Finance Assignment Help 53

1. A machine costing $35,000 to buy and $5,000 per year to operate will save mainly labor expenses in packaging over six years. The anticipated salvage value of the machine at the end of seven years is $5,000.
a. If a 10% return on investment (rate of return) is desired, what is the minimum required annual savings in labor from this machine?
b. If the service life is six years instead of seven, what is the minimum required annual savings in labor for the firm to realize a 10% return on investment?
c. If the annual operating cost increases by 15%, from $5,000 to $5,750, what would the minimum required annual savings to get the 10% return on investment?

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2. A company is looking at purchasing new vehicles to enhance their fleet. Which of the following vehicles would be the best in terms of lowest annual cost if the interest rate = 12% if the vehicles had a service life of 3 years? 4 years? 5 years?
Vehicle Initial    Cost Annual     Operating
Salvage Value                                           Cost
A $20,000                 $5,000            $2,000
B  $25,000                 $3,500             $2,500
C   $30,000                $2,000             $3,250
D   $35,000                 $1,000            $4,000
4. A company’s accounting record shows the following:
Truck A Truck B
Purchase Cost: $22,500 $45,000
Salvage Value: $2,000 $4,500
Useful Life (miles): 150,000 200,000
Miles Driven During Year: 13,000 24,000


4. A company in its first year of operation expects the following financial results from a project:
Sales revenue: $500,000
Variable costs: $155,000
Fixed costs: $80,000
Compute the break-even point in units sold if the company expects to produce and sell 15,000 units.

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