Bonus item: Your company must ensure the safety of its work force. Two plans are being considered for the next 10 years: (1) Install a high electrified fence around the property at a cost of $100,000. Maintenance and electricity would then cost $5,000 per year over the 10-year life of the fence. (2) Hire security guards at a cost of $25,000 paid at the end of each year. Because the company plans to build new headquarters with a "state of the art" security system in 10 years, the plan will be in effect only until that time. Your company's cost of capital is 15 percent for average-risk projects, and that rate is normally adjusted up or down by 2 percentage points for high- and low-risk projects. Plan 1 is considered to be of low risk because its costs can be predicted quite accurately. Plan B, on the other hand, is a high-risk project because of the difficulty of predicting wage rates. What is the proper present value of costs for the better project? Note: Do not put commas in the values. Round off your answers to two decimal places (e.g. x00x) and no need to put the $ sign in the box provided for your answer.

Bonus item: Your company must ensure the safety of its work force. Two plans are being considered for the next 10 years: (1) Install a high electrified fence around the property at a cost of $100,000. Maintenance and electricity would then cost $5,000 per year over the 10-year life of the fence. (2) Hire security guards at a cost of $25,000 paid at the end of each year. Because the company plans to build new headquarters with a "state of the art" security system in 10 years, the plan will be in effect only until that time. Your company's cost of capital is 15 percent for average-risk projects, and that rate is normally adjusted up or down by 2 percentage points for high- and low-risk projects. Plan 1 is considered to be of low risk because its costs can be predicted quite accurately. Plan B, on the other hand, is a high-risk project because of the difficulty of predicting wage rates. What is the proper present value of costs for the better project? Note: Do not put commas in the values. Round off your answers to two decimal places (e.g. x00x) and no need to put the $ sign in the box provided for your answer.

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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