GoG is considering a proposal to construct a new bypass around city “A”. The proposal will involve an initial cost of $60 million (for construction) and $2.25 million annually for maintenance. The bypass has an estimated life of 20 years during which it is expected to yield social benefits of $9.75 million every year. (i) Using a discount rate of 8%, calculate the BCR of the proposed project (ii) Interpret your answer for (i) (iii) Based on your results make a recommendation to GoG

Q: What if a third mutually exclusive project, a laundry facility, became available with the same…

A: Time period required for collecting the amount of investment is known as payback period.

Q: What is the​ project's NPV using a discount rate of 9 percent​? Should the project be​ accepted? Why…

A: Information Provided: Initial Outlay = $90,000 Cash Inflows = $16,000 Years = 9 A. Discount rate =…

Q: The estimated present cost to start a proposed municipal government project is $5,500,000. The…

A: The benefit-cost ratio (BCR) is a key metric in cost-benefit analysis that provides a summary of the…

Q: (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase…

A: Investment amount = $90,000 Annual cash inflow = $17,000 Period = 9 Years

Q: Perform financial analysis for a project using the format discussed in the course. Assume the…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: The city is building bridge that will cost 1.2 million dollars today and $25,000 per year to…

A: Initial Cost = 1,200,000 Annual Maintenance Cost in perpetuity = 25,000 Interest Rate = 10%

Q: A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to…

A: Internal rate of return(IRR): It is  the discount rate which makes the net present value (Difference…

Q: Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This…

A: Initial investment is $6,000,000.Annual Cash inflows are $1,100,000.The Discount rate is 7%.The…

Q: Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following…

A: NPV -  Net Present Value is the net of present value of cash inflow in future and cash outflow…

Q: Street lighting fixtures and their sodium vapor bulbs for a two-block area of a large city need to…

A: Present worth  The present value method refers to calculating the present value of future cash. The…

Q: the department of public works and highways (dpwh) is considering the construction of a new highway…

A: Benefit-cost ratio is an indicator showing the relationship between relative costs and benefits of a…

Q: (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase…

A: Net present value(NPV) is the difference between present value of all cash inflows and Initial…

Q: 2) Assume that you are considering a project. Its initial after-tax cost is $1,500,000 and it is…

A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Q: The Square Box is considering two independent projects, both of which have an initial cost of…

A: Information Provided: Initial cost = $18,000 Required return = 12% Term = 3 years

Q: KUST is evaluating a new project for hangu campus. The financial manager has determined that the…

A: Payback pereiod is the time required for the project to cover its intial investment. It can be…

Q: GoG is considering a proposal to construct a new bypass around city “A”. The proposal will involve…

A: Given Initial Cost =$60 million Annual maintenance cost = $2.25 million Life = 20 years Social…

Q: Perform a financial analysis for a project using the format provided in Figure 4-5. Assume that the…

A: ROI: It represents the return made on an investment over a period of time and is expressed in…

Q: TikTok is considering a project that will cost $ 800,000 and is expected to last for 10 years and…

A: The internal rate of return the rate of return which generated by project and it is calculated on…

Q: (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase…

A: Using the Excel functions

Q: Tower City aims to construct a new bypass between two main routes that will reduce commuter travel…

A: The NPV is a measure of the profitability of a project as it discounts future cash flows at an…

Q: The federal government is considering an investment that would cost $25 billion in construction…

A: Initial Investment = $25 billion or $25,000,000,000Annual Saving (P) = $2 billion or…

Q: and the yearly benefit is $250,000, with a maintenance cost (starting in year 1) of $50,000, is…

A: Internal rate of return(IRR) is the original or actual rate of return(ROR) being resulted by a…

Q: A city is spending $20 million on a new bridge. Operating and maintenance expenses for the bridge…

A: First cost (C) = $20 million Annual cost (A) = $0.6 million from year 3 Major repairs cost (R) =…

Q: Jose is reviewing a project with a required discount rate of 15.2 percent and an initial cost of…

A: Discounted payback period refers to the time taken to recover the amount invested initially after…

Q: (Related to Checkpoint 11.6) (MIRR calculation) Emily's Soccer Mania is considering building a new…

A: A more precise indicator of an investment's profitability is provided by MIRR, particularly when…

Q: Fox, Inc. is considering a six-year project that has initial after-tax outlay or after-tax cost of…

A: Net present value is the technique used in capital budgeting to evaluate the acceptability of the…

Q: Sunland Automotive is considering adding state safety inspections to its service offerings. the…

A: Modified internal rate of return (MIRR), which is the discounting rate that converts future cash…

Q: Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each…

A: Formulas:

Q: The Parks and Recreation Department of Burkett County estimates that the initial cost of a…

A: a) Formula for conventional B/C ratio:=B-DCwhere B is present/annual/future worth of the benefitsD…

Q: A cost-benefit analysis of a new irrigation project indicates that the net benefits (B C) of the…

A: NPV means PV of net benefit arises in the future from the project. It can be computed simply by…

Q: arket value at the end of its life. Operating and maintenance expenses for the system are projected…

A: The capitalized cost of system is the present value of all cost of the system that would incur…

Q: Management is considering two alternatives. Alternative A has projected revenue per year of $100,000…

A: Relevant cost is the cost which is relevant in decision making process. Because irrelevant cost do…

Q: A certain government funded city flood control system has an initial investment cost of $500,000.…

A: Initial Investment = $500,000 Operating Cost every year = $10,000 Every 5 years the repair and…

Q: The construction cost of the bypass is $20 million, and $500,000 would be required each year for…

A: A benefit-cost ratio is an indicator, used in cost benefit analysis, that attempts to summarize the…

Q: Tower City aims to construct a new bypass between two main routes that will reduce commuter travel…

A: Here, Cost of Route is $15 million Cost Savings is 17500 people $100 per year Cost Expense is $7500…

Q: Kansas furniture Corporation (KFC) is evaluating a capital budgeting project that costs $34,000 and…

A: Given information: Project costs $34,000 After tax cash flow $14,150 for 3 years Rate of return is…

Q: Tower City aims to construct a new bypass between two main routes that will reduce commuter travel…

A: The given details related to the project are:Compute the NPV, IRR, ERR, simple payback period and…

Q: The general city population is set to benefit in travel-time savings from a municipal road project…

A: in this we have to calculate net annual savings and net annual cost both must be equal to break…

Q: Use Annual Worth method to calculate the benefit/cost ratio at i = 6% for a new library. The first…

A: Annual worth: It is the annual value of those cash flows that are expected to happen in the future.

Q: A permanent flood-control dam is expected to have an initial cost of $2.8 million and an annual…

A: Calculation of B/C is shown below: Hence, option C is correct.

Q: The Square Box is considering two independent projects, both of which have an initial cost of…

A: The discounted payback period refers to the time it takes for the discounted cash flows to recover…

Q: The initial investment in a government-funded city flood control system is $500,000. From the…

A: In this we have to find out total present value of all cost.

Q: To address the chronic traffic condition at a major thoroughfare, two plans are being considered.…

A: NPV is a capital budgeting techniques which help in calculating the present value of any project on…

Q: A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to…

A: Benefit Cost ratio= PV of Benefit expected/ PV of investment If the benefit expected ratio is more…

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.