A company would like to invest on a project. The rate the company uses to justify their investments, i.e. the MARR is 25% per year (compounded yearly). Their estimations about the projects are as follows: Initial Cost: ($300,000) The Study Period: 15 years Salvage (Market) Value of the Project: 20% of the initial cost 1-) What is the capital recovery cost, CR? 2-) Operating costs in the first year are estimated to be ($7,500) and these operating costs are estimated to increase by 5% per
A company would like to invest on a project. The rate the company uses to justify their investments, i.e. the MARR is 25% per year (compounded yearly).
Their estimations about the projects are as follows:
Initial Cost: ($300,000)
The Study Period: 15 years
Salvage (Market) Value of the Project: 20% of the initial cost
1-) What is the capital recovery cost, CR?
2-) Operating costs in the first year are estimated to be ($7,500) and these operating costs are estimated to increase by 5% per year. Construct cash flow table and determine the minimum amount of annual revenue ($ per year?) that makes this investment an attractive option for the company? (i.e. what is Equivalent UNIFORM (Annual) Cost, EU(A)C?)
3-) Benefits in in the first year are estimated to be $30,000 and these benefits are estimated to increase by 13% per year. Construct cash flow table and determine the
4-) What is the simple payback period?
5-) Determine
6-) Is the Project acceptable? WHY?
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