Please show work 21) Walt Wallace Construction Enterprises is investigating the
ID: 1092300 • Letter: P
Question
Please show work
21)
Walt Wallace Construction Enterprises is investigating the purchase of a new dump truck with a 10-year life. Interest is 9%. The cash flows for two likely models are shown below. The present worth of dump truck B is most nearly?
22)
If the owner earns 8% interest on her investments, determine the present worth (at purchase) of owning a car with the following costs (EOY = end of year).
23
A college student has been looking for new tires and has found the following alternatives:
The student feels that the warranty period is a good estimate of the tire life and that a 10% interest rate is appropriate. What is the equivalent annual cash flow value for the 40-month warranty?
Model First Cost Annual Operating Cost Annual Income Salvage Value A $60,000 $3000 $10,000 $20,000 B $90,000 $2000 $14,000 $30,000Explanation / Answer
21.For company B,
Annual Cost
PV
Annual Income
PV
0
90000
90000
0
0
1
2000
1834.862
14000
12844.04
2
2000
1683.36
14000
11783.52
3
2000
1544.367
14000
10810.57
4
2000
1416.85
14000
9917.953
5
2000
1299.863
14000
9099.039
6
2000
1192.535
14000
8347.743
7
2000
1094.068
14000
7658.479
8
2000
1003.733
14000
7026.128
9
2000
920.8556
14000
6445.989
10
2000
844.8216
44000
18586.08
SUM
102835.3
SUM
102519.5
Therefore the PV = $102519.5 -$102835.3 = ($315.78)
23.
Year
downpayment
Annual payment
Insurance
gas n oil
Tires
Maintenance
salvae Value
0
2200
1
5500
1500
2000
2
5500
1500
2100
3
5500
1500
2200
4
5500
1500
2300
650
5
0
1500
2400
2400
6
0
1500
2500
4750
Present Values
Year
downpayment
Annual payment
Insurance
gas n oil
Tires
Maintenance
salvae Value
0
2200
1
5092.59
1388.889
1851.852
2
4715.36
1286.008
1800.412
3
4366.08
1190.748
1746.431
4
4042.66
1102.545
1690.569
477.7694
5
0
1020.875
1633.4
1633.4
6
0
945.2544
1575.424
4072.359
SUM
2200
18216.70
6934.32
10298.09
477.77
1633.40
4072.36
Present Net worth = (2200+18216.70+6934.32+10298.09+477.77+1633.40)-4072.36 =$35687.91
23. equivalent annual cash flow value for the 40-month warranty = 109.95/(1+10%/12)^40 =$78.8915
Annual Cost
PV
Annual Income
PV
0
90000
90000
0
0
1
2000
1834.862
14000
12844.04
2
2000
1683.36
14000
11783.52
3
2000
1544.367
14000
10810.57
4
2000
1416.85
14000
9917.953
5
2000
1299.863
14000
9099.039
6
2000
1192.535
14000
8347.743
7
2000
1094.068
14000
7658.479
8
2000
1003.733
14000
7026.128
9
2000
920.8556
14000
6445.989
10
2000
844.8216
44000
18586.08
SUM
102835.3
SUM
102519.5