2. Suppose a small company considers expanding its business. Buying new machineryand related equipment will cost $200,000 (which the owner has available from pastprofits). Owner has calculated that that investment will raise revenues by $23,000 peryear. The owner also estimates that it will become necessary to replace the newmachinery after 8 years. Should the owner buy the additional machinery if the realinterest rate is 3 percent? What if it were 3.5 percent? Since this is company's cashflow, should the owner care about the interest rate at all?

In economics, present values refer to the current value of a future stream of cash flow. The net…

Answered: 2. Suppose a small company considers…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Rearden Metals is considering opening a strip mining operation to provide some of the raw materials needed in producing Rearden metal. The initial purchase of the land and the as- sociated costs of opening up mining operations will cost $100 million today. The mine is expected to generate $30 million worth of ore per year for the next 10 years. In 11 years, when the project is over, Rearden will need to spend $200 million to restore the land to its original pristine natural appearance. Which of the following is FALSE? A) Rearden should only use the NPV rule in this case to determine whether to make this investment. B) Rearden could use either the NPV rule or the IRR rule in this case, and will get the same answer regardless of the cost of capital. C) In this case, the NPV will not necessarily be decreasing in the cost of capital or discount rate used. D) Rearden should not use the payback rule in this example because it is likely to be mis- leading. E) Rearden could make a mistake…
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1)How many years will it take to pay off a$525debt, with monthly payments of$15at the end of each month if the interest rate is18%, compounded monthly? i)3.1667 ii)6.1667 iii)5.1667 iv) 4.1667 2)Company A has fixed expenses of$15,000per year and each unit of product has a$0.20product at a$0.50variable cost. At what number of units of annual production will Company A have the same overall cost as Company B? i) 14,286 units ii) 66,666 units iii) 33,333 units iv) 28,572 units 3)The Profit From the monthly sale of x tons of a product, in thousands of dollars, is given by the function:P(x)=−0.05x²+1.6x−3. The maximum possible profit is i)$11,800 ii)$9,800 iii)$12,800 iv)$10,800 i need above 3 three i will 10 upvotes plz urgent no use excel only typing.
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2.One of life's great lessons is to start early and save all the money you can! If you save $10 today and $10 each and every day thereafter until you are 60 years old(suppose you're 20 years old now, save $3,650 per year), how nuch money will you accumulate if the annual interest rate is 5%?
2. Thomas is considering buying an artificial Christmas tree. The tree costs $285 and is expected to last six years. The alternative is to keep purchasing natural trees, which currently cost $35 (Christmas year 0) and are expected to increase $5 in price each of the subsequent years, e.g. +$40, +$45, +$50, etc. Note: Draw two cash flow diagrams for this problem. a. What decision would you advise regarding the two options? b. What additional information may be useful or necessary in order to make a decision? c. Which option is the better choice? Why?

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