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An oil company plans to purchase a large piece of vacant land for $95,000. There are four possible improvements with the following costs over and above the cost of the land: A. B. C. D. Cost of $75,000 Cost of $230,000 Cost of $30,000 Cost of $130,000 Conventional service station Automatic car wash with pumps Discount self-service only Service station with quick car wash In each case the estimated useful life is 15 years, and salvage value is the cost of the land. The net annual income, after paying all operating expenses is projected at: A. $23,000 B. $45,800 C. $11,000 D. $28,500

An oil company plans to purchase a large piece of vacant land for $95,000. There are four possible improvements with the following costs over and above the cost of the land: A. B. C. D. Cost of $75,000 Cost of $230,000 Cost of $30,000 Cost of $130,000 Conventional service station Automatic car wash with pumps Discount self-service only Service station with quick car wash In each case the estimated useful life is 15 years, and salvage value is the cost of the land. The net annual income, after paying all operating expenses is projected at: A. $23,000 B. $45,800 C. $11,000 D. $28,500

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Chapter 8 Incremental Analysis (Supplemental Chapter 8 Analysis Method) An oil company plans to purchase a large piece of vacant land for $95,000. There are four possible improvements with the following costs over and above the cost of the land: A. B. C. D. (PW Numerical Solution: PW Cost EUAB Salvage PW+PW In each case the estimated useful life is 15 years, and salvage value is the cost of the land. The net annual income, after paying all operating expenses is projected at: A. $23,000 B. $45,800 C. $11,000 D. $28,500 If the company requires a 12% rate of return, what should they do? Bet Cost of $75,000 Cost of $230,000 Cost of $30,000 Cost of $130,000 +PW)-PW Rearranged Alternatives: PW Benefit PW Cost Decision Perform Incremental Analysis to select the best alternative. Cast Delta Alternative: A PW Benefit A PW Cost Conventional service station Automatic car wash with pumps Discount self-service only. Service station with quick car wash Decision A B D
Transcribed Image Text:Chapter 8 Incremental Analysis (Supplemental Chapter 8 Analysis Method) An oil company plans to purchase a large piece of vacant land for $95,000. There are four possible improvements with the following costs over and above the cost of the land: A. B. C. D. (PW Numerical Solution: PW Cost EUAB Salvage PW+PW In each case the estimated useful life is 15 years, and salvage value is the cost of the land. The net annual income, after paying all operating expenses is projected at: A. $23,000 B. $45,800 C. $11,000 D. $28,500 If the company requires a 12% rate of return, what should they do? Bet Cost of $75,000 Cost of $230,000 Cost of $30,000 Cost of $130,000 +PW)-PW Rearranged Alternatives: PW Benefit PW Cost Decision Perform Incremental Analysis to select the best alternative. Cast Delta Alternative: A PW Benefit A PW Cost Conventional service station Automatic car wash with pumps Discount self-service only. Service station with quick car wash Decision A B D
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