Jim is considering buying one of the following tractors for use in his farm: A B...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Jim is considering buying one of the following tractors for use in his farm: A B 12 6 $50,000 $31,000 $5,500 Tractor Estimated lifespan (years) Purchase price Annual maintenance cost $4,400 Maintenance costs are assumed to be paid at the end of each year within the tractor's estimated lifespan. The cost of capital is 8% per annum. (a) Calculate the equivalent annual costs (EACs) of the two tractors, and show that Jim should purchase tractor A based on this criterion. [4 marks] (b) It is known that buyers of tractor B can optionally purchase one of the following protection plans (at the time of tractor purchase): • Gold Warranty Plan: Provides protection of the tractor for at most 8 years from the date of purchase. • Platinum Warranty Plan: Provides protection of the tractor for at most 10 years from the date of purchase. Should a Warranty Plan be purchased, it is assumed that the estimated lifespan of tractor B will lengthen to the respective protection period, and maintenance costs will be payable until the end of the protection period. Based on the EAC criterion, calculate the price for each of the two Warranty Plans, below which it will be better for Jim to purchase tractor B instead. Jim is considering buying one of the following tractors for use in his farm: A B 12 6 $50,000 $31,000 $5,500 Tractor Estimated lifespan (years) Purchase price Annual maintenance cost $4,400 Maintenance costs are assumed to be paid at the end of each year within the tractor's estimated lifespan. The cost of capital is 8% per annum. (a) Calculate the equivalent annual costs (EACs) of the two tractors, and show that Jim should purchase tractor A based on this criterion. [4 marks] (b) It is known that buyers of tractor B can optionally purchase one of the following protection plans (at the time of tractor purchase): • Gold Warranty Plan: Provides protection of the tractor for at most 8 years from the date of purchase. • Platinum Warranty Plan: Provides protection of the tractor for at most 10 years from the date of purchase. Should a Warranty Plan be purchased, it is assumed that the estimated lifespan of tractor B will lengthen to the respective protection period, and maintenance costs will be payable until the end of the protection period. Based on the EAC criterion, calculate the price for each of the two Warranty Plans, below which it will be better for Jim to purchase tractor B instead.
Expert Answer:
Answer rating: 100% (QA)
A The equivalent annual cost E AC of a machine is the sum of all ... View the full answer
Related Book For
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws
Posted Date:
Students also viewed these accounting questions
-
During the first week in November, Erin Mills worked 45 hours and produced 1,275 units under a piece-rate system. The regular piece rate is $0.45 a unit. Mills is paid overtime according to the FLSA...
-
During the first week in April, Courtney Nelson worked 46 hours and produced 1,450 units under a piece-rate system. The regular piece rate is $0.38 a unit. Nelson is paid overtime according to the...
-
During the first week of January 2012, Creative Designs Ltd. began operations. In its second year, Creative Designs approached the local bank for a $20,000 loan and was asked to submit financial...
-
Individual A is neither a trader nor a dealer for purposes of IRC 475. A purchases a single share of publicly traded Z stock for $1,000 on June 1, 2020. As of December 31, 2020, Z stock is trading at...
-
Wayne is single and has no dependents. Without considering his $11,000 adjusted net capital gain (ANCG), his taxable income, which includes no investment income, in 2015 is as follows: a. What is...
-
Consider a population of 1,024 mutual funds that primarily invest in large companies. You have determined that , the mean one-year total percentage return achieved by all the funds, is 8.20 and that...
-
A gas shows deviation from ideal gas behaviour at (a) Low pressure and high temperature (b) Low pressure and low temperature (c) Low temperature and high pressure (d) High temperature and high...
-
A Barberton Glass Co. truck was transporting large sheets of glass down the highway. Elliot Schultz was driving his automobile some distance behind the truck. Because of the negligent way that the...
-
You have been contracted by a small company to expand its network of 100 Windows 98 computers to more than 200 computers. The company wants you to leave Windows 98 on the existing 100 computers....
-
You send daily emails about a variety of topics for a shoe store. Your open rates are low, but sale announcements perform best. Which two marketing actions would most likely increase open rates?...
-
Lump sum liquidation with loss on realization of non-cash assets, exercise right of offset, and absorption of loss problem solving Monica, Grace, and Rose are partners in MGR Furniture Store...
-
If the price of milo increases: a. consumers will buy more milo b. consumers will buy less milo c. consumers will buy the same amount of milo d. cannot tell with the information given
-
If a change in the price of apples results in a change in the quantity supplied of oranges, then the goods are: a. own-price elastic b. cross-price elastic c. related d. unrelated
-
If income decreases then the consumption of beef will: a. increase b. decrease c. not change d. not enough information to answer
-
A general infl ation will lead to: a. a decrease in the consumption of beef b. an increase in the consumption of beef c. no change in the consumption of beef d. unemployment
-
Relative to the elasticity of apples, the elasticity of fruit is:. a. more elastic b. less elastic c. the same level of elasticity d. not enough information provided to answer
-
Q2. In the mechanisms shown in the figure, OA = 0.4m, w = 0.5rad/s. Find: velocity and acceleration of block C when 0 = 30. (20 scores) B w A C
-
Controls can be identified based on their function. The functions are preventive, detective, and corrective. A. True B. False
-
The chairman of the board of Hughes Corporation proposed that the board hire as controller a CPA who had been the manager of the team that conducted Hughes Corporations audit engagement. The chairman...
-
Define group auditors and component auditors. What issues are introduced when component auditors examine a division, subsidiary, or segment of group financial statements?
-
Your partner drafted the following auditors report yesterday. You need to describe the reporting deficiencies, explain the reasons for them, and discuss with the partner how the report should be...
-
Write a description of an effective manager. Write words that you would use to describe an effective leader. When you review your list, consider the differences and similarities in your adjectives....
-
Think of some individuals who you believe to be really exceptional leaders. What, if anything, do they have in common? Think of some individuals who you believe to be truly poor leaders. What, if...
-
Have you ever known people who were successful leaders in one situation and failures in another? Why do you think this happened?
Study smarter with the SolutionInn App