You are presented th three proposals. Proposal 1 includes a first cost of 5,000 e vell as an annual operating cost (AOC) of 1,00 $. The project is expected to n for 5 vears, ending with a 400 $ worth at the end of its usage life. Proposal 2 is considered a permanant investment with an initial installment cost of 1.000S and a 300 $ refurbishment cost every 10 years. An unexpected cashflow, due to an internal accident, occured on the seventh year of the investment, resulting in a 100 $ expense. Finally, Proposal 3, which is a 10 year investment, consists of a 900$ first investment cost as well as an annual payment of 100 $ starting year 6. Compare the three proposals (between each other) on the AW basis using a 10%

You are presented th three proposals. Proposal 1 includes a first cost of 5,000 e vell as an annual operating cost (AOC) of 1,00 $. The project is expected to n for 5 vears, ending with a 400 $ worth at the end of its usage life. Proposal 2 is considered a permanant investment with an initial installment cost of 1.000S and a 300 $ refurbishment cost every 10 years. An unexpected cashflow, due to an internal accident, occured on the seventh year of the investment, resulting in a 100 $ expense. Finally, Proposal 3, which is a 10 year investment, consists of a 900$ first investment cost as well as an annual payment of 100 $ starting year 6. Compare the three proposals (between each other) on the AW basis using a 10%

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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A five-year project has an initial fixed asset investment of $320,000, an initial NWC investment of $32,000, and an annual OCF of -$31,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is this project's equivalent annual cost, or EAC? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Equivalent annual cost
A new project has an initial cost of $250,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $13,250, $18,000, $20,240, $15,150, and $11,900, respectively. What is the average accounting return? Multiple Choice 11.52% 8.95% 13.46% 12.57% 5.33%
An elective project is currently under review. It requires an initial investment of $116,000 for equipment. The profit is expected to be $28,000 each year, over the 6-year project period. The salvage value of the equipment at the end of the project period is projected to be $22,000. Assume a MARR of 10%. Find an IRR for this project.
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You Answered Some particulars for a project are as follows. Initial Capital Cost in year 0 ($Mn) Follow-up 'one-off' cost in year 1 ($Mn) Annual Operating Cost ($Mn/yr) Annual Benefits ($Mn/yr) Correct Answers Project Closure Cost, at end of project life ($Mn) Useful Life (years) Interest/Discount rate (percent) 1000 300 10% of capital cost 400 2,391 (with margin: 5) 200 20 7 What is the Life Cycle Cost of the project - expressed in present value term? (your answer must be rounded off to the nearest million dollars, i.e., no decimal places)
Solve c) What is the payback period (PB) for this project?
A project requires an initial investment of $322,990 and its expected life is 7 years. Net operating income from the project is expected to be $28,100 each year, including depreciation of $42,270. The salvage value of the assets is expected to be $27,100 at the end of the life of the project. Ignoring income taxes, the payback period is: (Round your answer to 2 decimal places.) Payback period years
A five-year project has an initial fixed asset investment of $355,000, an initial NWC investment of $39,000, and an annual OCF of −$38,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 11 percent, what is this project’s equivalent annual cost, or EAC? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 7 percent and the maximum allowable discounted payback period is three years. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Project C Time: 2 Cash flow: -$ 2,600 $ 1,120 $ 960 3 $ 1,000 4 5 $ 620 $ 420 Discounted payback period years Should the project be accepted or rejected? (Click to select)
A five - year project has an initial fixed asset investment of $335,000, an initial NWC investment of $35,000, and an annual OCF of -$34,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is this project's equivalent annual cost, or EAC? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)
Beta Co. is considering two projects. Their required rate of return is 8%. Project Initial investment cost Annual cash flows Life of the project A B $110,000 $80,000 $55,838 $43,034 2 years 2 years a) Compute the present value factor and the IRR for the two projects. Please make sure your final answers for the present value factor are accurate to 3 decimal places and the ones for the IRR are accurate to the nearest whole percent. Project Present value factor IRR 0.500 13% 0.538 13% B
A project costs $2,620 up front (year 0), and its net cash flows are expected to be +$856 per year for 8 years (with the first cash flow occurring one year from today). If the WACC is 12%, the project's NPV is $_________. Do not round any intermediate work. Round your *final* answer to 2 decimal places (example: 12.34567 = 12.35). Do not enter the $ sign. Include a negative sign if your answer is negative.

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