The country, Wickslago, is considering spending $200,000,000 to acquire a production facility to produce a new vaccine. Annual profit (revenues - expenses) is estimated to be $8,570,000 each year for the next 30 years. The production facility has an estimated resale value of $8,000,000 after 30 years. Use the modified B/C ratio method with a MARR = 3% to determine if this is a good use of Wickslago money.

The country, Wickslago, is considering spending $200,000,000 to acquire a production facility to produce a new vaccine. Annual profit (revenues - expenses) is estimated to be $8,570,000 each year for the next 30 years. The production facility has an estimated resale value of $8,000,000 after 30 years. Use the modified B/C ratio method with a MARR = 3% to determine if this is a good use of Wickslago money.

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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Packaging equipment for Xi Cling Wrap costs $60,000 and is expected to result in end-of-year net savings of $23,000 per year for 3 years. The equipment will have a market value of $10,000 after 3 years. The equipment can be leased for $21,000 per year, payable at the beginning of each year. Xi Cling’s MARR is 10%/yr. Based on an internal rate of return analysis, determine if the packaging equipment should be purchased or leased.
Raytronics wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $1.4 million and will have a salvage value of $200,000 after 8 years. Its use will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. Corporate income-tax rate is 25%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR if the chamber is kept for 8 years. After-tax MARR is 10%. Use MACRS-GDS(5) with 100% bonus depreciation.
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
Fabco, Inc., is considering purchasing flow valves that will reduce annual operating costs by $10,000 per year for the next 12 years. Fabco’s MARR is 7%/year. Using an internal rate of return approach, determine the maximum amount Fabco should be willing to pay for the valves. $
Abhaliya
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Assume a high demand for the product and by-products that all produced goods are sold each year within the studyperiod. Calculate the following: Internal Rate of Return Based on the computed values, decide whether the project is economically justifiable or not.
A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $18,000 per year over the six-year study period. At MARR of 19%, calculate the benefit-cost ratio of the project a. 0.53 b. 0.63 c. 0.73 d. none of the above
A new garbage truck can be purchased for $64,000. Its expected useful life is six years at which time its market value will be zero. Annual receipts is expected to be $20,000 with expenses of $2,000 per year over the six-year study period. The company's MARR is 18%. a. What is the ROI? b. Determine if this is a good investment using Net Present Worth(NPW) method. What is its Net Annual Worth? с. d. Using IRR method, is this investment acceptable?
TopCap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $123,000. In addition, delivery and installation costs will total $5,500. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) 2019 3,600 dozen 2020 5,600 dozen 2021 8,500 dozen 2022 11,300 dozen 2023 12,000 dozen The caps have a contribution margin of $8.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Co.'s cost of capital for this capacity expansion has been set at 14%. Required: The caps have a…
The management of California Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Operating Income Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The present value index (rounded to two decimal places) for this investment is a. 1.45 b. 1.14 c. 0.70 d. 0.88
A marketing company intends to 0 distribute a new product. It is expected to produce net returns of $17,000 per year for the first four yoars and $13,000 per year for the following throe yoars Tha faciltios roquirodto distribute the product will cost $70,000 with a disposal value of $9,000 after seven years. The facilities will require a major facelift costing $10,000 each after three years and after five years. If the companyrequires a return on investment of 10%, should the company distribute the new product?

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