Problem 1 StatementA simple, direct space heating system is currently being used in a professional medical office complex. An upgraded "variable air-volume system" retrofit can bepurchased and installed for $200,000 (investment cost). Its power savings in the future will be 500,000 kilo-Watt hours per year over its estimated life of 8 years. Thecost of electricity is $0.10 per kilo-Watt hour. The firm's MARR is 15% per year and the salvage value of the system in 8 years is $20,000.Question 1Use the "Intelligent Guess and Check Procedure" AND linear interpolation to calculate the IRR of this project. In your supporting work you should mention how youchose your different interest rates (for example, "I chose the MARR as my first guess" and "I tried a larger interest rate because my PW(current rate) > 0" or "I tried asmaller interest rate because my PW(current rate) < 0"). Also, clearly show the linear interpolation equation you used to solve for the IRR.Enter your answer as a percentage with two decimal places. For example, 10.92% would be entered in as 10.92

The objective of this question is to calculate the Internal Rate of Return (IRR) of a project using…

Answered: Problem 1 Statement A simple, direct…

FINANCIAL ACCOUNTING

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Author:Libby

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Chapter1: Financial Statements And Business Decisions

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QUESTION 3 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the cash flow for capital expenditures.…
A labor saving device system save $2.000 per year for five (5) years. It can be installed at a cost of $8,000. The rate of return on this planned investment is most nearly a. 12.36% b.i 10.36% Oc 10% Od. 9.36%
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# 30 Investment Criteria A new furnace for a small factory will cost $27,00 a year to install and will require ongoing maintenance expenditures of $1,500 a year. But it is far more fuel efficient than the old one and will reduce the compounding of heating oil by 2400 gallons per year. Heating oil this year will cost $3.00 per gallon; the price per gallon is expected to increase by .50 per year for the next 3 years and stabilize for the foreseeable future. The furnace will last for 20 years at which point it will need to be replaced and will have no salvage value. The discount rate id 8 %. What is the NPV of the investment in the furnace? What is the IRR? What is the payback period?
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A cookie factory needs a new cookie machine. They have narrowed their choices to the following machines: a Cost $18000 25000 15000 Annual net savings 1055 2125 1020 IRR 7% 9% 8% Each machine has a 25-year useful life with no salvage value. If the MARR for this factory is 10%, which alternative should be chosen? (Incremental IRR analysis method is required)

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