Verizon 4:50 PM * 7696( -+ a s2.lite.msu.edu Eric Christian DelannoyStudent sect
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Verizon 4:50 PM * 7696( -+ a s2.lite.msu.edu Eric Christian DelannoyStudent section: 001 New Messages Courses Help Logout ACC230, Spring 2018 - Survey of Accounting Concepts Main Menu Contents Grades Course Contents » » SECOND CHANCE Timer Notes Evaluate Feedback Print Info Reconsider the lecture example regarding Middletowrn Community College. The college has decided not to rent vending machines but instead to buy them. X Company will sell machines to Middletown and promises to buy them back in four years. Assume that Middletown's annual profit equation for the snack operation is $0.09(X) $54,100, where X is the number of snack items sold. Middletown expects to sell 790,000 snack items in each of the next four years. X Company is willing to negotiate the purchase price with Middletown, but it promises to purchase the machines back in four years for $3,000. Assuming Middletown wants a 8% return on this investment, what is the most they can pay for the vending machines? Submit Answer Tries 0/3 Communication Blocked Sed FeedbackExplanation / Answer
Annual Income from Project Profit Equation 0.09 X - 54100 Number of units sold (X) 790,000 Annual Income from Project 17000 Present Annuity factor for 4 yrs @8% 3.3121 Present value of Annual income 56305.7 Add: Present value of Buyback price 2205 (ie. $3000 *PVf of Year-4 i.e. 0.735) Total Present value 58510.7 Therefore, the Price at most they can pay is $58511
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