A company plans to expand its business with a new investment of 1,200 million. With an estimated revenue of 400 million per year from year 2 to 7, thereafter decreasing gradient by 15 million per year. The operational costs incurred are 50 million per year and will increase in a gradient of 10 million per year. The investment life is predicted to be 12 years with a residual value of 500 million. There is a lump-sum income of 300 million in year 6, and there is an overhaul fee of 100 million in year 7. If the interest rate is assumed to be 10%. Question : 1. Is this investmen
A company plans to expand its business with a new investment of 1,200 million. With an estimated revenue of 400 million per year from year 2 to 7, thereafter decreasing gradient by 15 million per year. The operational costs incurred are 50 million per year and will increase in a gradient of 10 million per year. The investment life is predicted to be 12 years with a residual value of 500 million. There is a lump-sum income of 300 million in year 6, and there is an overhaul fee of 100 million in year 7. If the interest rate is assumed to be 10%.
Question :
1. Is this investment feasible to run? Give an explanation with using the calculation of Annual Worth analysis.
2. Draw a flow chart with a time horizon of 12 years.
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