Solar and conventional alternatives are available for providing energy at a remote U.S. Am training site. The costs associated with each alternative are shown. Use the B/C method to determine which should be selected at an interest rate of 8% per year over a 10-year study period.

Solar and conventional alternatives are available for providing energy at a remote U.S. Am training site. The costs associated with each alternative are shown. Use the B/C method to determine which should be selected at an interest rate of 8% per year over a 10-year study period.

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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One of two methods will produce solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an annual operating cost of $160,000 per year, and a $125,000 salvage value after its three-year life. Method 2 will cost $830,000 with an annual operating cost of $120,000, and a $240,000 salvage value after its five-year life. The company has asked you to determine which method is economically better, but it wants the analysis done over a three-year planning period. The salvage value of Method 2 will be 35% higher after 3 years than it is after 5 years. If the company’s MARR is 10% per year, which method should the company select?
A factory to manufacture automobile tires is being considered to be setup in Kuwait. The organization is expecting to manufacture 12044 tires annually. After doing some planning, the manger was able to estimate the following fixed and variable cost in KWD for the three locations under consideration: Location C Fixed Cost 289161 389161 239161 per year Variable 45 30 65 Cost per Unit What will be the total cost for the best location selected based on these costs. [round off to the closest whole number]
The U.S. government is considering building apartments for its employeesworking in a foreign country and currently living in locally owned housing. A comparison of two possible buildings indicates the following: Assume the salvage or sale value of the apartments to be 60% of the firstinvestment. Use 10% and a 20-ycar study period to compute the B/C ratio onincremental investment, and make a recommendation as to the best option. (Do not assume a do-nothing alternative.)
You are evaluating a project for The Farpour golf club, guaranteed to correctthat nasty slice. You estimate the sales price of The Tiff-any to be $400 per unitand sales volume to be 1000 units in year 1; 1500 units in year 2; and 1325units in year 3. The project has a three-year life. Variable costs amount to $225per unit and fixed costs are $100,000 per year. The project requires an initialinvestment of $165,000 in assets which will be depreciated straight-line to zeroover the three-year project life. The actual market value of these assets at theend of year 3 is expected to be $35,000. NWC requirements at the beginning ofeach year will be approximately 20 percent of the projected sales during thecoming year. The tax rate is 34 percent and the required return on the project is10 percent. What change in NWC occurs at the end of year 1?
A site on a major river is being evaluated for a new lock and dam for navigation purposes. Two options are considered: (a) single 1200-foot lock or (b) single 1200-foot lock and a single 600-foot lock (two locks, side by side). Benefits and costs of the two options are indicated in the table. Interest rate to be used is 7%, and the planning period is 50 years. Initial cost Annual operating cost Annual benefit Single Lock ($ million) 60.0 1.0 12.0 Double Locks ($ million) 85.0 1.5 16.0 (a-5 pts) Show the cash flow table for both options. (You may show only for the first three years as the same numbers will repeat for the remaining planning period.) (b-10 pts) Solve by the present worth method. (c-10 pts) Solve by the annual cash flow method. (d-10 pts) Solve by the incremental benefit-cost ratio method. (e-5 pts) Check your solutions for (b), (c), and (d). Are they different? Explain.
A firm by the name “Modern Nursing Care” is considering two projects for investment in biomedical plant. Based on the payback period method suggest which is a better investment choice.Project –A-Initial investment- 200000$, Cash inflows- 500000$ per year, life of project 8 years.Project-B-Initial investment-250000$, Cash inflows-25000$ per year, life of project 12 years.
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An electronic circuit board manufacturer is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing plant. All have lives of 10 years and zero salvage value. The required investment, the estimated after-tax reduction in annual disbursements, and the gross rate of return arc given for each alternative in the following table: llte rate of return on incremental investments is given for each project as follows: Which project would you select according to the rate of return on incremental investment if it is stated that the MARR is 15%?
Please view the following video before answering this question. Video Example 4.3 Click here to access the TVM Factor Table Calculator Consider a palletizer at a bottling plant that has a first cost of $141,000, operating and maintenance costs of $16,500 per year, and an estimated net salvage value of $23,500 at the end of 33 years. Assume an interest rate of 6.00%. What is the present equivalent cost of the investment if the planning horizon is 33 years? O $387,900 O $362,900 O $372,363 O $423,400
Please answer this problems manually. Thank you
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