Question

Kermit is considering purchasing a new computer system. The purchase price is $104403. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $6409 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $62267 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. What is the net present worth for this new computer system? Enter your answer in this format: 12345 D Question 9 0.1 pts Consider palletizer at a bottling plant that has a first cost of $163493, has operating and maintenance costs of $15852 per year, and an estimated net salvage value of $41773 at the end of 30 years. Assume an interest rate of 8%. What is the future worth of this project? Enter your answer as follow: 123456.78

Answer 1

8) First of all lets calculate installments

Installment = Loan/PVIFA(r%,n)

=(104403*25%) / PVIFA(10%,3 years)

=26100.75/2.486852

=10495.5$

Since tax rate is not given the above installment is not bifurcated into interest and principal component

Statement showing NPV

Particulars	0	1	2	3	4	5	NPV
Purchase price of machiney	-78302
Purchase price paid in installmet		-10496	-10496	-10496
Savings throught increased efficiency		62267	62267	62267	62267	62267
Maintenance expense		-20000	-20000	-20000	-20000	-20000
Salvage value						6409
Cash flow	-78302	31772	31772	31772	42267	48676
PVIF @ 12%	1.0000	0.8929	0.7972	0.7118	0.6355	0.5674
PV	-78302	28367	25328	22614	26861	27620	52489

9)

Statement showing future worth of project

Year	First cost	Maintenance cost	Salavge value	Cash flow	FVIF @ 8%	Future value
0	-163493			-163493	10.06	-1645174
1		-15852		-15852	9.32	-147697
2		-15852		-15852	8.63	-136757
3		-15852		-15852	7.99	-126627
4		-15852		-15852	7.40	-117247
5		-15852		-15852	6.85	-108562
6		-15852		-15852	6.34	-100520
7		-15852		-15852	5.87	-93074
8		-15852		-15852	5.44	-86180
9		-15852		-15852	5.03	-79796
10		-15852		-15852	4.66	-73885
11		-15852		-15852	4.32	-68412
12		-15852		-15852	4.00	-63345
13		-15852		-15852	3.70	-58653
14		-15852		-15852	3.43	-54308
15		-15852		-15852	3.17	-50285
16		-15852		-15852	2.94	-46560
17		-15852		-15852	2.72	-43111
18		-15852		-15852	2.52	-39918
19		-15852		-15852	2.33	-36961
20		-15852		-15852	2.16	-34223
21		-15852		-15852	2.00	-31688
22		-15852		-15852	1.85	-29341
23		-15852		-15852	1.71	-27168
24		-15852		-15852	1.59	-25155
25		-15852		-15852	1.47	-23292
26		-15852		-15852	1.36	-21566
27		-15852		-15852	1.26	-19969
28		-15852		-15852	1.17	-18490
29		-15852		-15852	1.08	-17120
30		-15852	41773	25921	1.00	25921
						-3399166

Thus future worth of project is $3399166