Considering purchase of earth-moving equipment

Assignment Help Financial Management

Reference no: EM131583938

A land development company is considering the purchase of earth-moving equipment. This equipment will have an estimated first cost of $190,000, a salvage value of $70,000, a life of 10 years, a maintenance cost of $40,000 per year, and an operating cost of $260 per day. Alternatively, the company can rent the necessary equipment for $1100 per day and hire a driver at $180 per day. (a) 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? (b) When approached to rent for the breakeven number of days, the equipment owner indicated that the minimum rental is for 100 days per year; however, he might consider a lower daily rental cost. What is the daily rental cost to justify renting over purchasing? If the equipment was purchased, assume it would be used for the breakeven number of days. Use the Goal Seek or Solver tool to determine the required rental cost per day.

Reference no: EM131583938

Questions Cloud

What is this investment currently worth : If the annual return on comparable investments is 8%, what is this investment currently worth

Historical standard deviation of the returns of this stock : What is the historical standard deviation of the returns of this stock? Explain the difference between geometric mean and arithmetic mean?

Find a formula for the median income : U.S. Exports to China U.S. exports to China have grown (although at a slower rate than imports) since 2001. In 2001, about 19.1 billion dollars of goods.

What are the monthly payments : You take out a 5-year car loan for $20,000. The loan has a 5% annual interest rate. The payments are made monthly. What are the monthly payments

Considering purchase of earth-moving equipment : A land development company is considering the purchase of earth-moving equipment.

What will be the standard deviation in eps : What will be the standard deviation in EPS if the firm switches to the proposed capital structure?

How the bank can maximize their expected profits : Use a decision tree to show how the bank can maximize their expected profits.

What are margin and turnover : What are margin and turnover? Explain how these concepts can improve the evaluation of an investment center

Compute the slopes of the respective tangent lines : FORESTRY The following graph shows the volume of wood produced in a single-species forest. Here f(t) is measured in cubic meters/hectare and t is measured.

User Account

All Pages