A commercial building design cost $91/square-foot to construct eight years ago (for an 77,000-square-foot building). This construction cost has increased 5.5% peryear since then. Presently, your company is considering construction of a 130,000-square-foot building of the same design. The cost capacity factor is X = 0.91. Inaddition, it is estimated that working capital will be 4% of construction costs, and that project management, engineering services, and overhead will be 4.2%, 8%, and30%, respectively, of construction costs. Also, it is estimated that annual expenses in the first year of operation will be $6/square foot, and these are estimated toincrease 5.67% per year thereafter. The future general inflation rate is estimated to be 6.69% per year, and the market-based MARR = 12% per year (im).Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year.a. What is the estimated capital investment for the 130,000-square-foot building?The estimated capital investment is $25.32 million. (Round to two decimal places.)b. Based on a before-tax analysis, what is the PW for the first 10 years of ownership of the building?More InfoPW=$ million (Round to two decimal places.)Enter your answer in the answer box, then click Check Answ1 part remainingN1245678910WorthFactorSingle PaymentCompound PresentAmountFactorTo Find FGiven PF/P1.12001.25441.40491.57351.76231.9738Discrete Compounding; i = 12%2.21072.47602.77313.1058To Find PGiven FP/F0.89290.79720.71180.63550.56740.50660.45230.40390.36060.3220CompoundAmountFactorTo Find FGiven AF/A1.00002.12004.77936.35288.115210.089012.299714.775717.5487Uniform SeriesPresent SinkingWorthFactorTo Find PGiven AP/AFundFactorTo Find AGiven FA/F1.00000.4717.29630.20920.15740.12320.89291.69012.40183.03733.60484.11144.56384.96765.32825.65020.09910.08130.06770.0570OXCapitalRecoveryFactorTo Find AGiven PA/P1.12000.59170.41630.32920.27740.24320.21910.20130.18770.1770

Present worth, also known as present value, is a financial concept used to evaluate the current…

Answered: A commercial building design cost…

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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Jax Inc is considering the purchase of a new machine for the production of computers. Machine A costs $7,000,000 and will last for six years. Variable costs are 25% of sales, and fixed costs are $500,000 annually. Machine B costs $10,000,000 and will last for ten years. Variable costs for the machine are 15% of sales, and fixed costs are $750,000 annually. The sales for each machine will be $4,000,000 per year. The required rate of return is 9%, the tax rate is 21%, and both machines will be depreciated using straight-line depreciation with no salvage value. Calculate the equivalent annual annuity for Machine B. (Round to 2 decimals) What is the Net Present Value for Machine B? (round to 2 decimals)
The engineering team at Manuel's Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $410,000 initially and is expected to increase revenue $110,000 per year every year. The software and installation from Vendor B costs $290,000 and is expected to increase revenue $95,000 per year. Manuel's uses a 4- year planning horizon and a 12.0% per year MARR. Part a 8 Your answer is incorrect. What is the present worth of each investment? Vendor A: $ Vendor B: $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±20.
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The ABC Corporation is considering opening an office in a new market area that would allow it to increase its annual sales by $2.5 million. The cost of goods sold is estimated to be 40 percent of sales, and corporate overhead would increase by $303,000, not including the cost of either acquiring or leasing office space. The corporation will have to invest $2.5 million in office furniture, office equipment, and other up-front costs associated with opening the new office before considering the costs of owning or leasing the office space. A small office building could be purchased for sole use by the corporation at a total price of $5.1 million, of which $900,000 of the purchase price would represent land value, and $4.2 million would represent building value. The cost of the building would be depreciated over 39 years. The corporation is in a 21 percent tax bracket. An investor is willing to purchase the same building and lease it to the corporation for $540,000 per year for a term of…
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A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
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