Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. the sch of technology, art, and design stad is con

The sch of technology, art, and design STAD is considering buying a package machine for its...

Free

90.2K

Verified Solution

Question

Accounting

The sch of technology, art, and design STAD isconsidering buying a package machine for its Engineering Technologyprogram. it is expected that this machine will generate a revenuefor the school through several projects and partnership with localcompanies. it is estimated that the net profit in the first yearwill be $75000 and decreasing at the rate of $10000 for the nextfive years after that profit stays constant at $7000 until the endof its time life (10 years). if interest rate is 10%, determine theamount of money that the STAD can invest on this machine.
assume there is no salvage value of the machine.
b)determine the equivalent annual for the following cashflow:
year 0-------0
year 1-------$200,000
year 2-------$180,000
year 3-------$160,000
year 4-------$140,000
year 5-------$120,000
year 6-------$100,000
year 7-------$80,000
year8-------$60,000

Answer & Explanation Solved by verified expert
4.3 Ratings (637 Votes)

(a) Amount of money that STAD can invest on this machine = Present value of future benefits expected from this project. = 242,328

Thus it indicates the maximum amount that STAD can invest, but not the actual investment.

Year CF DF PV
1 75000 0.909091 68181.82
2 65000 0.826446 53719.01
3 55000 0.751315 41322.31
4 45000 0.683013 30735.61
5 35000 0.620921 21732.25
6 25000 0.564474 14111.85
7 7000 0.513158 3592.107
8 7000 0.466507 3265.552
9 7000 0.424098 2968.683
10 7000 0.385543 2698.803
Total Present value 242328

Question - 2

Equivalent annual cash flow = Total present value / PVIFA = =139910.43

Year CF DF PV
1 200000 0.909091 181818.2
2 180000 0.826446 148760.3
3 160000 0.751315 120210.4
4 140000 0.683013 95621.88
5 120000 0.620921 74510.56
6 100000 0.564474 56447.39
7 80000 0.513158 41052.65
8 60000 0.466507 27990.44
Total 5.334926 746411.8

Equivalent annual cash flow = 746,411.80 / 5.334926 =139910.43

PVIFA = Present value of Interest factor annuity = Total of DF ( Discounting factors column)

Comment for any further clarification ........ all the best
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

nt Assignment Score Question 9 of 11 0 Stacked Osteopenia is a condition defined by...

Statistics
Q

Consider a photon produced in the center of the sun. (A) How long this Would it take...

Physics
Q

1Early Childhood: It is hard for us to imagine ourselves as little children or what our life...

Psychology
Q

2-3 paragraph response. Can you think of an example of an informational ad? What information is...

General Management
Q

9 Identify the midline period amplitude domain and range of the function shown in the...

Geometry
Q

1 f x sin y y cos x dxdy 24 1 2 24 2 3...

Calculus
Q

In this question we will approximate 82 with a rational number a To use the...

Calculus
Q

Question 3 Answer the questions asked about each of the factual situations. 1. Wildhorse purchased...

Accounting
Q

In the audit of cash, analytical procedures would normally be sufficient Group of answer choices...

Accounting
Q

A company issues bonds at par on April 1. These 9% bonds have a par...

Accounting
Q

i Requirements 1. Assume that the Tire Division has excess capacity, meaning that it can...

Accounting
Q

services focus on high-value checks received from business customers. Remote deposit Open loop Wholesale...

Finance