Ashton Baxter, a fleet manager from ABC Truck Operation has compiled a set of estimated costs...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Ashton Baxter, a fleet manager from ABC Truck Operation has compiled a set of estimated costs and salvage value for Truck Model A over the past few years of operation. The set of data compiled is shown below. The original purchase price of Truck Model A at year 0 is $112,000.00. ABC Truck Operation's financial policy states that the minimum return on investment is at a yearly effective interest rate of 12% compounded quarterly. Original purchase price at year 0: $ 112,000.00 vehicle (n) Life of Estimated End-of-Year Maintenance Cost ($) Years i. ii. iii. 1 2 3 4 5 6 7 8 9 10 8,000.00 8,000.00 12,000.00 12,000.00 12,000.00 18,000.00 18,000.00 18,000.00 Estimated Salvage Value if Sold in Year n ($) 95,000.00 78,000.00 67,000.00 60,000.00 54,000.00 50,000.00 45,000.00 35,000.00 27,000.00 20,000.00 Equivalent constant annual cost of owning and maintaining if Sold in Year n ($) 30,440.00 29,477.74 29,146.50 27,868.81 27,448.71 26,836.44 (iii) 27,020.73 27,235.90 27,293.12 Compute the yearly nominal interest rate for the minimum return on investment. (Provide your answer in percentage and to 2 decimal place) Draw the cash flow diagram for owning and maintaining Truck Model A for 7 years. (Truck Model A is sold at end of year 7) Compute the equivalent constant annual cost of owning and maintaining truck model A for 7 years. iv. Which year should Mr James replace the existing truck with a new truck of same model? Assume that the maintenance cost and salvage of the truck Model A for the different years of ownership does not change with time? Explain. Ashton Baxter, a fleet manager from ABC Truck Operation has compiled a set of estimated costs and salvage value for Truck Model A over the past few years of operation. The set of data compiled is shown below. The original purchase price of Truck Model A at year 0 is $112,000.00. ABC Truck Operation's financial policy states that the minimum return on investment is at a yearly effective interest rate of 12% compounded quarterly. Original purchase price at year 0: $ 112,000.00 vehicle (n) Life of Estimated End-of-Year Maintenance Cost ($) Years i. ii. iii. 1 2 3 4 5 6 7 8 9 10 8,000.00 8,000.00 12,000.00 12,000.00 12,000.00 18,000.00 18,000.00 18,000.00 Estimated Salvage Value if Sold in Year n ($) 95,000.00 78,000.00 67,000.00 60,000.00 54,000.00 50,000.00 45,000.00 35,000.00 27,000.00 20,000.00 Equivalent constant annual cost of owning and maintaining if Sold in Year n ($) 30,440.00 29,477.74 29,146.50 27,868.81 27,448.71 26,836.44 (iii) 27,020.73 27,235.90 27,293.12 Compute the yearly nominal interest rate for the minimum return on investment. (Provide your answer in percentage and to 2 decimal place) Draw the cash flow diagram for owning and maintaining Truck Model A for 7 years. (Truck Model A is sold at end of year 7) Compute the equivalent constant annual cost of owning and maintaining truck model A for 7 years. iv. Which year should Mr James replace the existing truck with a new truck of same model? Assume that the maintenance cost and salvage of the truck Model A for the different years of ownership does not change with time? Explain.
Expert Answer:
Related Book For
Statistics For Business And Economics
ISBN: 9780538481649
11th Edition
Authors: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams
Posted Date:
Students also viewed these accounting questions
-
Account Titles cash in bank ordinary share capital share premium-ordinary preference share share premium-ps ppe-building ppe-land mortgage payable ppe-office furnitures & Notes Payable Smallspoon...
-
A survey of information systems managers was used to predict the yearly salary of beginning programmer/analysts in a metropolitan area. Managers specified their standard salary for a beginning...
-
8. Reselect all cases. Then select only those cases for which X < 2, Y < 2, and Z < 2. Report the mean value of M for this sub-sample. O 1.31 O 0.375 O 840 3.36 Question 9 Q09. Reselect all cases....
-
Stems of the first land plants functioned primarily as transport and support structures. Modern stems have these functions also, plus several more. Describe the additional functions.
-
Presented here are selected transactions for Sager Company for 2010. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2000. The machine cost $71,000 on that date and had a useful...
-
Derby State University is a four-year public institution of higher education that features a robust and award-winning STEM curriculum. Located in the Southern United States, the heritage of...
-
A motor has large rotors mounted onto its dual output shafts. A design engineer has calculated the static rotor weight to be within the specifications for bearing loading. The motor ships, and on...
-
The Gilbert Air-Conditioning Company is considering the purchase of a special shipment of portable air conditioners manufactured in Japan. Each unit will cost Gilbert $80, and it will be sold for...
-
You and your friend each have a graduated cylinder identical to the cylinder 2 from our class. You read a volume of 371mL. Your friend reads a volume of 381mL. On the basis of this information, can...
-
Laredo Leather Company manufactures high-quality leather goods. The companys profits have declined during the past nine months. In an attempt to isolate the causes of poor profit performance,...
-
7. The table below provides various information about the National Football League (NFL) for 2016. Show your 1 work for all answers. Average Operating Income per Team Total Revenue of all NFL Teams...
-
Can superposition be applied in power-system short-circuit studies for calculating fault currents? (a) Yes (b) No
-
For distribution systems, standard reclosers are equipped for two or more reclosures, whereas multiple-shot reclosing in EHV systems is not a standard practice. (a) True (b) False
-
The dc-offset component of the three-phase short-circuit current of an unloaded synchronous machine is different in the three phases and its exponential decay is dictated by ____________.
-
From the power flow standpoint, the addition of a shunt-capacitor bank to a load bus corresponds to the addition of a positive/negative reactive load. Choose the right word.
-
Which statement is the most accurate? a) Since our current account deficit is matched by our capital account surplus, we have no problem with respect to our international transactions. b) Foreigners...
-
Business analytics involves turning data into useful business insights, something that can help us grow and improve our business. In today's digital world, companies embrace big data business...
-
Design an experiment to demonstrate that RNA transcripts are synthesized in the nucleus of eukaryotes and are subsequently transported to the cytoplasm.
-
A test was conducted for two overnight mail delivery services. Two samples of identical deliveries were set up so that both delivery services were notified of the need for a delivery at the same...
-
Suppose the data have a bell-shaped distribution with a mean of 30 and a standard deviation of 5. Use the empirical rule to determine the percentage of data within each of the following ranges: a. 20...
-
A manufacturer produces lots of a canned food product. Let p denote the proportion of the lots that do not meet the product quality specifications. An n = 25, c = 0 acceptance sampling plan will be...
-
What are the main types of investors that fund entrepreneurial ventures?
-
What steps are needed to show that entrepreneurial finance is beneficial to the economy at large?
-
What are the main challenges that entrepreneurs and investors face at the four steps of the funding cycle, as described in the FIRE framework?
Study smarter with the SolutionInn App