There is an alternative for a construction machine. This alternative requires an investment of 128*10* TL. The economic life of the project is N years. The discount rate is % i. It is estimated that annual maintenance costs will be 35*10° TL in the first half of its economic life and 45*10“ TL in the other half. The expected benefit of this alternative becomes 20*10ª TL with a linear increase at the end of the first 10 years and continues as 25*10* until the end of its economic life. The scrap value after the useful life is 115*10ʻ TL. Find out whether it is profitable by finding the benefit / cost ratio with future value analysis for this machine.

There is an alternative for a construction machine. This alternative requires an investment of 12810 TL. The economic life of the project is N years. The discount rate is % i. It is estimated that annual maintenance costs will be 3510° TL in the first half of its economic life and 4510“ TL in the other half. The expected benefit of this alternative becomes 2010ª TL with a linear increase at the end of the first 10 years and continues as 2510* until the end of its economic life. The scrap value after the useful life is 115*10ʻ TL. Find out whether it is profitable by finding the benefit / cost ratio with future value analysis for this machine.

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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Similar questions

Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating costs amount to R1000 for each year, and the one time initial investment cost is R8000. a. Calculate the Net Present Value (NPV) of this project.b. Calculate the cost-benefit ratio for the project. c. Is the project acceptable? Motivate your answer.
Smoot Automotive has implemented a new project that has an initial cost, and then generates inflows of P10,000 a year for the next seven (7) years. The project has a payback period of 4.0 years. 37. What is the project's internal rate of return (IRR)?
Consider a project that needs an investment outlay I at time t-0, with a constant annuity as returns at the end of each year of its ten-year project lifetime. The salvage value S at the end of life is unknown. Two other things are known as well about the project. The simple payback period is 4 years, and the discounted payback period is 6 years. What is the implied MARR (minimum acceptable rate of return) for this result?
Assume the following facts: A project will cost RM45 000 to develop. When the system becomes operational, after a one-year development period, operational costs will be RM9000 during each year of the system’s five year useful life. The system will produce benefits of RM30 000 in the first year of operation, and this figure will increase by 10% each year. When is the payback period for this project? Using the same facts, what is the ROI for this project? Using the same facts, what is the NPV for this project? (*Assuming 12% rate)
Suppose that a project requires an initial investment of 20 000 USD at the begynning of year 1. The project is expected to return 25 000 USD at the end of year 1. The required rate of return for the project is 20%. Calcualte the Net Present Value of the project as well as the Internal Rate of Return.
You are evaluating a project that costs $75,000 today. The project has an inflow of $ 155,000 in one year and an outflow of $65,000 in two years. What are the IRRs for the project? What discount rate results in the maximum NPV for this project? How can you determine that this is the maximum NPV?
You are evaluating a project that costs $75,000 today. The project has an inflow of $160,000 in one year and an outflow of $65,000 in two years. What are the IRRs for the project? What discount rate results in the maximum NPV for this project?
Assume that it costs $1,000 to start a project. If the project will give $400 profit in the first year, $500 in the second year and $300 in the third year. find the payback period. Now assume that the interest rate is 10%, find the net present value (NPV) and the profitability index (PI) for this project
Improvements with an initial investment cost of 67,000 TL will be made in an assembly line. Yearlymaintenance costs are 3.500 TL, and major maintenance every 3 years is 6.000 TL each.is worth. As the useful life of these improvements is expected to be 12 years, the interest rateFind the present value of costs when the ratio is 8%.
The annual maintenance costs of a tunnel, which is considered to have an eternal life, are worth 500 TL. The interest rate is considered to be an average of 5% per year. Since the capitalized cost is estimated to be 15,000 TL, how much can the initial investment cost of the tunnel be?
ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NP of the assembler if the required rate of return is 12%. Show calculation. Would you accept/reject a project based on NPV decision criteria? Why? Based on NPV calculated in part A, determine Profitability Index (PI). Show calculation. Would you accept/reject a project based on PI decision criteria? Why?
Replacing old equipment at an immediate cost of $40,000 and an additional outlay of $25,000 three years from now will result in savings of $15,000 per year for 5 years. The required rate of return is 7% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion. The net present value of the project is S. (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) The proposal should be rejected. accepted.

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