Energy efficiency of an equipment can be improved by 20% through enhanced maintenance leading to a fuel saving of Rs 250000/- per annum for 10 years. What is the maximum allowable investment on the project? Take interest rate as 12%.

Q: Assume cost is $10,000 each year, benefit is $8,000 each year, interest rate is 2%. calculate NPV if…

A: NPV refers to the net present value of a project. NPV is an important capital budgeting tool. As per…

Q: The annual maintenance costs of a tunnel, which is considered to have an eternal life, are worth 500…

A: Total capitalised cost include the initial cost of investment and the present value of annual cost…

Q: Following table shows the initial investment required in and cash flow (return) from a project…

A: Capital Budgeting Techniques are used to choose the most profitable investment alternative. Based on…

Q: A Freeze dryer is expected to cost RM19,000 two years from now and another RM12,000 four years from…

A: Concept. FV = PV ( 1+ r)n Where , FV = future value  PV = present value  r = interest rate n = time…

Q: There is a project that requires an investment of 20 thousand usd and its expected benefit is 7,500…

A: Internal rate of return: The internal rate of return is the rate at which the net present value of…

Q: Dhofar Energy Company is installing new equipment at a cost of 200000 OMR. Expected cash flows from…

A: Disocunted payback period is a technique used to determine the number of years it would take to…

Q: If the real cost of hedging is ______, then the hedging strategy was beneficial.   Group of answer…

A: Real Cost of Hedging: The real cost of hedging payables is the sum of the cost of hedging payables…

Q: Project A has a NPV of $100 and will last for 10 years. Project B has an NPV of $75 and will last…

A: Equivalent annual cost is the cost of operating and maintaining an asset annually. It is also called…

Q: Cooper Industries is considering a project that would require an initial investment of P235,000. The…

A: Discount factor = initial investment / Annual cost savings = P235,000/P70,110  = 3.352

Q: A project requires a $180k investment and will generate five annual cash flows of $60k starting next…

A: To calculate the NPV of the project, you need to use the following formula: NPV = CF1 / (1 + r)^1 +…

Q: An equipment with an estimated lifespan of 10 years is to be bought for Php 1,500,000. It will…

A: The IRR is a useful tool for evaluating the profitability of an investment and for making informed…

Q: Improvements with an initial investment cost of 67,000 TL will be made in an assembly line. Yearly…

A: Company uses capital budgeting techniques for the purpose of evaluating different projects. In the…

Q: An equipment with an estimated lifespan of 10 years is to be bought for Php 1,500,000. It will…

A: Initial Investment Cost (Year 0) I = Php 1,500,000Annual Revenue A= Php 400,000Annual Operating and…

Q: The initial investment cost of a project is 81.500 TL and its annual income is 20.000 TL / year. If…

A: The discounted payback period is the time period in which the project will pay back its initial…

Q: A new project will have an intial cost of $40,000. Cash flows from the project are expected to be…

A: Profitability Index: It represents the attractiveness measure of the project or an investment. It…

Q: A new IS project is to be developed with an initial cost of1.5million and a maintenance cost of…

A: In a typical capital budgeting project, we have to find the payback period, NPV and IRR.

Q: The initial cost of the project is 20,000 EUR. You assume that you will be able to generate cash…

A: Calculate the net present value as follows: Net present value = Present value of cash inflows -…

Q: A project costs $1200.00 at the end of the 1st year and the yearly cost increases by $400.00 every…

A: EUAC = r*NPV/1-(1+r)^(-n) here r = 8% and n is 4 years Let us first compute the NPV: Year Costs…

Q: An investment project requires an initial expenditure of $160 000.00 with a salvage value of $30…

A: Calculate NPV of the project to determine whether project should be undertaken or not.

Q: A certain project has a payback of 8 years. The project will generate cash earnings after taxes as…

A: The payback period is the amount of time required to recover the cost of investment. It is used to…

Q: Project A has a NPV of $100 and will last for 10 years. Project B has an NPV of $75 and will last…

A: Equivalent annual cost refers to the cost incurred for owning, operating, and the maintenance of an…

Q: You have the choice to invest in a related project at time T+1. The required investment is $10…

A: Present value refers to the current value of future cash flows or payments, discounted to reflect…

Q: A project whose machinery and installation cost $15,000, promises a net      stream of savings of…

A: Given that;The cash flows are:Year 0: -$15,000Year 1: $3,000Year 2: $3,000Year 3: $3,000Year 4:…

Q: What is the NPV of a project that COSTS $0.5M today and cash inflows $5,000 monthly, paid annually,…

A: Initial Cost = i = $500,000Monthly Cash Flow = cf = 5000 * 12 = $Time = t = 10 Cost of Capital = r =…

Q: What is the value of the FW for an alternative which is at an interest rate of 8% per year if first…

A: Future Worth Analysis is the method for determining the future value of present cash flows invested…

Q: A project having a life of one year is started with initial investment of Rs. 120 lakhs with 12%…

A: The initial investment is Rs. 120 Lakhs. The initial cost of capital is 12%. The NPV is Rs. 15 Lakhs…

Q: Replacing old equipment at an immediate cost of $70,000 and an additional outlay of ​$20,000 three…

A: NPV is the sum of future cashflows less Initial Investment

Q: Considering an interest rate of 8%, that the cost of the equipment is $300,000 and you will replace…

A: Where the actual cost of equipment is dividing over the life of equipment is called annual cost.…

Q: An investor is considering financing a toll highway for $120 million. They expect to get $11 million…

A: IRR means the rate of return produced by an investment. It refers to the profitability of the…

Q: Replacing old equipment at an immediate cost of $120,000 and an additional outlay of $15,000 six…

A: Initial cost = $120,000Additional cost in six years = $15,000Annual saving = $24,000Period = 9…

Q: If your project has a NPW of $141,000, your MARR is 7% per year and your project duration is 11…

A: NPW = $141,000MARR = 7%Project duration = 11 yearsTo find: The annual equivalent worth.

Q: A project costs $880 today, yields $150 / year for three years and $400 for two years. Then there is…

A: Given information: Initial cost is $880 Cash flows for first three years is $150 Cash flows for next…

Q: per year for the first 10 years and $1000 per year, for the 10 years past the initial maintenance…

A: The current value of a future sum of money or stream of cash flows, given a specified rate of…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.