Your company signed a contract to remove soil from government-owned property. This task has to be...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your company signed a contract to remove soil from government-owned property. This task has to be completed in three years, and it requires a specific bulldozer to dig and load the soil onto a transportation vehicle. You are planning to purchase a special ripper-bulldozer for $80,000. The maintaining costs of the bulldozer will be $6,000 per year in each of the next three years. This machine will generate $36,000 cost savings each year. The profits will be taxed at a rate of 15%. Assume that this asset falls into specific CCA Class with rate = 50% for tax purposes (the 50% rule applies). You estimate that the constant-dollar market (re-sale) value of the bulldozer, which is $80,000 now, will fall by 20% annually. Moreover, your need to have a working capital of $10,000 to be maintained in purchasing power over the lifetime of the project, and this amount can be recovered at the time of the project's completion. The general inflation rate is 8% per year, and inflation-free interest rate, i' is 5%. Using the information above, find the equivalent net present worth in constant dollars. Your company signed a contract to remove soil from government-owned property. This task has to be completed in three years, and it requires a specific bulldozer to dig and load the soil onto a transportation vehicle. You are planning to purchase a special ripper-bulldozer for $80,000. The maintaining costs of the bulldozer will be $6,000 per year in each of the next three years. This machine will generate $36,000 cost savings each year. The profits will be taxed at a rate of 15%. Assume that this asset falls into specific CCA Class with rate = 50% for tax purposes (the 50% rule applies). You estimate that the constant-dollar market (re-sale) value of the bulldozer, which is $80,000 now, will fall by 20% annually. Moreover, your need to have a working capital of $10,000 to be maintained in purchasing power over the lifetime of the project, and this amount can be recovered at the time of the project's completion. The general inflation rate is 8% per year, and inflation-free interest rate, i' is 5%. Using the information above, find the equivalent net present worth in constant dollars.
Expert Answer:
Answer rating: 100% (QA)
ANSWER Equivalent net present worth in constant dollars 30897562 workings 30580000 36000 90000 90000 ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Your parents will be retiring in three years and want to have $1,000,000 in pension assets. At the beginning of 2009, they have accumulated $700,000. Because of their long history with the company,...
-
The Gansac Publishing Company signed a contract with an author to publish her book. The signing took place on January 1, 2007 and a payment of $20,000 was made. The agreement was that the author...
-
A build-to-operate (BTO) company signed a contract to operate Alamosa County industrial wastewater treatment plants for the next 20 years. The contract will pay the company $2.5 million now and...
-
The compound bow in the previous problem requires 152 J of work to draw the string back to x = 0.540 m, at which point the archer need only exert 250 N of force to hold the string in place. (a)...
-
For a negative binomial random variable whose pdf is given by Equation 4.5.1, find E(X) directly by evaluating p r (1 p) kr . 00 (1> k-1 -1. k=r
-
Define prior- period errors. How are they reported?
-
What is the difference between a claim and a variation? Why have variations been a contentious issue on some projects?
-
You have performed preliminary analytical procedures on one of your audit engagements and observed the following independent situations: 1. The allowance for obsolete inventory increased from the...
-
In the figure a "semi-infinite" nonconducting rod (that is, infinite in one direction only) has uniform linear charge density = 5.19 C/m. Find (including sign) (a) the component of electric field...
-
There are N houses (numbered from 0 to N-1) along a street. In each of them, recyclable trash (plastic, glass, metal) is collected into separate bags. There are three trucks that collect the trash....
-
The ABC company sells starter sets of barbells that consist of one bar, two 20-pound weights, and four 5-pound weights. The bars weigh an average of 8 pounds with a standard deviation of 0.2 pounds....
-
Carla Vista Company had zero units of beginning work in process. During the period, 8,640 units were completed and transferred out, and there were 560 units of ending work in process. How many units...
-
A bond has a par value of $1,000, a coupon rate of 5.37 percent (paid annually), and that matures in 15 years. Assume the market interest rate on this bond is 12.59 percent and it increases 59 basic...
-
You hold a 6 year bond with a coupon of 5% and a price of 92.56%. In two years' time the discount rate applied to the bond is 5.75%. What will the price be in 2 years?
-
Calculate the duration ofacouponbondwiththefollowingcharacteristics (Show Work); Matures in exactly 4 years fromtoday. Has a Par Value of$1,000 Coupon Rate =3.00% Interest is paid annually at the end...
-
An investor is considering a muni bond paying 3.88% and an investment grade corporate bond paying 5.87%. At what tax rate would they be indifferent between the two bonds?
-
Explain the significant manner in which business rules impact both database normalization and the decision to denormalize database tables.
-
Sue Deliveau opened a software consulting firm that immediately paid $2,000 for a computer. Was this event a transaction for the business?
-
A credit card issued by the GECU credit union has an APR of 16% and an APY of 16.64%. (a) What is the compounding period? (b) Use the EFFECT function to find the compounding period.
-
Loadstar Sensors is a company that makes load/ force sensors based on capacitive sensing technology. For a major plant expansion project, the company wants to have $30 million 5 years from now. If...
-
Determine the rate of return for the following cash flow series. 12,000 i = ? 1 2 3 4 5 6 7 Year 100 100 100 300 300 300 300 4000
-
An electronic instrument, weighing \(1000 \mathrm{~N}\), is supported on a rubber mounting whose forcedeflection relationship is given by \(F(x)=157 x+0.2 x^{3}\), where the force \((F)\) and the...
-
The force-deflection relation of a steel helical spring used in an engine is found experimentally as \(F(x)=34.6 x+0.34 x^{2}+0.002 x^{3}\), where the force \((F)\) and deflection \((x)\) are...
-
Four identical rigid bars-each of length \(a\) - are connected to a spring of stiffness \(k\) to form a structure for carrying a vertical load \(P\), as shown in Figs. 1.72 (a) and (b). Find the...
Study smarter with the SolutionInn App