Relevant cash flows , Financial Accounting

Assignment Help:

The City of Miami must replace a number of its concrete mixer trucks with new trucks. It has received two bids and has evaluated closely the performance characteristics of the several trucks. The truck A, which costs $ 78,000, is top-of-the-line equipment. The truck has a life of eight years, suppose that the engine is rebuilt in the fifth year. Maintenance costs of $4,000 a year are expected in the first four years, followed by total maintenance and rebuilding costs of $15,000 in the fifth year. During the last three years, maintenance costs are expected to be $6,000 a year. At the end of eight years the truck will have an estimated scrap value of $12,000.

The trucks B cost $65,000 a truck. Maintenance costs for the truck will be higher. In the first year they are expected to be $2,000, and this amount is expected to increase by $1,000 a year by the eighth year. In the fourth year the engine will require to be rebuilt, and this will cost the company $10,000 in addition to maintenance costs in that year. At the end of eight years the truck will have an estimated scrap value of $7,000.
a)    What are the relevant cash flows related to the trucks?
b)    If the City of Miami's opportunity cost of funds is 8%, which truck should it accept? Ignore tax considerations, Due to the city pays no taxes.
c)    If its opportunity cost were 15% would your answer change?


Related Discussions:- Relevant cash flows

Account, list and explain the stages where the errors are deducted for rect...

list and explain the stages where the errors are deducted for rectification.

Economic order quantity formula, For getting the EOQ formula we shall use t...

For getting the EOQ formula we shall use the subsequent symbols: U = annual usage/demand Q = quantity ordered F = cost per order C = per cent carrying cost P  = pric

Bond yield, If I bought a 10 year bond five years ago for 936.05. The bons ...

If I bought a 10 year bond five years ago for 936.05. The bons make semiannual coupon payments at a rate of 8.4%. If the current price of the bonds is 1,048.77, what is the yield e

Expense recognition, Purchases office supplies on account costing $12,600 d...

Purchases office supplies on account costing $12,600 during July. It pays $5,500 for these purchases during July and the remainder during August. Office supplies on hand on July 1

Payments needed?, Payments needed? Zach Taylor is settling a $27,000 loan d...

Payments needed? Zach Taylor is settling a $27,000 loan due today by making 6 equal annual payments of $6018.83. What payments must Zach Taylor make to settle the loan at the inter

Bottomline Consulting, I am in a class that is supposed to be 100 level and...

I am in a class that is supposed to be 100 level and I am really struggling. I need hlep with trial balances, adjustments, etc.

Archer daniels midland company is considering, Archer Daniels Midland Compa...

Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investm

Calculate the financial ratios, Part I: Wal-Mart Stores Inc.'s income stat...

Part I: Wal-Mart Stores Inc.'s income statement and balance sheet are attached. Gather relevant information from the financial statements to calculate the financial ratios, and co

The functional currency method-foreing branches, The functional currency me...

The functional currency method (formerly temporal method) Under this method, the branch is considered to be an extension of the head office and this is reflected by the trading

Clean opinion in auditor''s work, Unqualified Opinion - AUDIT opinion not q...

Unqualified Opinion - AUDIT opinion not qualified for any material scope restrictions nor departures from GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). AUDITOR may issue an unqu

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd