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  • Finance Assignment

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    prashantgargindia_93
    14 vues1 page
    The document compares the net present value of various replacement cycles for equipment over a period of 6 years. It shows that the 4 year replacement cycle has the highest net present value, making it the most economically favorable option. Therefore, the estimated service life that minimizes average equivalent annual cost is 4 years.

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    Solution for Finance Problems

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    The document compares the net present value of various replacement cycles for equipment over a period of 6 years. It shows that the 4 year replacement cycle has the highest net present value, making it the most economically favorable option. Therefore, the estimated service life that minimizes average equivalent annual cost is 4 years.

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    14 vues1 page

    Finance Assignment

    Transféré par

    prashantgargindia_93
    The document compares the net present value of various replacement cycles for equipment over a period of 6 years. It shows that the 4 year replacement cycle has the highest net present value, making it the most economically favorable option. Therefore, the estimated service life that minimizes average equivalent annual cost is 4 years.

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 1

    ReplacementCycle1yr

    Time
    Initialcost
    Maintenance
    Residualvalue
    Netcashflows
    20%discount
    Presentvalues
    Netpresentvalue

    ReplacementCycle4yr
    Time
    Initialcost
    Maintenance
    Residualvalue
    Netcashflows
    20%discount
    Presentvalues
    Netpresentvalue

    ReplacementCycle6yr
    Time
    Initialcost
    Maintenance
    Residualvalue
    Netcashflows
    20%discount
    Presentvalues
    Netpresentvalue

    Year
    1
    2
    3
    4
    5
    6

    0
    40,000

    40,000
    1.000
    40,000
    25,833

    0
    40,000

    15000
    32000
    17,000
    0.833
    14,167

    0
    40,000

    40,000
    1.000
    40,000
    42,083

    15000

    15000
    30000
    15,000
    0.694
    10,417

    15,000
    0.833
    12,500

    ReplacementCycle5yr
    Time
    Initialcost
    Maintenance
    Residualvalue
    Netcashflows
    20%discount
    Presentvalues
    Netpresentvalue

    15000

    15000

    15000

    40,000
    1.000
    40,000
    69,186

    15,000
    0.833
    12,500

    15,000
    0.694
    10,417

    15,000
    0.579
    8,681

    15000
    20000
    5000
    0.482253086
    2411.265432

    0
    40,000

    15000

    15000

    15000

    15000

    15000

    15,000
    0.833
    12,500

    15,000
    0.694
    10,417

    15,000
    0.579
    8,681

    15000
    0.482253086
    7233.796296

    15000
    0.401877572
    6028.16358

    15000
    0
    15000
    0.334897977
    5023.46965

    40,000
    1.000
    40,000
    89,883

    NPV
    25,833
    42,083
    57,708
    69,186
    80,439
    89,883

    Answer:ESL=4Yrs

    ReplacementCycle2yr
    Time
    Initialcost
    Maintenance
    Residualvalue
    Netcashflows
    20%discount
    Presentvalues
    Netpresentvalue

    AnnuityFactor
    1.2000
    0.6545
    0.4747
    0.3863
    0.3344
    0.3007

    EAC
    ($31,000.00)
    ($27,545.45)
    ($27,395.60)
    ($26,725.78)
    ($26,897.01)
    ($27,028.23)

    *=MinimumEAC,HenceESL=4yrs

    ReplacementCycle3yr
    Time
    Initialcost
    Maintenance
    Residualvalue
    Netcashflows
    20%discount
    Presentvalues
    Netpresentvalue

    0
    40,000

    40,000
    1.000
    40,000
    80,439

    0
    40,000

    15000

    15000

    40,000
    1.000
    40,000
    57,708

    15,000
    0.833
    12,500

    15,000
    0.694
    10,417

    15000
    24000
    9,000
    0.579
    5,208

    15000

    15000

    15000

    15000

    15,000
    0.833
    12,500

    15,000
    0.694
    10,417

    15,000
    0.579
    8,681

    15000
    0.482253086
    7233.796296

    15000
    11000
    4000
    0.401877572
    1607.510288

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