6-76 An office building should last 60 years, but thisowner will sell it at 20 years for 40% of its con-struction cost. For the first 20 years it can be leasedas Class A space, which is all this owner operates.When the building is sold, the land's cost will berecovered in full.$2.2MLand$4.1MBuilding$640,000 Annual operating and maintenanceAnnual property taxes and insurance(% of initial investment)(a) If the owner wants a 12% rate of return, what isthe required monthly leasing cost?(b) Assuming that the building is vacant 5% of thetime, what is the required monthly lease?(c) What is an example monthly cost per square footfor Class A space in your community?4%

Given, Total life of office building = 60 years Useful for lease = 20 years Land = $2.2 M =…

6-76 An office building should last 60 years, but this owner will sell it at 20 years for 40% of its con- struction cost. For the first 20 years it can be leased as Class A space, which is all this owner operates. When the building is sold, the land's cost will be recovered in full. $2.2M Land $4.1M Building $640,000 Annual operating and maintenance 4% Annual property taxes and insurance (% of initial investment) (a) If the owner wants a 12% rate of return, what is the required monthly leasing cost? (b) Assuming that the building is vacant 5% of the time, what is the required monthly lease?

6-76 An office building should last 60 years, but this owner will sell it at 20 years for 40% of its con- struction cost. For the first 20 years it can be leased as Class A space, which is all this owner operates. When the building is sold, the land's cost will be recovered in full. $2.2M Land $4.1M Building $640,000 Annual operating and maintenance 4% Annual property taxes and insurance (% of initial investment) (a) If the owner wants a 12% rate of return, what is the required monthly leasing cost? (b) Assuming that the building is vacant 5% of the time, what is the required monthly lease?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2
What is the NPV of a project that costs $100,000, provides $23,000 in cash flows annually for six years, requires a $5,000 increase in net working capital (recaptured at the end), and depreciates the asset at 15 percent declining balance over six years and sold at zero salvage value? The discount rate is 14 percent. The tax rate is 40 percent $6,136.52 -$29639.22 -$23,460 -$13,283
Which is the answer?
3. Power Coal Mine Bhd is considering a new mining pit to increase its productionoutput. The company will have to pay $25 million for the rights to mine on thegovernment land. The infrastructure development costs will amount to another $12million. It is anticipated that the mine should generate annual net revenue of $10million for 15 years. When the mine is closed at the end of the fifteenth year, $10million will be spent for reclamation work. The company’s MARR is 10%per year.a.Draw a cash flow diagram for the above proposal.b. Compute the equivalent present worth (PW) of the proposal.c. Determine the minimum annual net revenue required for the proposal tobreakeven. Assume that costs of rights to mine, development, andreclamation remain the same.
D-76 A new chemical remediation tank is needed. C'urrent lechnology tanks, which cost $150,000, musI Ie drained and treated every 2 years at a cost of $30,000; the tanks will last 10 years, and ench will have a salvage value of 5% of first cost. A tank with new technology has just come on the market. T'hore are no periodic maintenance costs, and a tank will last 20 years. If the new tanks cost $325,000, what minimum salvage value, as a percentage of lirst cont, would be required for this technology to be a betler option? Use a 12% interest rate. (a) 10% (b) 36% (c) 57% (d) 72%
Give me right solution according to the question
12-3 AFTER-TAX SALVAGE VALUE Karsted Air Services is now in the final year of a project. The equipment originally cost $29 million, of which 75% has been depreciated. Karsted can sell the used equipment today for $8 million, and its tax rate is 35%. What is the equipment's after-tax salvage value?
A project using passive heating/cooling design con- a cepts to reduce energy costs requires an investment of $125,000 in equipment (straight-line deprecia- tion with a 10-year depreciable life and $0 salvage value), and $30,000 in labor (not depreciable). At the end of 10 years, the project will be terminated. Assuming a combined tax rate of 34% and after- tax MARR of l15%, determine the project's after-tax present worth.
15. A company purchases a piece of equipment for $15,000. After nine years, the salvage value is $900. The annual insurance cost is 5% of the purchase price, the electricity cost is $600/yr, and the maintenance and replacement parts cost is $120/yr. The effective annual interest rate is 10%. Neglecting taxes, what is most nearly the present worth of the equipment if it is expected to save the company $4500 per year? (A) $2300 (B) $2800 (C) $3200 (D) $3500
DO NOT GIVE SOLUTION IN IMAGE FORMAT
Problem 3 A piping contractor is considering the purchase of a number of pipe laying machines for a project that will last for 6 years. Each machine will cost $ 50,000.00 and have no salvage value at the end of the project. In determining whether to make this purchase, straight line deprecation can be used and an annual income tax on profits of of 34%, and an after-tax MARR is 8%. What is the minimum annual net benefit before taxes that must be generated by the each machine in order to justify its purchase? Answer:
12-3 AFTER-TAX SALVAGE VALUE Karsted Air Services is now in the final year of a project. The equipment originally cost $29 million, of which 100% has been depreciated. Karsted can sell the used equipment today for $8 million, and its tax rate is 25%. What is the equipment's after-tax salvage value?