Q3: An engineer determined the payback period of the project contract to be 9 years. Thefollowing table presents the project contact cost information:Annual costFirst cost15 MSalvage5 MContract3MIfi-13%, do you agree with that an engineer, and why?

Given information : Initial cost 15000000 Annual cost 3000000 Salvage 5000000 The…

Answered: : An engineer determined the payback…

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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Similar questions

Determine the B/C ratio for the following project.First Cost = P100, 000Project life, years = 5Salvage value = P10, 000Annual benefits = P60, 000Annual O and M = P22, 000Interest rate= 15%
Answer the questions ASAP.
Assume that Jeff Heun has reviewed his work schedule and decided that it makes sense to complete this project on time. Assuming that he now believes that the probability for completing the project on time is 95% and otherwise it will be finished 1 week late, determine the transaction price. Transaction price $enter the transaction price in dollars
Project 1. Riccarton plc is considering five project proposals. They are summarised below: Initial Annual Investment(£000) Revenue(£000) Annual Fixed Costs(£000) Life of Project(Year) A 10 20 5 3 B 30 30 10 5 C 15 18 6 4 Ꭰ E 12 18 17 8 10 8 2 15 Variable costs are 40 per cent of annual revenue. Projects D and E are mutually exclusive. Each project can only be undertaken once and each is divisible. Assume: - The cash flows are confined to within the lifetime of each project The cost of capital is 10 per cent. No inflation No tax All cash flows occur on anniversary dates. If the firm has a limit of £40,000 for investment in projects at Time 0, what is the maximum net present value obtainable?
Q1: For the machines indicated below. Consider i= 10% per year First cost Annual cost Salvage value Life duration Machine A 20,000 $ 5,000 $ 7,500 $ 3 Machine B 25,000 4,000 6,000 4 A- Draw cash flow diagram for each machine for one cycle of each project B- Draw cash flow diagram for each project considering the LCM life cycle (Hint: different project duration, need to have the LCM life cycle) C- Compare the machines to select best alternative one based on Present worth analysis method D- Repeat part B considering Future worth analysis
Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual Life of Project Investment Income Project 22A $242,800 $16,840 6 years 23A 275,000 20,680 9 years 24A 282,000 15,700 7 years Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation. Click here to view PV table. (a)
Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5 Salvage value P10, 000 Annual benefits Р60, 000 Annual O and M Р22, 000 Interest rate, % 15
A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project? Input area: Required Return Year 0 Year 1 Year 2 Year 3 (Use cells A6 to B10 from the given information to complete this question.) Output area: 14% ($41,000) $20,000 $23,000 $14,000 IRR
Sunland Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Project Investment 22A $243,500 271,400 23A 24A 283,000 Annual Life of Income Project $17,320 6 years 20,600 9 years 7 years 15,700 Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Sunland Company uses the straight-line method of depreciation.
Consider the project balances in the table below for a typical investment project with a service life of four years. An Project Balance - $13,000 - $13,000 - 11,500 CO n 0 1 2 3 4 - 2,425 (a) Determine the interest rate used in computing the project balance. The interest rate is %. (Round to the nearest whole number.) - 9,500 - 8,500 100
An interior design studio is trying to choose between the following two mutually exclusive design projects: Year 0 1 2 3 Cash Flow Cash Flow (0) -$64,000 31,000 31,000 31,000 a-1 If the required return is 10 percent, what is the profitability index for both projects? (Round your answers to 3 decimal places. (e.g., 32.161)) Project I Project II -$18,000 9,700 9,700 9,700 Profitability Index a-2 If the company applies the profitability index decision rule, which project should the firm accept? O Project I O Project II Project I Project II b-1 What is the NPV for both projects? (Round your answers to 2 decimal places. (e.g., 32.16)) O Project I Project II NPV b-2lf the company applies the NPV decision rule, which project should it take?
Solve c) What is the payback period (PB) for this project?

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: An engineer determined the payback period of the project lowing table presents the project contact cost information: Annual cost 3M First cost Contract 15 M