Question 7A construction company is deciding if they should make a new building bronze, silver, or goldLEED-certified, or not at all. Regardless of the level of certification, this new building willgenerate extra annual revenues of $40,000 starting at the end of the first year due to plannedbusiness operation. In terms of operational cost, each option offers different levels of annualenergy savings (can be taken as annual incomes), but also different operation and maintenancecosts. Please also note that a building with no certification will have no energy savings, but fullenergy costs. Further, the government offers different tax credits depending on the level ofenvironmental impact. Please note that all annual costs and savings begin at the end of year 3 andextend until the end of the operation life. The buildings are intended to operate for 20 years, andthe company has a minimum attractive rate of return (MARR) of 5%. The following data isavailable for each option:AnnualEnergySavingsOperation andMaintenanceEnvironmental SalvageCertification Initial CostTax CreditvaluecostsNoCertification S331,000$687,000$952,000$1,056,000-S13,000$17,000$31,000S53,000$9,000$14,000$23,000$31,000Szero$5,000$11,000$16,000$191,000$446,000$715,000$785,000BronzeSilverGoldUsing the Incremental IRR Analysis Method, find the best alternative.

Calculation of Annual Income of No Certification, Bronze , Silver and Gold:: No Certification…

Answered: A construction company is deciding if…

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 electronic circuit board manufacturer is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing plant. All have lives of 10 years and zero salvage value. The required investment, the estimated after-tax reduction in annual disbursements, and the gross rate of return arc given for each alternative in the following table: llte rate of return on incremental investments is given for each project as follows: Which project would you select according to the rate of return on incremental investment if it is stated that the MARR is 15%?
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Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $495,000 cost with an expected four-year life and a $10,000 salvage value. Additional annual information for this new product line follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. $ 1,960,000 1,502,000 121,250 167,000 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 8%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine income and net cash flow for each year of this machine's…
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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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You are building a new facility and are trying to determine which vendor you are going to use to install new windows. You get quotes from two vendors-Vendor A and Vendor B. The useful life of the windows is 9.1 years and the MARR is 14%. The annual worth from the quotes are given below. What should you do? Vendor A B AW Save for Later -$6300 -$3200 O Purchase windows from Vendor B. O Purchase windows from Vendor A O Do nothing. Attempts: 0 of 1 used Sand

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