1. A capitalized cost of $24,000 has been set aside to pay for the annual mainte
ID: 2802226 • Letter: 1
Question
1. A capitalized cost of $24,000 has been set aside to pay for the annual maintenance costs for the main unspan on Hofstra's campus. Given a 6.2% annual interest rate, what is the annual expense of maintaining the unispan. 2. A certain industrial firm desires an economic analysis to determine which of two different machines should be purchased. Each rmachine is capable of performingthe same task in agiven amount of time. Assume an interest rate of 8%. The following data are to be used in this analysis: Machine Y $8000 12 $2000 $150 Machine X $5000 First cost Estimated life, in years Salvage Value Annual maintenance cost 0 Which machine would you choose? Base your answer on equivalent annual cost. 3·The maintenance foreman of a plant in reviewing his records found that a large press had the following maintenance cost record over the last five years: 5 yrs ago: $600 4 yrs ago: $700 3 yrs ago: $800 2 yrs ago: $900 Last year: $1000 After consulting with a lubrication specialist, he changed the preventive maintenance schedule. He believes that this year maintenance will be $900 and decrease $100 a year in each of the following four years. If his estimate of the future is correct, what will be the equivalent uniform annual maintenance cost for the ten-year period? Assume interest at 8%. Joshua would like to purchase new tires at the end of the month, and has found the following alternatives: 4. Tire Warranty (Years) Price per Tire $39.95 $59.95 S69.95 $90.00 4 Joshua feels that the warranty period is a good estimate of the tire life and that a 12% nominal interest rate is appropriate. Using an annual cash flow analysis, which tire should be purchased?Explanation / Answer
1)
Annual expenses of maintaining the unispan:
= Amount set aside*Rate
= $24,000*6.20%
= $1,488
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