Question

You are considering purchasing a CNC machine which costs $130,000. This machine will have an estimated service life of 10 years with a net aftier-tax salvage value of $13,000. Its annual after-tax operating and maintenance costs are estimated to be $60,000. To expect an 17 % rate of return on investment, what would be the required minimum annual after-tax revenues? Click the icon to view the interest factors for discrete compounding when /-17 % per year The required minimum annual after-tax revenues would be Sthousand. (Round to one decimal place.) More Info Single Payment Compound Amount Eaual Payment Series Present Worth Compound Amount Factor Sinking Fund Present Capital Recovery Factor Worth Factor Factor Factor (FIP I, N) Factor (PIA, , N) 0.8547 (P/F, L, N (FIA, L, N) 1.0000 (A/F , N) (A/P, L, N) N 1.1700 0.8547 1.0000 1.1700 2.1700 0.4608 1.5852 1.3689 0.6308 2 0.7305 3.5389 0.6244 0.2826 2.2096 0.4526 3 1.6016 5.1405 2.7432 1.8739 0.5337 0.1945 0.3645 4 7.0144 3.1993 2.1924 0.1426 0.3126 5 0.4561 0.1086 3.5892 2.5652 9.2068 0.2786 6 0.3898 3.9224 0.2549 3.0012 11.7720 0.0849 7 0.3332 nter un oF aneu A 7793 A 2079 09977 E444

Answer 1

Solution:-

Formula:-

PW (i) = D + A (P/A, i, N) + F(P/F, i, N)

Where,

• P = Present value of the sum of money
• F = Future value of the sum of money
• D = The initial Cost of the problem at hand
• A = The annual cost of the problem at hand
• i = Interest rate (which is unknown in this case)
• N = Number of terms that the money is for

PW(0.17) = -1,30,000 + ($X - $60,000)(P/A, 0.17, 10) + $13,000 (P/F, 0.17, 10)

                   = -1, 30,000 + ($X - $60,000) (4.659) + $13,000 (0.2080)

                   = -1, 30,000 + 4.659X – $279,540 + $2704

                   = $406,836 + 4.659X

     4.659X = $406,836

               X = $406,836 / 4.659

               X = $87,322.6