Question

9) An investor wants to invest in the trucking business. To run this business, 10 trucks should be acquired. The market price of a truck is $50 000. It is also necessary to pay $390 000 per year as wages to the truck drivers. Vehicle repair and maintenance costs are $10 000 per year. What is the annual worth of the project's costs at 5% MARR over a 10-year period? A) S400 000 B) $406 475 C) $454 750 D) $464 750 E) $551 800 10) The annual worth method is A) similar to the present worth method but transforms all annuities to a uniform series at the minimum acceptable rate of return. B) similar to the present worth method but transform all annuities to arithmetic gradient series at the minimum acceptable rate of return. C) methodologically different from the present worth method since it does not convert all annuities to the present worth at the minimum acceptable rate of return. D) similar to the present worth method since it transforms all annuities to the present worth as a single payment E) similar to the present worth method except that all payments are converted into a geometric gradient series. 11) What is the present worth of an independent project that requires initial investment of $50 000 and annual maintenance costs of $4 000 for 10 years at a 4% minimum acceptable rate of return? A) -$4 000 B)-S32 444 C)-$54 000 D) -$82 444 E) -$17 556 12) Annual worth comparison method A) should be used widely because it does not have to assume a fixed minimum acceptable rate of return over the duration of a project. B) can be preferable to the payback period method because the latter discriminates over the short-term projects. C) should be used whenever it requires less calculations than the present worth method since the two methods lead to the same result for projects with equal lives. D) can provide more accurate estimates of a project worth for the related but not mutually exclusive projects then other methods. E) is always preferred to the present worth method for comparison of two projects with the same service lives.

Answer 1

Question 9

Market price of truck = $50,000

Total number of trucks purchased = 10

Total amount paid for trucks = market price of trucks * total number of trucks purchased = $50,000 * 10 = $500,000

The total amount paid for trucks is $500,000.

Annual salaries paid to truck drivers = $390,000

Annual repair and maintenance cost = $10,000

Time period = 10 years

MARR = 5%

Calculate the annual worth of the project -

AW = Total amount paid for trucks(A/P, i, n) +Annual salaries paid to truck drivers + Annual repair and maintenance cost

AW = $500,000(A/P, 5%, 10) + $390,000 + $10,000

AW = [$500,000 * 0.1295] + $390,000 + $10,000

AW = $64,750 + $390,000 + $10,000

AW = $464,750

Thus,

The annual worth of the project's cost is $464,750

Hence, the correct answer is the option (D)

Note -: As per the Chegg Answering Policy, when more than 1 question is posted then, in that case, only 1st posted question is answered with complete explanation.