A company has the opportunity to take over a redevelopment project in an industrial area of a city. No immediate investment is required, but it must raze the existing buildings over a four-year period and, at the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years, at which time the entire project, and properties thereon, will revert to the city. The net cash flows are estimated to be as follows: Year End Net Cash Flow Year End Net Cash Flow $500,000 6 200,000 1 300,000 7 250,000 3 100,000 8 300,000 -2,400,000 9 350,000 4 150,000 10 400,000 Determine whether multiple IRRS exist. If so, use the ERR method when E=8% per year to determine a rate of return.
A company has the opportunity to take over a redevelopment project in an industrial area of a city. No immediate investment is required, but it must raze the existing buildings over a four-year period and, at the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years, at which time the entire project, and properties thereon, will revert to the city. The net cash flows are estimated to be as follows: Year End Net Cash Flow Year End Net Cash Flow $500,000 6 200,000 1 300,000 7 250,000 3 100,000 8 300,000 -2,400,000 9 350,000 4 150,000 10 400,000 Determine whether multiple IRRS exist. If so, use the ERR method when E=8% per year to determine a rate of return.
Chapter2: Loads On Structures
Section: Chapter Questions
Problem 1P
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ERR AND IRR METHOD. engineering economics
Transcribed Image Text:3. A company has the opportunity to take over a redevelopment project in an industrial area of a city. No
immediate investment is required, but it must raze the existing buildings over a four-year period and, at
the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all
costs for a period of 10 years, at which time the entire project, and properties thereon, will revert to the
city. The net cash flows are estimated to be as follows:
Year End Net Cash Flow Year End Net Cash Flow
$500,000 6
200,000
2
300,000 7
250,000
3
100,000 8
300,000
-2,400,000 9
4
350,000
5
150,000 10
400,000
Determine whether multiple IRRS exist. If so, use the ERR method when E=8% per year to determine
a rate of return.
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