2. A piece of equipment now is use at a plant has a market value of $35,000. This market value is expected to decline by 30% per period (from the previous period) until it reaches zero at the end of period 5. The forecasted operating and repair cost of the equipment for the next period is $20,000 and this is expected to grow at a rate of 25% per period. Applying an interest rate of 11%, answer the questions below. a. What is the economic service life? b. What is the lowest period equivalent cost for keeping the equipment in operation for the economic service life?

2. A piece of equipment now is use at a plant has a market value of $35,000. This market value is expected to decline by 30% per period (from the previous period) until it reaches zero at the end of period 5. The forecasted operating and repair cost of the equipment for the next period is $20,000 and this is expected to grow at a rate of 25% per period. Applying an interest rate of 11%, answer the questions below. a. What is the economic service life? b. What is the lowest period equivalent cost for keeping the equipment in operation for the economic service life?

Name: 2. A piece of equipment now is use at a plant has a market value of $
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Description: 2. A piece of equipment now is use at a plant has a market value of $35,000. This market value isexpected to decline by 30% per period (from the previous period) until it reaches zero at the end of period5. The forecasted operating and repair cost o

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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Salalah Wind Energy has taken up a new project with an initial investment of 50000 OMR.The expected future cashflow from the project over the next three years will be 22500 OMR, 23500 OMR and 24500 OMR.What is the profitability index if the discount rate is 7 percent? اخترأحد الخيارات a. 1.63 b. 1.48 c. 1.44 d. 1.23 e. None of these
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a. Renting a machine will need monthly payments of $6,000 for the next 5 years (i.e., at t = 1, 2, …, 60). However,if we choose to buy the machine today,which is (t = 0) will cost $320,000. Assume the machine's value is zero after 5 years. It is possible to borrow and lend at a semi-annually compounded interest rate of 6% (APR). Would it be better to buy or to lease? Explain. b.We are currently at year 0. It is worthy to note that there is a perpetuity that pays $250 at the end of each odd year and $150 at the end of each even year. The term structure is flat at 10% per year. Evaluate the present value of this perpetuity. c.Assume the CAPM is valid.The return on asset ABC is perfectly correlated with the return on market portfolio. Your friend makes the following statetment: a portfolio that had a dollar invested and at the same time,shorting one dollar of the market portfolio will have no systematic risk. Comment on this and whether it is feasible.
Please show working Someone promises to pay you $1,000 in years 5, 10 and 15 for a total of $3,000. Assume your required return is 8%. a. what is the duration of this promise to pay you $3,000 over 15 years? b. what's the convexity? c. using the duration estimate alone, what is the estimated percentage price change in t=0 value if rates are expected to increase 2%?
A DSL company has made an equipment investment of $40 million with the expectation that it will be recovered in 10 years. The company has a MARR based on a real rate of return of 12% per year. If inflation is 7% per year, how much must the company make each year (a) in constant-value dollars, and (b) in future dollars, to meet its expectation?
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