x
Info
x
Warning
x
Danger
 / 
 / 
 / 
93. Bison Mfg. considering two options for purchasing comparable machinery. Machine

Question : 93. Bison Mfg. considering two options for purchasing comparable machinery. Machine : 1412662

 

 

93.

Bison Mfg. is considering two options for purchasing comparable machinery. Machine 1 will cost $27,500 plus an annual maintenance fee of $1,500 per year for four years. Machine 2 will cost $25,000 with maintenance being an add-on charge. The estimated cost of maintenance is $1,000 the first year, $3,000 the second year, and $4,000 the third year and the fourth year. Assume the purchase cost is paid up front, but that maintenance is paid for at the end of each year. Interest is at 10%. Ignore income taxes and residual values.

Required: 

Determine which machine should be chosen based on present value considerations.


 
 


Option A should be chosen because it has the lower cost based on present value considerations.

 

 

 

94.

On May 1, 2016, Bo Smith, proud father of newborn son Bobo, purchased $200,000 in zero-coupon bonds that mature on May 1, 2036. The bonds pay no interest during the period of time they are outstanding. The interest rate for such borrowings is at 9%. Interest compounds annually.

Required: 

Calculate the price Bo paid for the bonds.


 
 

 

 

 

 

95.

On February 1, 2016, Lynda Brown, proud mother of newborn daughter Goldie, purchased $600,000 in zero-coupon bonds that mature on February 1, 2036. The bonds pay no interest during the period of time they are outstanding. The interest rate for such borrowings is at 12%.

Required: 

Calculate the price Lynda paid for the bonds.


 
 

 

 

 

 

 

Solution
5 (1 Ratings )

Solved
Accounting 1 Year Ago 38 Views
This Question has Been Answered!
Unlimited Access Free
Explore More than 2 Million+
  • Textbook Solutions
  • Flashcards
  • Homework Answers
  • Documents
Signup for Instant Access!
Ask an Expert
Our Experts can answer your tough homework and study questions
150323 Accounting Questions Answered!
Post a Question