Plant A Plant B Plant C Average Station Heat Rate (BTU/kwh) 16500 14500 13000 Total investment (boiler/turbine/electrical/ structures) $8.530 $9,498 $10,546 Annual operating cost: Fuel $1,128 $930 $828 Labor $616 $616 $616 O&M $150 $126 $114 Supplies $60 $60 $60 Insurance and property taxes $10 $12 $14 The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm's MARR is known to be 12%. The firm's marginal income tax rate is 25%. a. Determine the unit power cost ($/kWh) for each plant. b. Which plant would provide the most economical power?

Plant A Plant B Plant C Average Station Heat Rate (BTU/kwh) 16500 14500 13000 Total investment (boiler/turbine/electrical/ structures) $8.530 $9,498 $10,546 Annual operating cost: Fuel $1,128 $930 $828 Labor $616 $616 $616 O&M $150 $126 $114 Supplies $60 $60 $60 Insurance and property taxes $10 $12 $14 The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm's MARR is known to be 12%. The firm's marginal income tax rate is 25%. a. Determine the unit power cost ($/kWh) for each plant. b. Which plant would provide the most economical power?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Please answer both part A and B
Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $115,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 115,000 $ 0 Working capital investment required $ 0 $ 115,000 Annual cash inflows $ 21,000 $ 69,000 Salvage value of equipment in six years $ 8,700 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 15%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your…
n Taraz Company has assembled the following dato with respect to eight projects. Project 1: Initial cost $100,000, NPV- $5.000 Project 2: intial cost $104000, NPv 55,150 Pject innal cost $tOR.000 NPV1530 Project 4: Initial cost $110,000; NPV = $5,450 Project 5: Initial cost $98,000, NPV $4950 Project 6 Ininial cost 596.000, NPV S4,900 Project 7. nitial coot S4000, NPVSAASO Paject ntia con po0 MPY $4,700 Taraz Company can only do one of the projects. Which ONE is the BEST? Note: Your calculator needs to display at least 4 digits after the decimal in order to anewer tha question comecty O Project 1 Project 2 Project 3 Project 4 O Project 5 Project 6 Project 7 Project 8 SUMIT ALL ANEWERS
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5.000.000 ₺ to realize a new venture ABC Holdingwants to buy a factory worth. Also for the workshops sectionPayment of 2.500.000 ₺ and 3.000.000 ₺ for the construction of administrative buildingswill be made. The factory, which has an economic life of 10 years,It is foreseen to be sold for 2.500.000 ₺. It will be produced from the factorythe demand for the product is 50,000 pieces / year and will not change for 10 yearsIt is estimated. The unit cost of the product is 75 ₺ and the sales price is 150 ₺prices are increasing at the rate of inflation (12%). From investmentSince the lowest expected interest rate is 18%, this investment should be made andEvaluate the failure to do so according to the present tense method.
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Question 5 A machine that have the following cost is under consideration for a new manufacturing process. The interest rate is 6% compounded semiannually. First cost = $70,000 Semiannual operating cost = 6,000 Semiannual income = 18,000 Salvage value = 9,000 Life in years = 5 years a. PW = $29,059 b. PW = $39,059 O c. PW = -$39,059 d. PW = $19,059
Problem 5: Platypus Corporation's managers have presented the company's management with two proposals for expanding its production capacity. Based on the following two different alternatives, which proposal should they adopt? Cost of the Equipment Required Project 1 $250,000 Working Capital Investment Required 0 Annual Cash Inflows $65,000 Maintenance cost in year 4 $15,000 Maintenance cost in year 6 0 Salvage Value of Equipment in 8 Years $12,000 Project 2 $100,000 $150,000 $50,000 0 $15,000 0 Both projects have a life of 8 years. In 8 years Project 2's working capital will be released and be available to invest in other projects. The company has a discount rate of 16% Required: 1) Calculate the net present value for each project. 2) Based solely on the net present value of the project, which alternative would you recommend the company invest in? Why?
Three companies have provided estimates for a proposed project: Item Company A Company B Company C Capital Investment $100,000 $150,000 $125,000 Useful Life (Months) 96 144 120 Market Value $40,000 0 $30,000 Net Annual Cash $45,000 $500,000 $35,000 Flow 12% MARR 12% 12% What is the AW for each of the 3 estimates? It is thought useful life is the estimate which has the greatest volatility. If the pessimistic estimate is 8 years and the optimistic estimate is 12 years what is the worst and best case conditions for AW and which proposal would you recommend?
QUESTION 2 You are given the following forecasted data about a project: • Project life =3 years Required investment $1,200.000 • Salvage value $200,000 • Depreciation method straight-line depreciation • Unit price = $140 • First year's demand 100.000 units · Annual demand growth rate 5% • Unit variable cost $80 • Annual fixed cost $10,000 • Income tax rate 40% • MARR 10% Suppose the key variable is identified here to be the first year's demand. This variable's most likely value is 100,000 units (as indicated above), but what would happen to the NPW if it were 120,000 units instead? The change in the NPW values (new NPW- original NPW) is closest to: -$1,875,732.53 $1,875,732.53 -$1,563,110.44 $1,563, 110.44
A3