Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel forautomobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $11 million and the M&O cost is estimated at$2.3 million per year. Alternatively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $20 million, butless contamination will render the M&O cost lower at $0.5 million per year. At an interest rate of 12% per year and a 5-year projectperiod, which system is better-ponds or tubes? Use a present worth analysis.The present worth of lined ponds is $million and that of plastic tubes is $imillion.Lined pondsv are used to grow algae.

Lined ponds Construction costs =$11 million MO cost=$2.3 million per year interest rate =12%…

tion will render the M&O cost lower at $0.5 million per year. At an interest rate of 12% per year and a 5-year project system is better-ponds or tubes? Use a present worth analysis. orth of lined ponds is $| | million and that of plastic tubes is $[ Emillion.

tion will render the M&O cost lower at $0.5 million per year. At an interest rate of 12% per year and a 5-year project system is better-ponds or tubes? Use a present worth analysis. orth of lined ponds is $| | million and that of plastic tubes is $[ Emillion.

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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80. Which one of the following should be assumed about a project that requires a $100,000 investment at time zero, then returns $20,000 annually for 5 years? A. The NPV is negative. B. The NPV is zero. C. The profitability index is 1.0. D. The IRR is negative.
The most likely outcomes for a particular project are estimated as follows: Unit price: Variable cost: Fixed cost: Expected sales: 50 24 30 $370,000 36,000 units per year However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.4 million, which will be depreclated straight-line over the project life to a final value of zero. The firm's tax rate is 21% and the required rate of return is 14%. (For all the requirements, a negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.) a. What is project NPV in the best-case scenario, that is, assuming all variables take on the best possible value? b. What is project NPV in the worst-case scenario?
For the following two alternatives, if the MARR is 10% per year (a)which one has a shorter payback period (b) which one do you select if you use the PW analysis. (c) is your selection different in (a) and (b)? Why? (d) use Spreadsheet to solve a and b. Alternative A: initial cost = $300,000 Revenue = $60,000 Alternative B: initial costs = $300,000 Revenue starts from n=1 at $10,000 and increases by $15,000 per year The expected life is 10 years for each alternative.
Q.3 (x1=70000 x2=10%) The IPS company has installed a system to help reduce the number of defective products. The capital investment in the system is $X1, and the projected annual savings are tabled below. The system's market value at the EOY five is negligible, and the MARR is x2% per year A. What is the FW of this investment? Based on econonical deciston rule, is this a good investment. b. What is the IRR of the system? Based on economical decision rule, is this a good investmentr. C. What is the discounted pavback period for this investment.
Generro Company is considering the purchase of equipment that would cost$60,000and offer annual cash inflows of$16,300over its useful life of 5 years. Assuming a desired rate of return of10%, is the project acceptable? (PV of \$1 and PVA of \$1) (Use appropriate factor(s) from the tables provided.) Mitiple Choice The answer cannot be detergined. No, since the negative net present value indicates the investmeot will yield a fate of retum below the desred tate of return. Yes, since the investment will generate$81.500in future cosh flows, which is gremer than the purchase cont of$60,000Yes, since the positve net present valse ind cates the investment will eam a rate of return greater than10 h.
solve it correctly. not use excel
Please do not give solution in image format ? And Fast Answering Please ? And please explain proper steps by Step ?
Adam Andler Corp is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price should increase with inflation. Fixed costs will also be constant, but variable costs should rise with inflation. The project should last for 3 years. This is just one of many projects for the firm, so any losses on this project can be used to offset gains on other firm projects. What is the project's expected NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC or cost of capital Net investment cost (depreciable basis) The salvage value of its equipment No other fixed assets will be acquired for following years The company will require an increase in net working capital at the $10,000 beginning The company will liquidate all working capital at the end of the project -10,000 Units sold (constant through years) 60,000 $30.00 $50,000 $17.00 Average price per unit, Year 1 Fixed operating…
Coore Manufacturing has the following two possible projects. The required return is 12 percent. Year Project Y Project Z 0 -$27,500 -$55,000 1 13,500 19,500 234 2 11,900 26,000 3 14,300 17,500 9,900 24,000 a. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Which, if either, of the projects should the company accept? a. Project Y Project Z 1.38 ง b. Project Y 3 decimal places required. Project Z c. Accept project x
"JFINEX Corporation is considering a new project that has an NPV of 50,000 and IRR of 5.3%. What is the cost of the project if the profitability index is 3?"
A company is considering a project but the engineers disagree on what the costs and benefits will be over the 6 year lifespan. Assume that interest is 6%. a. What is the present worth of this project if the probabilities for each scenario are accurate? b. If the beta distribution approximation is used, what is the expected value of the initial cost? С. What is the payback period for the most likely alternative with 50% probability? P = 0.25 P = 0.50 P = 0.25 initial cost $10,000 $12,000 $13,000 annual savings $4,000 $5,000 $6,500 annual costs $500 $1,000 $1,500 salvage value $1,000 $2,000 $2,500
18. Occidental Oman is thinking about a project where the initial investment is RO 12000 and the total life of the project is 5 years. The project is expected to generate RO 3800 every year during the entire life of project. If the management keeps a standard of 3 year as pay back then in this case the decision will be __________. a. The project is not worth as cash flow is not significant b. None of the options c. The project will be rejected because the payback period is more d. The project will be accepted because the payback period is less

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