8) ROVNO Ltd. just invested $50,000 into a new local network. Services provided by the network will bring $15,000 per year in the next five years. The following information is given: - Real MARR = 10% - Expected annual inflation = 2% - The network will be sold for salvage after five years; its depreciation rate is 20% Is this a good investment in terms of the internal rate of return?

8) ROVNO Ltd. just invested $50,000 into a new local network. Services provided by the network will bring $15,000 per year in the next five years. The following information is given: - Real MARR = 10% - Expected annual inflation = 2% - The network will be sold for salvage after five years; its depreciation rate is 20% Is this a good investment in terms of the internal rate of return?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Global steel prices have a year-over-year inflationary rate increase of 12.4%. Tube Fab purchased $700,000 of a particular carbon steel during the year just ended right now, and they intend to purchase the same quantity at the end of each of the next 5 years. Tube Fab earns a real rate of 16% on their money. a) Determine the then-current amounts they will pay for steel at the end of each of the next 5 years. b) Determine the constant value amounts they will pay for steel at the end of each of the next 5 years. c. Determine Tube Fab's PW of expenditures over the next 5 years using then-current dollars. d. Determine Tube Fab's PW of expenditures over the next 5 years using constant value dollars. Include screen shots of any excel formulas used.
Fink Co. is interested in purchasing a new business vehicle. The vehicle costs $50,000 and will generate constant-dollar delivery revenue of $20,000 (year O dollars) for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $5,000. The tax rate is 21%, and annual inflation is 3%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Fink Co. uses an after-tax real interest MARR of 8%, compute the PW, and determine whether Fink Co. should purchase the new business vehicle. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. LA
A project involved initial construction costs of $2.5 million. The annual rate of economic depreciation for that construction class is 0.008. The project is expected to terminate in 25 years. The expected annual rate of inflation is 0.025. a. Estimate the horizon value at time t=25 owing to the remaining value of this asset. b. If the real discount rate is 0.035, what is the present value of the horizon value from (a)?
14.46. Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.10% of its income after-tax income into such an account. (a) How much will the company have after 7 years if after-tax income averages $16.4 million per year and inflation and market interest rates are 4% per year and 9% per year, respectively? (b) What will be the buying power of that amount in today's dollars if the inflation rate is 4% per year?
Required information To retire at a decent age and move to Hawaii, an engineer plans to trust her account to an investment firm that promises to make a real ROR of 10% per year, after commissions and fees. Inflation has a historic rate of 4% per year and the account balance is currently $490,000. NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. To retire in 13 years with no further deposits, determine the account balance in (future) dollars to realize a real 10% per year return. The account balance in (future) dollars to realize a real 10% per year return is $
The price of a HeeHaw Model BR549 computer is presently $2200.If deflation of 2% per quarter is expected on this computer, what will its price be in nominal dollars at the end of 1 year? If inflation is 4.5% per year, what will the price be in Year-0 dollars?
Consider the following project Net cash flow e -225 Period Change in value (economic depreciation) Expected economic income 2 91.55 The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) 3 253.25 1 Period 2