1.) A project is estimated to cost P100,000, lasts 8 years and have a P10,000 salvagevalue. The annual gross income is expected to average P24,000, and annual expenses,excluding depreciation will total P6,000. If capital is earning 10% before income tax,determine if this is a desirable investment using A.) Rate of Return Method and B.)Annual Cost or Worth Method.II. Gradients (Shows solutions manually):2.) The year-end operating and maintenance costs of a certain machine are estimatedto be P12,000 the first year and to increase by P2,500 each year during its 4-year life. Ifcapital is worth 12%, determine the equivalent uniform year-end costs.3.) Annual maintenance costs for an equipment are P1,500 this year and are estimatedto increase 10% each year every year. What is the present worth of maintenance costfor six years if i = 12%

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Answered: 1.) A project is estimated to cost…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Consider the following proposed capital investment in an engineering project and determine its (a) year-by-year ATCF, (b) after-tax AW, and (c) annual equivalent EVA.
Determine the average rate of return for a project that is estimated to yield total income of $220,800 over 4 years, cost $419,000, and has a $41,000 residual value.
Determine the average rate of return for a project that is estimated to yield total income of $484,440 over 4 years, costs $668,000, and has a $66,000 residual value.
Determine the average rate of return for a project that is estimated to yield total income of $356,400 over 4 years, costs $601,000, and has a $59,000 residual value.%
If produced by Plan A, a producer’s initial capital cost will be $120,000, its annual operating cost will be $30,000, and its salvage value after 4 years will be 20,000. With Plan B, there is a first cost of $240,000, an annual operating cost of $10,000, and $40,000 salvage value after 4-year life. Based on a present worth analysis at 15% interest rate, which plan should be chosen?
A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC investment of $2,440, and an annual OCF of −$39,040. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is the project's equivalent annual cost, or EAC? Show equations using excel.
A project requires an initial investment of $322,990 and its expected life is 7 years. Net operating income from the project is expected to be $28,100 each year, including depreciation of $42,270. The salvage value of the assets is expected to be $27,100 at the end of the life of the project. Ignoring income taxes, the payback period is: (Round your answer to 2 decimal places.) Payback period years
h
Explain how did it get the after-tax cash flow, NPV, EVA, and MVA
For this investment, an initial amount of $25,000 should be paid this year (t=0). As of next year (t=1), five equal payments of $20,000 should also be paid (i.e., from t=1 to t=5). Thus, the sum of the required investment expenditure over those periods is $125,000. How much is the sum of the present value of the required investment expenditure over those periods, assuming that the annual interest rate is 5%?
The expected annual net income is $200,000; the average investment is $800,000; and depreciation expense is $50,000. The annual rate of return is
A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $ -810,000 Equipment replacement cost in year 2, $ -300,000 Annual operating cost, $/year Salvage value, $ Life, years -860,000 250.000 4 an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors. e equivalent annual cost of the project is $-820000

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