Determine the payback period for a proposed investment as follows End of the Year123Cash Flow(25000)-500350300420550201 vonro

Payback period formula:- Payback period= Year upto which Cummulative CF is less than total…

Answered: End of the Year 2 3 |Cash Flow (25000)…

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Economics

End of the Year 2 3 |Cash Flow (25000) -500 350 300 420 550

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A company plans to expand its business with a new investment of 1,200 million. With an estimated revenue of 400 million per year from year 2 to 7, thereafter decreasing gradient by 15 million per year. The operational costs incurred are 50 million per year and will increase in a gradient of 10 million per year. The investment life is predicted to be 12 years with a residual value of 500 million. There is a lump-sum income of 300 million in year 6, and there is an overhaul fee of 100 million in year 7. If the interest rate is assumed to be 10%. Question : 1. Is this investment feasible to run? Give an explanation with using the calculation of Annual Worth analysis. 2. Draw a flow chart with a time horizon of 12 years.
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You purchase equipment for $13,000,000 To operate the equipment, you incur expenses of $3,900,000 per year The equipment generates revenue of $8,400,000 per year 5. a) What is the non-discounted (i 0% ) payback period? b) What is the payback period at MARR = 15%? %3D %3D
Solve and show solutions completely. Draw the cash flow diagrams. The engineer of a medium scale industry was instructed to prepare two plans to be considered by management to improve their operations. Plan A calls for an initial investment of P200,000 now with an expected salvage of 20% of the first cost 20 years hence. The operation and maintenance disbursements are estimated to be P15,000 each year and taxes will be 2% of the first cost. Plan B calls for an immediate investment of P140,000 and a second investment of P160,000 eight years later. The operation maintenance disbursements will be P9,000 a year for the initial installation and P8,000 a year for the second installation. At the end of 20 years, the salvage value will be 20% of the investments. Taxes will be 2% of first cost. If money is worth12%, which plan will you recommend using present worth cost method.
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Vermonto Ltd is putting together a tender for a one-off contract using relevant costing principles. The job requires 50m2 of Material X Vermonto has established the following information regarding material X: Material X Amount held 40m2 Original cost £25 per m2 Net realisable value £28 per m2 Current purchase price £30 per m2 Material X is no longer used by Vermonto for its ongoing operations and any existing inventories will be sold if not used. What is the relevant cost for material X for the purpose of pricing the contract?
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A relocation of a short stretch of rural highway feeding into Route 390 northwest of Dallas is to be made to accommodate new growth. The existing road is now unsafe, and improving it is not an alternative. Alternate new route locations are designated as East and West. The initial investment by government highway agencies will be $4,000,000 for East and $5,125,000 for West. Annual highway maintenance costs will be $120,000 for East and $90,000 for the shorter location West. Relevant annual road user costs, considering vehicle operation, time en route, fuel, safety, mileage, and so on, are estimated as $880,000 for East and only $730,000 for West. Assume a 20-year service life and i-7% Part a What is the present worth of the benefits and costs of route West over route East? PW benefits of route West over route East: $ PW costs of route West over route East: $
A trust fund is to be established for providing the costs associated with a small engineering laboratory for the Engineering College. The following costs are required for the engineering laboratory: (1) The construction cost is$1,500,000and the initial equipment cost is$900,000; (2) The annual laboratory operating cost is$250,000for the first 3 years and$200,000thereafter; (3) The cost of equipment replacement is$350,000every 6 years, beginning 6 years from now. How much money is required in the trust fund now to build the engineering laboratory and maintain its perpetual operation and equipment replacement? The interest rate is 8%per year.