(b) Ford Automobiles is considering investing in a new manufacturing facility that will cost $10 million. The facility is expected to have a useful life of 20 years and generate annual revenue of $4 million with an annual operating cost of $1.5 million. The facility will also require a major renovation at the end of the tenth year, which will cost $5 million. At the end of the 20-year useful life, the facility can be sold for $1 million. Assuming a required rate of return of 12%, what is the annual worth of the investment in the facility? Should the company invest in the facility?

(b) Ford Automobiles is considering investing in a new manufacturing facility that will cost $10 million. The facility is expected to have a useful life of 20 years and generate annual revenue of $4 million with an annual operating cost of $1.5 million. The facility will also require a major renovation at the end of the tenth year, which will cost $5 million. At the end of the 20-year useful life, the facility can be sold for $1 million. Assuming a required rate of return of 12%, what is the annual worth of the investment in the facility? Should the company invest in the facility?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Today, you have $30,000 to invest. Two investment alternatives are available to you. One would require you to invest your $30,000 now, the other would require the $30,000 investment two years from now. In either case, the investments will the end five years from now. The cash flows for each alternative are provided below. Using a MARR of 14%, what should you do with the $30,000 you have?
The City Council of a fast growing city in the west of Canada is planning to construct a new express way to help improve the traffic flow in the city. Construction is to start in 2020 and is expected to last four years at a cost of $40 million per year. After construction is completed, the regular cost of operation and maintenance is expected at $3 million for the first year, increasing by 1%. a) Draw a cash flow diagram for the new express way project (from present till end of year 2063). b) Determine the Present Worth of the project. c) Determine the Annual Worth of the project (Hint: make use of the PW calculated in b).
Consider a new machine at a bottling plant that has a first cost of $250000, operating and maintenance costs of $15100 per year, and an estimated net salvage value of $25000 at the end of 30 years. Assume an interest rate of 7%. What is the annual equivalent cost of the investment if the planning horizon is 30 years?
Consider a project which involves the investment of P100,000 now and P100,000 at the end of one year. Revenues of P150,000 will be generated at the end of years 1 and 2. What is the present value of this project if the 3 effective annual interest rate is 10% ? a P65,421.50 P68,421.50 b P67,421.5 P69,421.50
Consider the following two mutually exclusive service projects with projectlives of three years and two years, respectively. (The mutually exclusive service projects will have identical revenues for each year of service.) The interest rate is known to be 12%. Net Cash Flow End of Year Project A Project B 0 -$1,000 -$800 1 -400 -200 2 -400 -200+0 3 -400+200 If the required service period is six years and both projects can be repeated with the given costs and better service projects are unavailable in the future, which project is better and why? Choose from the following options:(a) Select Project B because it will save you $344 in present worth over the required service period.(b) Select Project A because it will cost $1,818…
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Answer is 296,611. Please show solution.
2. A municipality is considering an investment in a small renewable energy power plant with the following parameters. The cost is $400,000 and the output averages 50 kW year- round. The price paid for electricity at the plant gate is $0.037/kWh. The investment is to be evaluated over a 25-year time horizon, and the expected salvage value at the end of the project is $22,000. The MARR is 7%. [Total: 9 marks] a. Calculate the net present value (NPV) of this investment. Is it financially attractive? b. Calculate the operating credit per kWh which the government would need to give to the investment in order to make it break even financially. Express your answer to the nearest 1/1000th of dollars.
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Compute the AW (annual worth) of The Bella. Remember to include your calculations in your supporting work. Round your answer to the nearest dollar.
H5.
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