Considering the purchase of earth moving equipment

Assignment Help Financial Management

Reference no: EM131085626

A land development company is considering the purchase of earth moving equipment. The equipment will have a first cost of $190,000 and a salvage value of $70,000 when the company sells it in 10 years. A service contract for maintenance on the equipment will cost $40,0000 per year. The operating cost is expected to be $260 per day. Alternatively, the company can rent the necessary equipment for $1100 per day and hire a driver for $180 per day. If the company's MARR is 10% per year how many days per year must the company need the equipment in order to justify its purchase?

Please DO NOT USE EXCEL TO SOLVE

Reference no: EM131085626

Questions Cloud

The stock is about to go ex-dividend : Lee Ann, Inc., has declared a $6.60 per-share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld when the dividend is paid. Lee Ann sells for $94.60 per share, and ..

What would risk-free rate have to be for two stocks : Stock Y has a beta of 1.4 and an expected return of 16.4 percent. Stock Z has a beta of 0.85 and an expected return of 12 percent. Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?

The time for long-term corporate bonds : Consider the following table for the total annual returns for a given period of time. Series Average return Standard Deviation Large-company stocks 11.7 % 20.6 % Small-company stocks 16.4 33.0 Long-term corporate bonds 6.0 8.7 Long-term government bo..

Conventional factoring arrangement : Dexter Company has a conventional factoring arrangement with its local bank. Which one of the following would be a common characteristic of that type of financing arrangement?

Considering the purchase of earth moving equipment : A land development company is considering the purchase of earth moving equipment. The equipment will have a first cost of $190,000 and a salvage value of $70,000 when the company sells it in 10 years.

What would be nominal and effective cost of such credit : Adams Manufacturing Inc. buys $9.8 million of materials (net of discounts) on terms of 2/10, net 50; and it currently pays after 10 days and takes the discounts. Adams plans to expand, which will require additional financing. What would be the nomina..

What is the expected return of the portfolio : Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .15 .35 .45 .27 Good .55 .16 .10 .08 Poor .25 − .01 − .06 − .04 Bust .05 − .12 − .20 − .09 a. Your portfolio is invested 30 percent each in A..

Banking system and the federal reserve system : Create a diagram of the U.S. banking system and the Federal Reserve System. Include special financial services of the banking system in your diagram. Be creative in this activity. Pretend you have been asked to teach the structure and interrelationsh..

What advice you can offer based on equivalent annual costs : Assume that a friend of yours is thinking about buying a new car. Her presently owned car can be sold for $1600 or can provide adequate service for 2 more years at an operating cost of $1500 next year and $1700 the year afterward. Assuming that she w..

User Account

All Pages