Solve the two question below using excel spreadsheet.
1. A small machine costs $10,000 and at the end of a 5 year life will have a disposal cost of $200. The machine will be used to process 1,000kg of material per month over the whole of the 5 year life. For interest rates of 6%, and 12% calculate a. The present equivalent value of the machine. b. The contribution to the cost of processing the material, per kg, resulting from the capital cost of the machine.
2. You have a choice of buying equipment for $10,000, with the expectation of a service life of 4 years from this equipment. The interest rate is 10%. You could rent equivalent equipment for $90 per day and additional overhead costs of $100 for each time the equipment is rented. If a typical job using the equipment takes three days, how many days per year would the builder need to use the equipment in order to make buying preferable? Assume salvage value of $0. Assume storage per day when not in use costs $10. For the purpose of this calculation assume the year has 365 days available for work.