University Grants Commission (UGC) is planning to award a grant of Rs 25,000,000 to UET texila to upgrade its engineering education. The grant will extend over a period of 12 years and will create an estimated savings of 500,000 per year in faculty salaries and student-related expenses. UGC uses a rate of return of 7% per year on all grants award. This grant will share UGC funding with ongoing activities, so an estimated 200,000 will be removed from other program funding. To make this program successful, 150,000 per year operating cost will be incurred from the regular maintenance and operation budget. Use the B/C method and modified B/C method to determine if the grant is economically justified.

University Grants Commission (UGC) is planning to award a grant of Rs 25,000,000 to UET texila to upgrade its engineering education. The grant will extend over a period of 12 years and will create an estimated savings of 500,000 per year in faculty salaries and student-related expenses. UGC uses a rate of return of 7% per year on all grants award. This grant will share UGC funding with ongoing activities, so an estimated 200,000 will be removed from other program funding. To make this program successful, 150,000 per year operating cost will be incurred from the regular maintenance and operation budget. Use the B/C method and modified B/C method to determine if the grant is economically justified.

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

You have been tasked with recommending one of the two investment projects for acceptance by your company. Project 1 costs $100,000 to implement today (it is a cost), it will bring subsequent positive cash flows of $50,000 at the end of year one; and subsequently $30,000; $45,000; $8,000. Project 2 initial cost is $14,000, and subsequent cash flows are $7,000 per year for 3 years. Your company is using WACC of14% for both projects. a. Calculate NPV and IRR for each project, and decide which one to recommend. b. Calculate MIRR for projects A and B. Which project would you recommend based on MIRR? c. Find the crossover rate. What does this rate represent? Describe in YOUR OWN words.
Ace Inc. is evaluating two mutually exclusive projects—Project A and Project B. The initial investment for each project is $50,000. Project A will generate cash inflows equal to $15,625 at the end of each of the next five years; Project B will generate only one cash inflow in the amount of $99,500 at the end of the fifth year (i.e., no cash flows are generated in the first four years). The required rate of return of Ace Inc. is 10 percent. Which project should Ace Inc. purchase? Group of answer choices Project A should be purchased because it has a higher net present value (NPV) than Project B. Project A should be purchased because it will produce cash every year for five years. Project A should be purchased because it has a positive net present value (NPV). Neither project should be purchased, because neither has a positive net present value (NPV).
Ela incorporated uses discounted payback period for projects under PhP 25.000 and has a cut off period of 4 years for these small value projects. Two projects. R and S are under consideration. The anticipated cash flows for these two projects are listed below. If Ela incorporated uses an 8% discount rate on these projects are they accepted or rejected?
A firm wants to sponsor a new engineering lab at a local university. This requires $4M to construct the lab, $1.5M to equip it, and $750,000 every 6 years for new equipment. What is the required endowment if the university will earn 8% interest on the funds? Answer: $6,777,957
Ace Barker Inc. is evaluating two mutually exclusive projects: A and B. The initial investment for each project is $42,000. Project A will generate cash inflows equal to $15,600 at the end of each of the next five years; Project B will generate only one cash inflow in the amount of $70,000 at the end of the fifth year (i.e., no cash flows are generated in the first four years). The required rate of return of Ace Barker Inc. is 10 percent. Which project should Ace Barker Inc. purchase? O Project A should be purchased because it has a higher net present value (NPV) than Project B O Project A should be purchased because it will produce cash every year for five years. O Project B should be purchased because it has a positive net present value (NPV). Neither project should be purchased, because neither has a positive net present value (NPV).
We are funding an organization for ten years. The first payment will be made one year from today (end of year one) and will be $8,350. Each year after that, the organization will receive payment from us annually. The payment will increase at a rate of 2% per year after the second payment. If the annual interest rate is 15%, what is the present value of this endowment?
An investment project provides cash inflows of $3,000 per year for five years. What is the payback period if the project requires $5,000 at the beginning of the project?
A public project is being considered by a local government that will cost $10M at the start and SSM at the end of years 1 through 5. The project is estimated to earn $20M at the end of year 2, $30M at the end of years 3 and 4, and $20M at the end of year 5. Assuming i = 10%. What is the benefit-to-cost ratio for this project? Draw a cash flow diagram for the costs and benefits annually.
Project for Ma Consider a nominal prize of one million dollars, to be paid in twenty annual payments of $50,000. Assume when each payment is made, the recipient immediately pays Federal income tax at a 25% rate and invests the rest. Assume the funds invested eam 6% per year, with both Federal taxes paid from that income and the remainder reinvested. The Assignment 1. Determine the total amount of money the winner will have at the end of twenty years. This will be one year after the last payment 2. Determine the amount the winner would have had at the end of twenty years if he or she had been given one million dollars all at once under the same conditions regarding taxes and Investment. 3. Determine the amount for a lump sum payment that would leave the winner with the same amount as the annuity after twenty years. 1. Discuss assumptions that were made to simplify this assignment along with important factors that have been omitted.

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