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ClassHW_7

# ClassHW_7 - Hw-7 Solutions 1(9.1 The investment value of...

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Hw-7 Solutions 1. (9.1) The investment value of the old lift truck is its current market value. Defender: PW(20%) = - \$7,000 - \$8,000(P/A, 20%, 5) = - \$30,925 Challenger: PW(20%) = - \$22,000 - \$5,100(P/A, 20%, 5) + \$9,000(P/F, 20%, 5) = - \$33,635 Keep the old lift truck (PW Defender > PW Challenger ). 2. (9.6) EOY EUAC 1 \$62,000 2 \$55,950 = \$80,000(A/P, 15%, 2) \$50,000(A/F, 15%,2) + \$30,000 3 \$54,960 = \$80,000(A/P, 15%, 2) \$50,000(A/F, 15%,2) + [\$30,000(P/A, 15%, 2) + \$35,000(P/F, 15%, 3)](A/P, 15%, 3) 4 \$56,170 5 \$56,920 3. (9.7) Challenger Year Market Value Loss in Value Cost of Capital O&M Marginal Cost EUAC 0 \$42,500.00 −− −− −− −− −− 1 \$31,000.00 \$11,500.00 \$6,375.00 \$10,000.00 \$27,875.00 \$27,875.00 2 \$25,000.00 \$6,000.00 \$4,650.00 \$12,500.00 \$23,150.00 \$25,677.33 Defender Year Market Value Loss in Value Cost of Capital O&M Marginal Cost EUAC 0 \$25,000.00 −− −− −− −− −− 1 \$17,000.00 \$8,000.00 \$3,750.00 \$14,000.00 \$25,750.00 Not necessary to calculate EUAC! Min(EUAC) of Challenger < Marginal Cost of keeping Defender for 1 additional year;

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ClassHW_7 - Hw-7 Solutions 1(9.1 The investment value of...

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