esIn 2022, the California Air Resources Board (CARB) started planning its "Phase 3"requirements for reformulated gasoline (RFG). RFG is gasoline blended to tightspecifications designed to reduce pollution from motor vehicles. CARB consulted withrefiners, environmentalists, and other interested parties to design these specifications.As the outline for the Phase 3 requirements emerged, refiners realized that substantialcapital investments would be required to upgrade California refineries.Assume a refiner is contemplating an investment of $320 million to upgrade itsCalifornia plant. The investment lasts for 14 years and does not change raw materialand operating costs. The real (inflation-adjusted) cost of capital is 6%.How much extra revenue would be needed each year to recover that cost?Note: Enter your answer in dollars, not millions, rounded to the nearest wholenumber.Annuity payment

Present value of annuity is computed as follows:-PV = A * wherePV = Present value of annuityA =…

Answered: In 2022, the California Air Resources…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070.To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take fivefive years at a cost of $15 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070. The present worth of this project is how many million. (2 decimal places)
On April 30, 2020, Flounder Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $93 million, with an estimated useful life of 12 years and residual value of $30 million. Flounder expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits: Part Cost Useful life Residual value Pattern ofbenefits Total output(nautical miles) Engines (6) $975,000 per engine 8 years $100,000 per engine Varies with activity 7 million Hull $3,900,000 10 years $503,000 Highest in early years 7.90 million Body $83.25 million 15 years $15.21 million Evenly over life of body 12.30…
Your company is developing a new textbook for FIN 301 and you paid your current FIN 301 instructor $700,000 for his input about the feasibility of such a product. The project would involve initial capital investment of $1,200,000 and installation costs related to the capital expenditures of $600,000. The project would also necessitate an increase in net working capital of $200,000 at the beginning of the project. You can straight line depreciate any depreciable expenses to zero over the three-year life of the project, and you don't expect the capital investment to be sold at the end of the project. Each year, you estimate you will receive $3,000,000 in sales revenue from your awesome textbook. Variable product and selling costs associated with these sales are expected to be 40% of revenue in each of those years. The fixed costs in each of the three years of the project will be $500,000. The corporate tax rate is 40%. Calculate the total year 0 cash flows associated with the project. $…
An electrical utility is experiencing a sharp power demand that continues to grow at a high rate in a certain local area. Two alternatives are under consideration. Each is designed to provide enough capacity during the next 25 years, and both will consume the same amount of fuel, so fuel cost is not considered in the analysis. • Alternative A. Increase the generating capacity now so that the ultimate demand can be met without additional expenditures later. An investment of $33 million would be required, and it is estimated that this plant facility would be in service for 25 years and have a salvage value of $0.7 million. The annual operating and maintenance costs (including income taxes) would be $0.4 million. salvage • Alternative B. Spend $15 million now and follow this expenditure with future additions during the 10th year and the 15th year. These additions would cost $18 million and $12 million, respectively. The facility would be sold 25 years from now with a value of $1.25…
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Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.The roadway to be constructed is projected to cost $125,000 per lane mile. It will need to begin construction 12 months prior to the project’s estimated completion date. Your government controls the permitting process for the roadway and has already issued the necessary permits. The total roadway project will be paid for at its completion
[The following information applies to the questions displayed below.] Washington County's Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board's decision appear below. Cost of acquiring additional land for runway Cost of runway construction Cost of extending perimeter fence Cost of runway lights Annual cost of maintaining new runway Annual incremental revenue from landing fees In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $105,000. The old snowplow could be sold now for $10,500. The new, larger plow will cost $6,000 more in annual operating costs. Second, the County Board of Representatives believes that the proposed long runway,…
On April 30, 2020, Ayayai Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2020. Overall, the cost of the ship was $93 million, with an estimated useful life of 12 years and residual value of $30 million. Ayayai expects that the new ship, as a whole, will provide its greatest economic benefits in its early years of operation. After further research and discussion with management, it is determined that the ship consists of major parts with differing useful lives, residual values, and patterns of providing economic benefits: Part Cost Useful life Residual value Pattern ofbenefits Total output(nautical miles) Engines (6) $925,000 per engine 8 years $100,000 per engine Varies with activity 6 million Hull $3,350,000 10 years $500,000 Highest in early years 7.50 million Body $84.10 million 15 years $14.98 million Evenly over life of body 12.00 million…
Washington County’s Board of Representatives is considering the construction of a longer runway at the county airport. Currently, the airport can handle only private aircraft and small commuter jets. A new, long runway would enable the airport to handle the midsize jets used on many domestic flights. Data pertinent to the board’s decision appear below. Cost of acquiring additional land for runway $ 70,000 Cost of runway construction 200,000 Cost of extending perimeter fence 29,840 Cost of runway lights 39,600 Annual cost of maintaining new runway 28,000 Annual incremental revenue from landing fees 40,000 In addition to the preceding data, two other facts are relevant to the decision. First, a longer runway will require a new snowplow, which will cost $100,000. The old snowplow could be sold now for $10,000. The new, larger plow will cost $12,000 more in annual operating costs. Second, the County Board of Representatives believes that the…
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some alr pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would require an initial outlay of $210.55 million, and the expected cash Inflows would be $70 million per year for 5 years. If the firm does Invest in mitigation, the annual inflows would be $75.20 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%. a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not…

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