8.12 US Airport Authority (USAA) is entertaining three independent proposals presented in the table below for Gator Regional Airport. USAA uses a MARR of 12 percent and has no budget constraint. Using B/C ratio and PW values, which of the following projects are economically justified and should be undertaken by USAA to maximize the services to the public? New Parking Garage (NPG) Flight Information Screen (FIS) Gate Expansion (GE) (in millions) First cost (P) $120 $3 $50 Annual operating cost (АОC) $5 $0.5 $3 Annual benefits (B) $25 $1.0 $6 Disbenefits at the time $5 $0 $2 zero (D) Salvage value (S) Life, years $15 $0.4 $5 20 5 25

8.12 US Airport Authority (USAA) is entertaining three independent proposals presented in the table below for Gator Regional Airport. USAA uses a MARR of 12 percent and has no budget constraint. Using B/C ratio and PW values, which of the following projects are economically justified and should be undertaken by USAA to maximize the services to the public? New Parking Garage (NPG) Flight Information Screen (FIS) Gate Expansion (GE) (in millions) First cost (P) $120 $3 $50 Annual operating cost (АОC) $5 $0.5 $3 Annual benefits (B) $25 $1.0 $6 Disbenefits at the time $5 $0 $2 zero (D) Salvage value (S) Life, years $15 $0.4 $5 20 5 25

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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An electrical utility is experiencing a sharp power demand that continues to grow at a high rate in a certain local area. Two alternatives are under consideration. Each is designed to provide enough capacity during the next 25 years, and both will consume the same amount of fuel, so fuel cost is not considered in the analysis. • Alternative A. Increase the generating capacity now so that the ultimate demand can be met without additional expenditures later. An investment of $33 million would be required, and it is estimated that this plant facility would be in service for 25 years and have a salvage value of $0.7 million. The annual operating and maintenance costs (including income taxes) would be $0.4 million. salvage • Alternative B. Spend $15 million now and follow this expenditure with future additions during the 10th year and the 15th year. These additions would cost $18 million and $12 million, respectively. The facility would be sold 25 years from now with a value of $1.25…
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