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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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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DRAW CASH FLOW DIAGRAM Calculate the capitalized cost of a project that has an initial cost of P8,000,000 and an additional cost of P250,000 at the end of every 8 years. The annual operating costs will be P150,000 at the end of every year for the first 5 years and P200,000 thereafter. In addition there is expected to be recurring major rework cost of P500,000 every 13 years. Assume i=12%
Techniques of Capital Budgeting refer to the criteria used to evaluate the project. These techniques can be broadly classified into two categories, one which is non-time adjusted and the other which is suitably adjusted for time. Do a comparative analysis of these two categories giving suitable examples to corroborate your claims.
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Three investments are being studied by Bright Star Construction Limited. The table below provides the estimated cash flow for each of the three investments over the next five years. Due to budget constraints, Bright Star can only select one investment out of the three investments. At a MARR (Minimum Acceptable Rate of Return) of 12%, answer the following. Investment 1 2 3 a) b) Initial Cost $9,000,000 $5,000,000 $7,000,000 Expenses per Year $3,000,000 $1,500,000 $2,000,000 Return at end of year 5 $38,000,000 $20,000,000 $29,000,000 Use a rate of return method to determine the economically best investment for Bright Star. Are you expecting different results if the comparison is based on Annual Worth? (Hint: no calculations are needed). c) What are the case(s) in which a rate of return method is recommended? d) Is it always necessary for the alternative with the highest rate of return to be the best alternative?
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
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There are four steps for the selection of capital investment projects 1) Generate alternative capital investment project proposals. 2) Estimate cash flows for each project proposal. 3) Evaluate and choose which investment project to undertake 4) When completed review the investment project to see which assumptions about the project were correct What is the point of looking at the assumptions made after the investment was completed? Would it be better if the review was undertaken at earlier intervals, such as the mid-way point or sooner?
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: $
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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.