A government-funded wind-based electric power generation company in the southern part of the country has developedthe following estimates (in $1000) for a new turbine farm. The MARR is 10% per year and the project life is 25 years.Benefits: $45,000 in year O: $29.000 in year 4Government savings: $2.000 in years 1 through 20Cost: $56,000 in year oDisbenefits: $3000 in years 1 through 10NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part.Calculate the conventional B/C ratio.The conventional B/C ratio is1.2407

Conventional B/C ratio is the overall value generated by an asset. It is calculated as present value…

A government-funded wind-based electric power generation company in the southern part of the country has developed the following estimates (in $1000) for a new turbine farm. The MARR is 10% per year and the project life is 25 years. Benefits: $45,000 in year 0: $29.000 in year 4 Government savings: $2,000 in years 1 through 20 Cost: $56,000 in year o Disbenefits: $3000 in years 1 through 10 NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. Calculate the conventional B/C ratio. The conventional B/C ratio is 1.2407

A government-funded wind-based electric power generation company in the southern part of the country has developed the following estimates (in $1000) for a new turbine farm. The MARR is 10% per year and the project life is 25 years. Benefits: $45,000 in year 0: $29.000 in year 4 Government savings: $2,000 in years 1 through 20 Cost: $56,000 in year o Disbenefits: $3000 in years 1 through 10 NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. Calculate the conventional B/C ratio. The conventional B/C ratio is 1.2407

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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A proposal is being considered to improve an existing road connecting two medium size cities in West Africa to reduce transportation costs. The cost of the project is $1,000,000. Present annual transportation cost for all traffic amounts to $1,270,000 per year and would continue if no improvement is made. After the improvement, annual transportation costs are estimated to be $1,166,000. Assume the life of the project 20 years, and MARR is 12%. Should the project be undertaken? Evaluate this proposal by using the net present value method, benefit/cost method, and internal rate of return method. Assume costs appear at the beginning of each year while benefits at the end of a year.
The Border Patrol is considering the purchase of a new helicopter for aerial surveilance of the New Mexico-Texas border with Mexico. A similar helicopter was purchased 4 years ago at a cost of $1,400,000. At an interest rate of 7% per year, what would be the equivalent value today of that $1,400,000 expenditure?
A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $18,000 per year over the six-year study period. At MARR of 19%, calculate the return on investment of the project a. -35% b. -36% c. -37% d. none of the above
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $2,000. Annual operating and maintenance expenses for the system over the 9-year life are estimated to be $9,000 per year. If the new system is purchased, cost savings of $15,000 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15%/year for economic decision making. Based on a present worth analysis, is the purchase of the new sprinkler system economically attractive?
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U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows Capital investment Annual net income: (a) Year 1 2 3 4 5 Total ow Transcribed Text Project Bono $160,000 Project Bono 14,000 Project Edge 14,000 Project Clayton 14.000 ow Transcribed Text 14,000 Your answer is incorrect. 14,000 $70,000 Project Edge Project Clayton $175,000 $200,000 18,000 17,000 16,000 12,000 9,000 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15% (Assume that cash $72,000 O Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. years Compute the cash payback period for each project. (Round answers to 2 decimal places, eg years C years 27,000 23,000 9 21.000 13,000 C 12,000 $96,000 1.50.) (b) The parts…
Check my work The cost of a fence that can detect poacher intrusion into a National Wildlife Preserve is $2.900 million per mile. If the effective life of the fence is 11.00 years, determine the equivalent annual cost of a/an 9.00-mile long fence at an interest rate of 9.00% per year. (Round the final answer to three decimal places.) The equivalent annual cost is $
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National Integrated Systems (NIS), a global provider of heating and air conditioning is planning a project whose data is provided below. The project’s equipment has a 3 year tax life after which its salvage value will be zero. The machinery will be depreciated on a straight line basis over three years. Revenues and other operating costs are expected to be constant over the project’s life. What is the project’s cash flow in Year 1? Equipment Cost = $130,000Depreciation rate = 33.33%Annual Sales Revenue= $120,000Operating Costs (ex Depreciation) = $50,000 Tax Rate = 35%
Spacevoyage Inc. is considering the installation of a new experimental laboratory which requires a key equipment costing $5,000,000. It is expected that the equipment will generate important experimental material worth $2,000,000 for each of the next 5 years. In the 6th year, the equipment will need an upgrade costing $2,500,000. Required return for this project is 15%. a) Which capital budgeting method between NPV and IRR will be most suitable for arriving at a decision on whether or not to get the equipment installed? Briefly explain your reasons. b) Should the new equipment be installed? Support your answer with relevant computation.
An institution plans to invest $1.5 million to support research on new methods of teaching. The project which has a lifetime of 15 years can save the cost of salary, student fees and other university fees worth $ 500,000 per year. Since the research activities are done at the same time as other research, the allocation for other research activities is reduced by $ 200,000 per year. The project requires an operating cost of $ 50,000 per year. At MARR of 6% per annum, determine (i) conventional B/C (ii) modified B/C ratio analysis for this project to assess the fairness of this financing program within 15 years.

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