U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $14 million now and another $10 million 1 year from now. If total operating costs will be $1.4 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 11 to recover its investment plus a return of 19% per year? The company must make $ 6393505.38 its investment plus a return of 19% per year. million annually in years 1 through 11 to recover
U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $14 million now and another $10 million 1 year from now. If total operating costs will be $1.4 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 11 to recover its investment plus a return of 19% per year? The company must make $ 6393505.38 its investment plus a return of 19% per year. million annually in years 1 through 11 to recover
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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These are the values I was solving for, but I'm being told the $6,393,505.38 is incorrect. Not sure what I'm doing wrong.
Thanks!
Transcribed Image Text:Initial Cost
$14,000,000
Follow On Cost (1 yr)
$10,000,000
Operating Costs (yr)
$1,400,000
Salvage Value
$0
Interest
19%
Life
11
P/F Follow On Cost
-0.840336134
-0.2228909
($6,281,099.84)
PW= $28,684,461.19 $6,393,505.38
P/A Operating Cost
Transcribed Image Text:U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and
martensitic stainless steel round bars that is expected to cost $14 million now and another $10 million
1 year from now. If total operating costs will be $1.4 million per year starting 1 year from now, and the
estimated salvage value of the plant is virtually zero, how much must the company make annually in years
1 through 11 to recover its investment plus a return of 19% per year?
The company must make $ 6393505.38
its investment plus a return of 19% per year.
million annually in years 1 through 11 to recover
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