33 A company has a need for a snow removal machine. The machine can be purchased for the cost of $25,000. The machine is expected to have a life of 6 years with no salvage value. The annual operating cost amounts to $5,000. Alternatively, the machine can be rented at the cost of $400 per day payable at the end of the year. (a) Determine Net Present Worth for buying option. Use an interest rate of 10% per year. (5 points) (b) Determine the number of days per year that snow removal is required in order to justify the purchase decision. Use an interest rate of 10% per year(10 points) (C) If the machine was needed for 30 days only every year, should the company BUY or RENT the machine? Justify your answer(5 points) ) (20 Points) Enter your answer 32 As part of the rehabilitation of the downtown area of a southern U.S. city, the Parks and Recreation Department is planning to develop the space below several overpasses into basketball, handball, miniature golf, and tennis courts. The initial cost is expected to be $150,000 for improvements which are expected to have a 20-year life. Annual maintenance costs are projected to be $12,000. The department expects 24,000 people per year to use the facilities an average of 2 hours each. The value of the recreation has been conservatively set at $0.50 per hour. (a) At an interest rate of 3% per year, what is the conventional B/C ratio for the project? (15 points) (b) Is the project economically justified? (5 points) (20 Points) Enter your answer 34 Fill in the blank in the following two PW equations by using the following Table. PWX = -150,000 + (P/A, 15%, .)- (P/F, 15%, + 25,000 (P/F, 15%, PWY = + + (P/A, 15%, _) 65 (P/F, 15%, (10 Points) Initial Cost (8) Annual Income (S/year) Annual Expenses (S/year) Salvage Value (8) Life (years) Alternative X Alternative Y - 150,000 250,000 20,000 40,000 9,000 -14,000 25,000 35,000 3 6 Enter your