The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. Th sites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, t land for a parking garage will cost $1 million, and construction costs will be $10 million for the parking garage, infrastructure relocati and drainage. The SW site is 30 km from downtown, but the land will be donated by a developer who knows that an arena at this si will dramatically increase the value of the remainder of his land holdings. Because of its centralized location, there will be greater attendance at most of the events held at the DT site. This will result in more revenue to vendors and local merchants in the amount $550,000 per year. Additionally, the average attendee will not have to travel as far, resulting in annual benefits of $400,000 per yea All other costs and revenues are expected to be the same at either site. If the city uses a discount rate of 7% per year, and will construct at one site or the other, which site should be selected? Use a 30-year study period. The AB/C ratio is Select site downtown

The city engineer and economic development directors are evaluating two sites for construction of a multipurpose sports arena. Th sites are downtown (DT) and southwest (SW) of the metropolitan area. The city already owns enough land at the DT site; however, t land for a parking garage will cost $1 million, and construction costs will be $10 million for the parking garage, infrastructure relocati and drainage. The SW site is 30 km from downtown, but the land will be donated by a developer who knows that an arena at this si will dramatically increase the value of the remainder of his land holdings. Because of its centralized location, there will be greater attendance at most of the events held at the DT site. This will result in more revenue to vendors and local merchants in the amount $550,000 per year. Additionally, the average attendee will not have to travel as far, resulting in annual benefits of $400,000 per yea All other costs and revenues are expected to be the same at either site. If the city uses a discount rate of 7% per year, and will construct at one site or the other, which site should be selected? Use a 30-year study period. The AB/C ratio is Select site downtown

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

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XYZ operates indoor tracks. The firm is evaluating the Santa Fe project, which would involve opening a new indoor track in Santa Fe. During year 1, XYZ would have total revenue of $168,000 and total $78,000 if it pursues the Santa Fe project, and the firm would have total revenue of $156,000 and total costs of $71,400 if it does not pursue the Santa Fe project. Depreciation firm would $76,400 if the firm pursues the project and $39,100 if the firm does not pursue the project. The tax rate is 44.70%. What is the relevant operating cash flow (OCF) for year 1 of the Santa Fe project that should use in its NPV analysis of the Santa Fe project? taken by the O $29,640.70 (plus or minus $1) O $43,900.00 (plus or minus $1) O $24,240.70 (plus or minus $1) O $19,659.30 (plus or minus $1) O None of the above is within $1 of the correct answer costs of be XYZ
A toll bridge across the Mississippi River is being considered as a replacement for the current 1-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $17,500,000, and $334,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fifth year of its 25-year projected life at a cost of $1,200,000 per occurrence (no resurfacing cost in year 25). Revenues generated from the toll are anticipated to be $2,500,000 in its first year of operation, with a projected annual rate of increase of 1.75% per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 25 years and a MARR of 11% per year, should the toll bridge be constructed? Also, assume that the initial surfacing…
A toll bridge across the Mississippi River is being considered as a replacement for the current 1-40 bridge linking Tennessee to Arkansas. Because this bridge, if approved, will become a part of the U.S. Interstate Highway system, the B-C ratio method must be applied in the evaluation. Investment costs of the structure are estimated to be $19,000,000, and $332,000 per year in operating and maintenance costs are anticipated. In addition, the bridge must be resurfaced every fifth year of its 30-year projected life at a cost of $1,300,000 per occurrence (no resurfacing cost in year 30). Revenues generated from the toll are anticipated to be $2,400,000 in its first year of operation, with a projected annual rate of increase of 2% per year due to the anticipated annual increase in traffic across the bridge. Assuming zero market (salvage) value for the bridge at the end of 30 years and a MARR of 12% per year, should the toll bridge be constructed? Also, assume that the initial surfacing of…
Preliminary plans are under way for the construction of a new stadium for a major league baseball team. City officials have questioned the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may buy the boxes for $340,000 each. The fixed construction cost for the upper deck area is estimated to be $5,780,000, with a variable cost of $170,000 for each box constructed. (a) What is the break-even point for the number of luxury boxes in the new stadium? (b) Preliminary drawings for the stadium show that space is available for the construction of up to 52 luxury boxes. Promoters indicate that buyers are available and that all 52 could be sold if constructed. (i) What is your recommendation concerning the construction of luxury boxes? O Build the luxury boxes. O Do not build the luxury boxes. (ii) What profit is anticipated (in dollars)? (Enter a negative value if a predicted loss.) $
The Dudumwezi city Council is a considering the introduction of speed trains in order to deal with the problem of traffic congestion in the city. The project will be implemented through the PPP model. Councilors are skeptical about the financial viability of the project and have asked for a financial viability assessment of the project. To this end the council management has engaged a consultant to carry out this assessment. Required:To aid the Councilor’s, explain why it is important to carry out a cash flow analysis in project finance and the five factors that need to be considered when calculating cash flows.
15. Preliminary plans are under way for the construction of a new stadium for a major league baseball team. City officials have questioned the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected in- dividuals may buy the boxes for $300,000 each. The fixed construction cost for the upper- deck area is estimated to be $4,500,000, with a variable cost of $150,000 for each box constructed. a. What is the breakeven point for the number of luxury boxes in the new stadium? b. Preliminary drawings for the stadium show that space is available for the construction of up to 50 luxury boxes. Promoters indicate that buyers are available and that all 50 could be sold if constructed. What is your recommendation concerning the construction of luxury boxes? What profit is anticipated?
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A new roof will cost $12000 . It will be invested in 19 years . If the interest rate is 7% per year . How much must be saved each year to accumulate $12000 after 19 years
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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 air 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 $269.87 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $93.62 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 16%. 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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