Question

National Widgets Incorporated is buying a new delivery vehicle that they believe will increase their profits. Vehicle A will

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Vehicle A

Present worth = Present worth of benefits -Present worth of costs

Present worth = 5600{1- [(1+g)/(1+i)]^n / i-g } - 28000

Here i = 10%; g = 2%; n =10 years

Present worth = 5600{1- [(1+0.02)/(1+0.1)]^10 / 0.1-0.02 } - 28000

Present worth = 37101.74 - 28000

Present worth = $ 9101.7

Vehicle B

Present worth = Present worth of benefits -Present worth of costs

Present worth = 5400{1- [(1+g)/(1+i)]^n / i-g } - 29500

Here i = 10%; g = 4%; n =10 years

Present worth = 5400{1- [(1+0.04)/(1+0.1)]^10 / 0.1-0.04 } - 28000

Present worth = 38637.15 - 29500

Present worth = $ 9137.15

Since the PW of Vehicle B is higher the same is to be choosen

Add a comment
Know the answer?
Add Answer to:
National Widgets Incorporated is buying a new delivery vehicle that they believe will increase their profits....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • You are considering buying a delivery van for your company. It will cost​ $35,000 right now​...

    You are considering buying a delivery van for your company. It will cost​ $35,000 right now​ (Year 0), and you estimate that with the​ van, your profits will be​ $7,500 per year for Years 1 through 10. At the end of Year​ 10, you think you can sell the van for​ $1,000. Assume a MARR of​ 18%. a. What is the present worth of the​ van? b. Is this investment worth​ considering? a. What is the present worth of this​...

  • please help ill rate even if you only get 2/3 correct your company manufaftjres widgets. the...

    please help ill rate even if you only get 2/3 correct your company manufaftjres widgets. the new widget will cost $10,000 and you estimate each year will cost $3,000. you plan to manufacture them for 20 years at which point you will sell the equipment for $2,000. the MARR is 10%, how much revenue do you need to make each year for the annual worth of the project to be greater than 0? 1. what isthe annualized value of the...

  • please help ill rate even if you only get 2/3 correct Your company manactures widgets and...

    please help ill rate even if you only get 2/3 correct Your company manactures widgets and you're about to starting a new type of widget the Super Wide Supreme. The new equipment manufacture the Super Widget Supreme cost $10.000, and you mate your expenses cach e $3.000. You plan to manufacture them for 20 years, which point you will be able to the equipment for $2.000 if your company's MARR 10% how much evene do you need to make each...

  • You purchase a widget-making machine that can produce $4,000 worth of widgets each year for up...

    You purchase a widget-making machine that can produce $4,000 worth of widgets each year for up to four years. However, there is a 15% chance that the machine will break entirely at the end of each year after the cash for that year has been produced. (This is roughly the process describing how incandescent light bulbs burn out, too.) What is the expected NPV of this widget machine? Assume a 10.9% discount factor, applicable beginning with the first $4,000. ___________________...

  • Net Present Value Method Rapid Delivery, Inc., is considering the purchase of an additional delivery vehicle...

    Net Present Value Method Rapid Delivery, Inc., is considering the purchase of an additional delivery vehicle for $38,000 on January 1, 2016. The truck is expected to have a five-year life with an expected residual value of $7,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $65,000 per year for each of the next five years. A driver will cost $46,000 in 2016, with an expected annual salary increase...

  • Please help me in this economics problem You are considering two investment options. In option A,...

    Please help me in this economics problem You are considering two investment options. In option A, you have to invest $5,500 now and $800 three years from now. In option B, you have to invest $3,800 now $1,800 a year from now, and $1,000 three years from now. In both options, you will receive four annual payments of $1,800 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a)...

  • AM Express Inc. is considering the purchase of an additional delivery vehicle for $45,000 on January...

    AM Express Inc. is considering the purchase of an additional delivery vehicle for $45,000 on January 1, 20Y1. The truck is expected to have a five-year life with an expected residual value of $6,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $60,000 per year for each of the next five years. A driver will cost $42,000 in 20Y1, with an expected annual salary increase of $3,000 for each...

  • Net Present Value Method Rapid Delivery, Inc., is considering the purchase of an additional delivery vehicle...

    Net Present Value Method Rapid Delivery, Inc., is considering the purchase of an additional delivery vehicle for $30,000 on January 1, 2016. The truck is expected to have a five-year life with an expected residual value of $5,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $58,000 per year for each of the next five years. A driver will cost $42,000 in 2016, with an expected annual salary increase...

  • You are considering two investment options. In option A. you have to invest $6,000 now and...

    You are considering two investment options. In option A. you have to invest $6,000 now and $700 three years from now. In option B. you have to invest $3,000 now, $1,300 a year from now, and $800 three years from now. In both options, you will receive four annual payments of $1,900 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the...

  • Finch Delivery is a small company that transports business packages between New York and Chicago. It...

    Finch Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Finch Delivery recently acquired approximately $6.3 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds....

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT