,the capitalized cost is $40,914.72.What is the value of M? (Answer to the nearest dollar)

A machine costs $500,000 new.It has a useful life of 20 years,at the end of which it can be sold for $S.Maintenance costs are $15,000 at the end of each year.If the cost of capital is j₁ = 12%,the capitalized cost of the machine is $675,000.What is the value of S?

Equipment that was purchased three years ago has a depreciation expense in year 3 of R₃ = $735 assuming the constant percentage method and d = 15%.Determine the original cost of this equipment,C.(Answer to the nearest dollar)

A delivery van costing $24,000 has an estimated lifetime of 12 years at which time it will cost $1200 to dispose of it.Annual maintenance costs are $900.If the interest rate is j₁ = 9%,what is the capitalized cost of the van? (Answer to the nearest dollar)

You are given 3 investments,each costing $100,000: (I)Government of Canada 10-year bond with a yield of j₂ = 5% (II)An annuity paying $12,960 a year for 10 years (III)A lump sum of $163,000 due in 10 years Rank the above investments from highest net present value to lowest net present value.