Given: F = $5,000, N = 5 years, and i = 7% , Find: A

Related MCQs

• A manufacturing company is considering the purchase of a new CNC lathe, which will cost $60,000 and has an annual maintenance cost of $8,000. A few parts in the lathe need to be replaced once every 5 years to enable smooth running of the lathe. This would cost an additional $20,000 (once every 5 years). Assuming that the lathe would last 15 years under these conditions, what is the total equivalent cost (present value) of this investment at an interest rate of 12%? (Assume that there will be no appreciable salvage value at the end of 15 years.)
• A manufacturing company is considering the purchase of a new CNC lathe, which will cost $60,000 and has an annual maintenance cost of $8,000. A few parts in the lathe need to be replaced once every 5 years to enable smooth running of the lathe. This would cost an additional $20,000 (once every 5 years). Assuming that the lathe would last 15 years under these conditions, what is the total equivalent cost (present value) of this investment at an interest rate of 12%? (Assume that there will be no appreciable salvage value at the end of 15 years.)
• A couple wants to save for their daughter’s college expense. The daughter will enter college 8 years from now and she will need $40,000, $41,000, $42,000 and $43,000 in actual dollars for 4 school years. Assume that these college payments will be made at the beginning of the school year. The future general inflation rate is estimated to be 6% per year and the annual inflation-free interest rate is 5%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college (for 8 years)?
• A couple wants to save for their daughter’s college expenses. The daughter will enter college 8 years from now and she will need $40,000, $41,000, $42,000, and $43,000 in actual dollars for 4 school years. Assume that these college payments will be made at the beginning of the school year. The future general inflation rate is estimated to be 6% per year and the annual inflation-free interest rate is 5%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college (for 8 years)?
• A couple wants to save for their daughter’s college expense. The daughter will enter college 8 years from now and she will need $40,000, $41,000, $42,000 and $43,000 in actual dollars for 4 school years. Assume that these college payments will be made at the beginning of the school year. The future general inflation rate is estimated to be 6% per year and the annual inflation-free interest rate is 5%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college (for 8 years)?
• Gene Research, Inc. just finished a 4-year R&D and clinical trials successfully and expects a quick approval from the Food and Drug Administration. If the company markets the product on their own, it requires $30 million immediately (n ⇓ = ⇓ 0) to build a new manufacturing facility, and it is expected to have a 10 year product life. The R&D expenditure in the previous years and the anticipated revenues that the company can generate over the next 10 years is summarized as follows:Merck, a large drug company is interested in purchasing the R&D project and the right to commercialize the product from Gene Research, Inc., immediately (n□ =□ 0). What would be a starting negotiating price for the project from Merck? Assume that Gene’s MARR ⇓ = 20%.
• Gene Research, Inc. just finished a 4-year R&D and clinical trials successfully and expects a quick approval from the Food and Drug Administration. If the company markets the product on their own, it requires $30 million immediately (n ⇓ = ⇓ 0) to build a new manufacturing facility, and it is expected to have a 10 year product life. The R&D expenditure in the previous years and the anticipated revenues that the company can generate over the next 10 years is summarized as follows:Merck, a large drug company is interested in purchasing the R&D project and the right to commercialize the product from Gene Research, Inc., immediately (n = 0). What would be a starting negotiating price for the project from Merck? Assume that Gene’s MARR ⇓ = 20%.
• Gene Research, Inc. just finished a 4-year R&D and clinical trials successfully and expects a quick approval from the Food and Drug Administration. If the company markets the product on their own, it requires $30 million immediately (n ⇓ = ⇓ 0) to build a new manufacturing facility, and it is expected to have a 10 year product life. The R&D expenditure in the previous years and the anticipated revenues that the company can generate over the next 10 years is summarized as follows:Merck, a large drug company is interested in purchasing the R&D project and the right to commercialize the product from Gene Research, Inc., immediately (nD =D 0). What would be a starting negotiating price for the project from Merck? Assume that Gene’s MARR ⇓ = 20%.
• Given: F = $100,000, N = 8 years, and i = 7% Find: A
• Your firm has purchased an injection molding machine at a cost of $100,000. The machine’s useful life is estimated at 8 years. Your accounting department has estimated the capital cost for this machine at about $25,455 per year. If your firm’s MARR is 20%, how much salvage value do you think the accounting department assumed at the end of 8 years?