A new furnace for your small factory is being installed right now, will cost $46,000, and will be completed in one year. At that point, it will require ongoing maintenance expenditures of $4,000 a year. But it is far more fuel efficient than your old furnace and will reduce your consumption of heating oil by 4, 300 gallons per year. Heating oil this year costs $3 a gallon; the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace will last for 20 years from initial use, at which point it will need to be replaced and will have no salvage value. (Specifically, the firm pays for the furnace at time 0 and then reaps higher net cash flows from that investment at the end of years 1 - 20.) The discount rate is 10%. a. What is the net present value of the investment in the furnace? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar. b. What is the IRR? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the payback period? d. What is the equivalent annual cost of the furnace? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. e. What is the equivalent annual savings derived from the furnace? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. f. Compare the PV of the difference between the equivalent annual cost and savings to your answer to part (a). Are the two measures the same or is one larger? please give me real answers of the question with the numbers. For example, what is the NPV in the first question. You only gave me the way of solution but i do not want to this. I want clear answers.
A new furnace for your small factory is being installed right now, will cost $46,000, and will be completed in one year. At that point, it will require ongoing maintenance expenditures of $4,000 a year. But it is far more fuel efficient than your old furnace and will reduce your consumption of heating oil by 4, 300 gallons per year. Heating oil this year costs $3 a gallon; the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace will last for 20 years from initial use, at which point it will need to be replaced and will have no salvage value. (Specifically, the firm pays for the furnace at time 0 and then reaps higher net cash flows from that investment at the end of years 1 - 20.) The discount rate is 10%. a. What is the net present value of the investment in the furnace? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar. b. What is the IRR? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the payback period? d. What is the equivalent annual cost of the furnace? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. e. What is the equivalent annual savings derived from the furnace? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. f. Compare the PV of the difference between the equivalent annual cost and savings to your answer to part (a). Are the two measures the same or is one larger? please give me real answers of the question with the numbers. For example, what is the NPV in the first question. You only gave me the way of solution but i do not want to this. I want clear answers.
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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Transcribed Image Text:A new furnace for your small factory is being installed right now, will cost $46,000, and will be completed in one year. At
that point, it will require ongoing maintenance expenditures of $4,000 a year. But it is far more fuel efficient than your old
furnace and will reduce your consumption of heating oil by 4, 300 gallons per year. Heating oil this year costs $3 a gallon;
the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable
future. The furnace will last for 20 years from initial use, at which point it will need to be replaced and will have no salvage
value. (Specifically, the firm pays for the furnace at time 0 and then reaps higher net cash flows from that investment at
the end of years 1 - 20.) The discount rate is 10%. a. What is the net present value of the investment in the furnace? Note:
Do not round intermediate calculations. Round your answer to the nearest whole dollar. b. What is the IRR? Note: Do
not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. What is the payback
period? d. What is the equivalent annual cost of the furnace? Note: Do not round intermediate calculations. Round your
answer to 2 decimal places. e. What is the equivalent annual savings derived from the furnace? Note: Do not round
intermediate calculations. Round your answer to 2 decimal places. f. Compare the PV of the difference between the
equivalent annual cost and savings to your answer to part (a). Are the two measures the same or is one larger? please
give me real answers of the question with the numbers. For example, what is the NPV in the first question. You only gave
me the way of solution but i do not want to this. I want clear answers.
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