Alternative R has a first cost of $82,000, annual M&O costs of $52,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $70,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 24%.
The M&O cost for alternative S is $_____ .
Let x = M & O costs.
Incremental cash flow analysis.
0 = -93,000 + (-x + 52,000)(P/A,24%,5) + 50,000(P/F,24%,5)
0 = -93,000 + (-x + 52,000)(2.7454) + 50,000(0.3411)
x = $-93000+142760.8+17055/2.7454
x=66815.8/2.7454
x=24337.36
M & O cost for S = $24337.36
Alternative R has a first cost of $82,000, annual M&O costs of $52,000, and a $20,000...
Alternative R has a first cost of $76,000, annual M&O costs of $54,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $61,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 30%. The M&O cost for alternative S is____ $ .
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Daily Enterprises is purchasing a $9.9 million machine. It will cost $52,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. The machine will generate incremental revenues of$ 3.9 million per year along with incremental costs of $1.2 million per year. If Daily's marginal tax rate is 35%, what are the incremental earnings (net income) associated with the newmachine? The annual incremental earnings are $___. (Round to the...
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