investment is ($ 350,000) with a (6) year life cycle. The operational o 0) and increased by ($ 2,500) thereafter. A major maintenance should b a cost of ($ 25,000). The salvage value for this units is ($ 35,000). Taki to 18 %, What is the minimum annual revenue that make project profi

investment is ($ 350,000) with a (6) year life cycle. The operational o 0) and increased by ($ 2,500) thereafter. A major maintenance should b a cost of ($ 25,000). The salvage value for this units is ($ 35,000). Taki to 18 %, What is the minimum annual revenue that make project profi

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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Concept explainers

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.

Question

As an energy engineer at an industrial facility. A cogeneration units project is suggested with an
initial investment is ($ 350,000) with a (6) year life cycle. The operational cost at first year is ($
10,000) and increased by ($ 2,500) thereafter. A major maintenance should be made at third year
with a cost of ($ 25,000). The salvage value for this units is ($ 35,000). Taking an interest rate is
equal to 18 %, What is the minimum annual revenue that make project profitable?

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