Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A construction company now plans to buy a kind of big trencher for a gas pipeline project. The trencher costs $200,000 .It is supposed to

A construction company now plans to buy a kind of big trencher for a gas pipeline project. The trencher costs $200,000 .It is supposed to operate for next 7 years. At the end of the 7th year, the company plans to sell it for $30,000 ( estimated market value )

The annual operating cost is estimated to be $30,000. On the other hand, It is expected to have $80,000 annual revenues in each year. For the calculations convenience we can simply assume that the annual cost and revenues occurs at the end of each year.

At the end of the fifth year ,it is expected to have a major maintenance, and it's cost is estimated to be $20,000 at that time. Answer the following question

1- Draw the cash flow Diagram

2- Based on the above statement of cash flows, What is the equivalent annuity of this truck over this period of 7 years, using the discount rate 10%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technology Ventures From Idea To Enterprise From Idea To Enterprise

Authors: Richard C Dorf, Byers

3rd Global Edition

9780071289214

More Books

Students also viewed these Economics questions

Question

Differentiate between intelligence testing and achievement testing.

Answered: 1 week ago