The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 3 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 23 years, what is the present worth of the desalting option revenue at an interest rate of 6% per year? The present worth of the desalting option revenue at an interest rate of 6% per year is determined to be $

The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 3 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 23 years, what is the present worth of the desalting option revenue at an interest rate of 6% per year? The present worth of the desalting option revenue at an interest rate of 6% per year is determined to be $

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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A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070.To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take fivefive years at a cost of $15 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070. The present worth of this project is how many million. (2 decimal places)
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GoG is considering two alternative proposals to improve road safety and reduce traffic congestion in city “A”: (a) constructing a new bypass or (b) upgrading existing roadways. The Bypass Proposal will have an initial cost of GHC60 million and annual maintenance costs of GHC2.25 million. It is expected to yield benefits of GHC9.75 million per year. The Upgrading Proposal has an initial cost of GHC7 million, annual maintenance costs of GHC262,500 and annual social benefits of GHC1.14 million. Each project has a life of 30 years. The Bypass Proposal, which would have donor funding component, involves a discount rate of 8% while the Upgrading Proposal, to be funded wholly by government, has a discount rate of 4%. i. Calculatethenetpresentvalueofeachproposalanddetermineifit is economically viable ii. Which of the two proposals is more economically justifiable.
The Egyptian government is considering three projects to overcome the drought due to (sad EINahda) project. Project A is a dam. The dam will have irrigation and recreation benefits in addition to the water control benefits. Projects B and C consist of permanent dikes along the Nile River near Nagaa Hammadi. Data for these projects are shown in the following table. Using a MARR of 0.11 and considering the project life to be 30 years, use incremental annual worth benefit-cost analysis to choose the best project. Project A Project BProject C First Cost (millions of $) Annual Benefits (millions of $) 45.8 30.8 22 4.6 3.4 Annual Op, and Maint. Costs (millions of $) 0.4 0.2 0.2 Benefit to Cost Ratio AW(C) = Benefit to Cost Ratio AW(B) = Benefit to Cost Ratio AW(A) = Benefit to Cost Ratio AW(B-C) = Benefit to Cost Ratio AW(A-B) = Select 1 for Project A 2 for Project B 3 for Project C
The Cebu City plans to increase the capacity of her existing water transmission lines. Two plans are under consideration. Plan A requires the construction of a parallel pipeline, the flow being maintained by gravity. The initial cost is P197,342,811 and the life is 40 years, with an annual operating cost of P8,450,154 for the 1st 20 years and P13,297,046 for the next 20 years. Plan B requires the construction of a booster pumping station costing P100M with the life of 40 years. The pumping equipment cost an additional amount of P25M, it has a life of 20 years and a salvage value of P2M. The annual operating cost is P5M. Using the Present Value (PV) Method and an interest of 21% cpd. annually, what is the PV of Plan A?
Liwayway High School is planning to install solar panels to provide some of the electricity for its groundwater desalting facilty. The project would be done in two phases. The first phase will cost P400 million in year 1 and P500 million in year 2. This investment will result in energy savings (phase 2) of P54,000,000 in year 3, P54,600,000 in year 4, and amounts increasing by P600,000 each year through year 10. Let i = 10% per year.(a) What is the future worth of the savings?(b) Is the cost of the solar project justified by the savings? (Hint: Calculate the difference between savings and cost).
A city is analyzing two alternatives for generating electricity. The first is the construction of a hydroelectric dam with an investment of $200 million and an annual cost of $2 million for operation and maintenance. The life span of the dam is so great that it can be considered infinite. The second alternative consists of generating electricity from a gas plant, whose lifetime is 20 years. The initial investment required is $40 million and the annual cost of operation and maintenance is $6 million. The minimum attractive rate of real return is 5% per annum. Compare and calculate the Net Present Value of the resulting savings
Citywide Courier Services projects that demand for its services will rise for a period of three years before subsiding. It can lease additional communication for $1,000 at the beginning of every quarter for three years. Alternatively, it can purchase the equipment for $13,995 at 7.5% compounded quarterly. The salvage value of the equipment after three years is expected to be $4,000. Which option would you recommend? How much better is that option in today's dollars?
A new solid waste treatment plant is to be constructed in Washington County. The initial installation will cost $30 million (M). After 10 years, minor repair and renovation (R&R) will occur at a cost of $14M will be required; after 20 years, a major R&R costing $18M will be required. The investment pattern will repeat every 20 years. Each year during the 20-year period, operating and maintenance (O&M) costs will occur. The first year, O&M costs will total $3M. Thereafter, O&M costs will increase at a compound rate of 6% per year. Based on a 6% MARR, what is the capitalized cost for the solid waste treatment plant? Click here to access the TVM Factor Table calculator. Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±25,000.
The government plans to increase the capacity of her existing water transmission lines in Cebu City. Two plans are under consideration. Plan A requires the construction of a parallel pipeline, the flow being maintained by gravity. The initial cost is P182,947,337 and the life is 50 years, with an annual operating cost of P5,725,635 for the 1st 25 years and P11,441,794 for the next 25 years. Plan B requires the construction of a booster pumping station costing P100M with the life of 50 years. The pumping equipment cost an additional amount of P25M, it has a life of 25 years and a salvage value of P2M. The annual operating cost is P5M. Using the Present Value (PV) Method and an interest of 23% cpd. annually, what is the PV of Plan A?
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