A "Special Commission for Beaches" is formed to design, build and operate a series of beach resorts along the Charles River, which is expected to get cleaner year after year. The SCB is allowed to raise money by selling tax-free bonds (currently selling at about 4% for similar agencies). Revenues will come from user fees and, if necessary, from Cambridge, Boston, and other cities and towns along the river. What discount rate do you use in deciding how fancy to make the bathhouses, the restaurants, and the boating facilities? 11% 7% 4% 15%

A "Special Commission for Beaches" is formed to design, build and operate a series of beach resorts along the Charles River, which is expected to get cleaner year after year. The SCB is allowed to raise money by selling tax-free bonds (currently selling at about 4% for similar agencies). Revenues will come from user fees and, if necessary, from Cambridge, Boston, and other cities and towns along the river. What discount rate do you use in deciding how fancy to make the bathhouses, the restaurants, and the boating facilities? 11% 7% 4% 15%

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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The Great White Hall: Flatland Views city council has advertised for proposals to build a new community center, a library and a theatre but the city council cannot agree on how to evaluate the submitted proposals. The request for proposal (RFP) specified that respondents had to meet certain basic needs, although optional items could be included. The RFP also asked that each respondent calculate a benefit/cost (B/C) ratio using a discount rate of 12%. What are the options for analyzing and making decisions on this public funding proposal? What are the opportunities for negotiation? How do you arrive at the best combination from submitted proposals?
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You are considering an investment that will pay you $1,200 per month for three years. The first payment occurs one month from today. What is the present value of this investment if the annual percentage rate is 12 percent?
1. The local chief executive (LCE) of Pagadian City is considering to build, operate and transfer (BOT) a Public Transportation System as an income generating enterprise for the city, through private sector initiatives. Two proposals have been submitted. The cash flows are shown below. Perform the appropriate techniques of engineering economics using any appropriate measure of economic worth. As a Civil Engineer, make a recommendation to the LCE, based solely on economic considerations. Assume MARR of 10% per year. Copy your Excel spreadsheet in your Answer Sheet. Cash flow/Proposals Initial Cost, P (in million) Maintenance and operating cost, P/year 40-Bus Fleet 50-Bus Fleet 87 95 P 4.75 million increasing 450,000 per year P 3.85 increasing 5% per year Income, P/year P 12.5 million increasing 15% 12.75 million increasing 15% per year per year Life, years 7 10
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MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolitan areas. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $18 million. The corporation expects the cash inflows of each new facility in Year 1 to equal zero. Net cash inflows are expected to increase to $5.5 million in each of years 2 and 3; $2.5 million in year 4; and $3.0 million in each of years 5 through 10. The lease agreement for the facility will expire at the end of year 10, and MaxiCare expects the cost to close a facility will pretty much exhaust all cash proceeds from the disposal. Cost of capital for MaxiCare is estimated as 12%. Assume that all cash flows occur at year end. Required: 1. Compute (using the built-in NPV function in Excel) the net present value…
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Larry’s Lawn Service (LLS) currently offers a single lawn maintenance service that includes cutting grass, trimming shrubs, and removing leafs. LLS is considering offering an additional lawn care service which will include fertilizing and pest control. LLS hired you to perform a study to determine whether or not LLS should in fact go ahead with the new service. Your fee to LLS is $10,000 which is due whether LLS makes the investment in the new project or not. Additionally, if this new lawn care service is implemented, LLS believes that it will actually increase business for its original lawn maintenance service. You have estimated the dollar value of this benefit to the existing lawn maintenance service to be $20,000/year 33.) For LLS, the $10,000 fee is a: Question 33 options: Incremental cash flow Externality Sunk cost Opportunity cost
The Dudumwezi city Council is a considering the introduction of speed trains in order to deal with the problem of traffic congestion in the city. The project will be implemented through the PPP model. Councilors are skeptical about the financial viability of the project and have asked for a financial viability assessment of the project. To this end the council management has engaged a consultant to carry out this assessment. Required:To aid the Councilor’s, explain why it is important to carry out a cash flow analysis in project finance and the five factors that need to be considered when calculating cash flows.
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