5-34. The required investment cost of a new, largeshopping center is $50 million. The salvage valueof the project is estimated to be $20 million (the valueof the land). The project's life is 15 years and the annualoperating expenses are estimated to be $15 million. TheMARR for such projects is 20% per year. What must theminimum annual revenue be to make the shopping centera worthwhile venture? (5.5)

This is a minimum revenue problem based on the MARR (Minimum Attractive Rate of Return) concept. Let…

Answered: 5-34. The required investment cost of a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3EB: A restaurant is considering the purchase of new tables and chairs for their dining room with an...

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A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
The required investment cost of a new, large shopping center is $50 million. The salvage value of the project is estimated to be $20 million (the value of the land). The project’s life is 15 years and the annual operating expenses are estimated to be $15 million. The MARR for such projects is 20% per year. What must the minimum annual revenue be to make the shopping center a worthwhile venture?
The required investment cost of a new, large shopping center is $52 million. The salvage value of the project is estimated to be $18 rmillon (the value of the land) The projects life is 18 years and the annual operating expenses ar estimated to be $13 million. The MARR for such projects is 22% per year. What must the minimum annual revenue be to make the shopping center a worthwhile venture? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 22% per year To make the shopping center a worthwhile venture, the minimum annual revenue must be S milion per year (Round to three decimal places)
The construction cost of a permanent water park is $550,000. Annual maintenance and operation costs are $100,000 per year. A) At an interest rate of 7% per year, find the capitalized cost of the park in present worth. (Hint: a capitalized cost is when every cost is brought to present worth, in this case the upfront construction costs are current). B) What would be the annualized cost if the whole project was to be financed over 25 years at 6% interest?
The ABC Transportation estimates the cost of upgrading a highway to be $85million now. Resurfacing and other maintenance will cost $550,000 every 3 years. Annualrevenue is expected to be average $18.5 million. If i = 8% per year, what isa) the capitalized cost now,b) the equivalent A value of this capitalized cost?
A newly constructed bridge costs $10,000,000. The same bridge is estimated to need renovation every 10 years at a cost of $1,000,000. Annual repairs and maintenance are estimated to be $100,000 per year.(a) If the interest rate is 5%, determine the capitalized-equivalent cost of the bridge.{b) Suppose that the bridge must be renovated every 15 years, not every10 years. What is the capitalized cost of the bridge if the interest rate is thesame as in (a)?(c) Repeat (a) and (b) with an interest rate of 10%. What can you say about the effect of interest on the results?
The annual benefits associated with construction of an outer belt highway are estimated at $10.5 million by a local planning commission. The initial construction costs will be $400 million, and the project’s useful life is 50 years. Annual maintenance costs are $500,000 with periodic rebuilding costs of $10 million every 10 years. If interest is 2%, the benefit–cost ratio is closest to what value? (a) 0.25 (b) 0.75 (c) 1.11 (d) 1.35?
Problem Solving. Solve the following problems completely. 4. Atty. Gacayan invested P280, 000 which will be used in a project that will produce auniform annual revenue of P180,000 for 5 years and then have a salvage value of 16% ofthe investment. Out-of-pocket costs for operation and maintenance will be P80,000 peryear. Taxes and insurance will be 3% of the first cost per year. Atty Gacayan expectscapital to earn not less than 30% before income taxes. Determine if the investment is goodand Calculate the following:A. Present worth of the net cash flow.
1. A start-up biotech company is considering making an investment of $100,000 in a newfiltration system. The associated estimates are summarized below: Annual receipts $75,000Annual expenses $45,000Useful life 8 yearsSalvage value $20,000 Straight line depreciation will be used, and the effective income tax rate is 20%. The After-tax MARR is 15% per year. Determine whether this investment is an attractive option for the company.
A new project will cost $40,000 to fund today, and an additional $40,000 next year. The device built will generate revenues of $17,000 starting in year 2 which increases by 4% each year until the device is sold at the end of year 12. The device’s salvage value is $10,000. $2,000 of maintenance is required every year. What is the NPV of building this device, if the interest to borrow the funds is 15%? (Round to nearest dollar)
2. Central Concrete is evaluating a project that would cost $265,000 today. The project is expected to have the following other cash flows: -$35,000 in 1 year, $182,000 in 2 years, $131,000 in 3 years, and $83,000 in 4 years. The cost of capital of the project is 7.93 percent. What is the net present value of the project?
A project requires an immediate investment of $14,000 for the purchase and installation of equipment. The project is expected to generate after-tax cashflows in the amount of $5,000 at the end of each of the next four years. The appropriate discount rate is 10%. What is the net present value (NPV) of the project? [Select the best answer, please.] $ 815 $ 825 $ 1,850 $ 2,150 $ 15,850

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