Two mutually exclusive alternatives are being considered forthe environmental protection equipment at a petroleumrefinery. One of these alternatives must be selected. Theestimated cash flows for each alternative are as follows:Alternative AAlternative BCapital InvestmentAnnual Expenses$20,000$38,0005,5004,000Market Value at end of useful1,0004,200lifeUseful life5 years10 yearsWhich alternative is preferred, based on the repeatabilityassumption? Use AW Method.a.b. Assume the study period is shortened to five years. The marketvalue of Alternative B after five years is estimated to be $15,000.Which alternative would you recommend? Use AW method.

The AW method is commonly used for comparing alternatives. As illustrated in Chapter 4, AW means…

Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of these alternatives must be selected. The estimated cash flows for each alternative are as follows: Capital Investment Annual Expenses Market Value at end of useful life Useful life Alternative A $20,000 5,500 1,000 5 years Alternative B a. Which alternative is preferred, based on the repeatability assumption? Use AW Method. $38,000 4,000 4,200 10 years b. Assume the study period is shortened to five years. The market value of Alternative B after five years is estimated to be $15,000. Which alternative would you recommend? Use AW method.

Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of these alternatives must be selected. The estimated cash flows for each alternative are as follows: Capital Investment Annual Expenses Market Value at end of useful life Useful life Alternative A $20,000 5,500 1,000 5 years Alternative B a. Which alternative is preferred, based on the repeatability assumption? Use AW Method. $38,000 4,000 4,200 10 years b. Assume the study period is shortened to five years. The market value of Alternative B after five years is estimated to be $15,000. Which alternative would you recommend? Use AW method.

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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The following data pertain to an investment proposal (Ignore income taxes.): Cost of the investment $ 36,000 Annual cost savings $ 11,000 Estimated salvage value $ 4,000 Life of the project 5 years Discount rate 13% Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed investment is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
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Compare the Annual Worth of the two systems and identify the better option at MARR = 10% per year: Solar: First cost $1,500,000; AOC $-700,000; Salvage value $100,000; Life of 8 years Geothermal: First cost $2,250,000; AOC $-600,000; Salvage value $50,000; Life of 8 years Select the Geothermal System with a calculated AW of $-1,017,368 Select the Geothermal System with a calculated AW of $-727,591 Select the Solar System with a calculated AW of $-1,238, Select the Solar System with a calculated AW of $-972,416
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Harris Corporation has provided the following data concerning an investment project that it is considering: Initial investment Annual cash flow Salvage value at the end of the project Expected life of the project Discount rate $ 160,000 $ 54,000 $ 11,000 O $67,000 O $160,516 O $516 O $(5,776) 4 15 per year years % Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $ Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -880,000 -300,000 -930,000 250,000 14 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors The equivalent annual cost of the project is $- 980,731.95
The cash flows for two mutually exclusive alternatives are as follow: A B - $500 - $600 -200 -300 500 150 400 300 300 450 Year 0 1 2 3 4 Each alternative has a 4-year useful life and no salvage value. The MARR is 12%. Which alternative should be selected based on: (a) Payback period (b) Benefit-cost ratio analysis (c) Rate of return analysis
1. Two mutually exclusive alternatives requiring different investments are being considered. The life of all two alternatives is estimated to be 20 years with no salvage value. The MARR that is considered is acceptable is 12%. The cash flows representing these two alternatives are as follows: Investment cost Net income per year Alternative A $100,000 $15,000 Alternative B $60,000 $11,000 Find the investment that should be selected using IRR on incremental investment (use PW formula).
Im not understanding , the solution provided looks wrong, or I am wrong, particualrly EPS, Constant Growth YEARS 1 2 3 4 5 YEARS 1 2 3 4 5 BV Equity $ 50.00 $ 53.50 $ 57.25 $ 61.25 $ 65.54 Cost of Capital DIV PS $ 3.50 $ 3.75 $ 4.01 $ 4.29 $ 6.03 EPS (Net Income) $ 7.00 $ 7.49 $ 8.01 $ 8.58 $ 7.54 11.5% PV CF $ 3.14 $ 3.01 $ 2.89 $ 2.77 $ 3.50 ROE 14.0% 14.0% 14.0% 14.0% 11.5% TV $ 52.43 Payout Ratio 0.5 0.5 0.5 0.5 0.8 PV TV $ 30.42 DIV PS $ 3.50 $ 3.75 $ 4.01 $ 4.29 $ 6.03 Price $ 45.74 Growth of DIV 0% 7.0% 7.0% 7.0% 40.6%
What is the annual equivalent cost of purchasing a lift truck that has an initial cost of $85,000, an annual operating cost of $13,500, and an estimated salvage value of $23,000 after six years of use at an annual interest rate of 6%? X More Info Equal Payment Series Single Payment Compound Present Amount Worth Compound Amount Factor (F/A, I, N) Sinking Present Fund Worth Factor Factor Capital Recovery Factor (A/P, i, N) Factor Factor (F/P, i, N) (P/F, i, N) (A/F, i, N) (P/A, i, N) 1.0800 0.9434 1.0000 1.0000 0.9434 1.0800 1.1238 0.8900 2.0800 0.4854 1.8334 0.5454 1.1910 0.8396 3.1836 0.3141 2.6730 0.3741 1.2625 0.7921 4.3746 0.2288 3.4861 0.2886 1.3382 0.7473 5.6371 0.1774 4.2124 0.2374 1.4185 0.7050 6.9753 0.1434 4.9173 0.2034 0.6851 8.3938 0.1191 5.5824 0.1791 1.5038 1.5938 1.6895 0.6274 9.8975 0.1010 6.2098 0.1610 0.5919 11.4913 0.0870 6.8017 0.1470 1.7908 0.5584 13.1808 0.0759 7.3801 0.1359 SAWNIN 1 2 3 4 5 67899 10

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