Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 6, Problem 51P
To determine

Calculate the cost per pound.

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Deep Mines Ltd. of Saskatchewan is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and operating a mine in the area: Cost of new equipment and timbers Working capital required Net annual cash receipts Cost to construct new roads in three years Salvage value of equipment in four years "Receipts from sales of ore, less out-of-pocket costs for salaries, utilities, insurance and so forth. It is estimated that the mineral deposit would be exhausted after four years of mining. At that point, the working capital would be released for reinvestment elsewhere. The company's discount rate is 20%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. $256,000 89,000 118,000* 44,000 50,000 Required: 1-a. Determine the NPV of the proposed…
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A local car dealer is advertising a standard 36-month lease of $900 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $3,200, plus a $1,200 refundable initial deposit now. The first lease payment is due at the beginning of month 1. In addition, the company offers a 36-month lease plan that has a single up-front payment of $21,900, plus a refundable initial deposit of $1,200. Under both options, the initial deposit will be refunded at the end of month 36. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, which option is preferred? The present worth of the standard lease option is $ (Round to the nearest dollar.)
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