A county will invest $3,600,000 to clean up a chemical spill that occurred following a natural disaster. At the end of the 9-year planninghorizon, an additional $900,000 will be spent in restoring the site to an environmentally acceptable condition. The investment isexpected to produce net annual benefits that will decrease by 25% each year. The net annual public benefit in the 1st year is estimated tobe $2,400,000. Determine the B/C ratio for the investment using a 5% MARR.Click here to access the TVM Factor Table calculator.B/C =Carry all interim calculations to 5 decimal places and then round your final answer to 3 decimal places. The tolerance is ±0.003.

Answered: A county will invest $3,600,000 to…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 21P

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Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: Required: Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.
A municipality is planning on constructing a water treatment plant at an initial cost of $10,000,000. Every 5 years, major repairs and cleanup are required at a cost of $2,000,000. Due to the necessity to remove sludge and make minor repairs, annual costs of operating the treatment plant are estimated to be $700,000, $775,000, $850,000, $925,000, and $1,000,000 each year leading up to the 5-year major repair and cleanup. Based on a 4%/year TVOM, what is the capitalized cost for the water treatment plant?
A state government is considering construction of a flood control dike having a life span of 15 years. History indicates that a flood occurs every five years and causes $600,000 in damages, on average. If the state uses aMARR of 12% per year and expects every public-works project to have a B–C ratio of at least 1.0, what is the maximum investment that will be allowed for the dike? Assume that the flood occurs in the middle of each five-year period. (a) $1,441,000 (b) $643,000 (c) $843,000 (d) $4,087,000 (e) $1,800,000.
On January 1, 2020, Optimistic Company was granted by a local government authority 5,000 hectares of land located near the slums outside the city limits. The condition attached to this grant was that the entity shall clean up this land and lay roads by employing laborers from the village where the land is located. The government has fixed the minimum wage payable to the workers. The entire operation will take 3 years and is estimated to cost P10,000,000. This amount will be spent P2,000,000 for 2020, P2,000,000 for 2021 and P6,000,000 for 2022. The fair value of this land is P12,000,000. Prepare the journal entry for 2020 in connection with this grant
There are two mutually exclusive proposals for a for a flood control project in Illinois. The first proposal involves an initial outlay of $1,350,000 and annual expenses of $110,000. This plan is assumed to be permanent. The second proposal requires an initial outlay of $700,000, followed by $200,000 every 12 years thereafter. Annual expenses for the second proposal are estimated to be $95,000 for the first 12 years and $150,000 each year there after. Annual benefits are identical for both projects, and terminal salvage values are negligible. The interest rate is 6% per year. Which proposal should be recommended?
A local municipality is considering investing $270,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shown in the cash flow profile given below (in thousands of dollars). Notice, an intermediate investment of $180,000 is anticipated in the 6th year of the investment. Based on a MARR of 6%, calculate the benefit-cost ratio of the investment. Round answer to two decimal places
Green County is planning to construct a bridge across the south branch of Carey Creek to facilitate traffic flow though Clouser Canyon. The first cost for the bridge will be $9,500,000. Annual maintenance and repairs the first year of operation, estimated to be $10,000, are expected to increase by $1000 each year thereafter. In addition to regular maintenance, every 5 years the roadway will be resurfaced at a cost of $750,000, and the structure must be painted every 3 years at a cost of $100,000. If Green County uses 5% as its cost of money and the bridge is expected to last for 20 years, what is the EUAC?
The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway. Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city’s cost of capital is 8% per year, and the planning horizon is 10 years. Which landscaping plan will you recommend based on B/C ratio analysis? Landscaping plan A B C Initial planning cost $75,000 $50,000 $65,000 Annual maintenance expense 4,000 5,000 4,700 Annual community benefits 20,000 18,000 20,000
The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway. Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city’s discount rate is 8% per year, and the planning horizon is 10 years. Solve, a. Use the B–C ratio method to recommend the best plan when annual maintenance expenses offset annual benefits in the numerator. b. Repeat Part (a) when annual maintenance expenses add to total costs in the denominator. Which plan is best? c. Should the recommendations in Part (a) and (b) be the same? Why or why not?
A city government is considering two types oftown-dump sanitary systems. Design A requires aninitial outlay of $400,000 with annual operating andmaintenance costs of $50,000 for the next 15 years;design B calls for an investment of $300,000 withannual operating and maintenance costs of $80,000per year for the next 15 years. Fee collections fromthe residents would again be $85,000 per year. Theinterest rate is 8%, and no salvage value is associatedwith either system.(a) Using the benefit–cost ratio BC(i), which systemshould be selected?M16_PARK9091_06_GE_C16.indd 901 10/22/15 5:22 PM902 Chapter 16 Economic Analysis in the Service SectIf a new design (design C), which requires aninitial outlay of $350,000 and annual operatingand maintenance costs of $65,000, is proposed,would your answer in part (a) change?
A city has decided to build a sofiball complex, and the city council has already voted to fund the project at the level of $800,000 (initial capital investment). The city engineer has collected the following financial information for the complex project:• Annual upkeep costs: $120.000• Annual utility costs: $13,000• Renovation costs: $50,000 for every five years• Annual team user fees (revenues): $32,000• Useful life: Infinite• interest rate: 8%lf the city can expect 40.000 visitors to the complex each year, what should be the minimum ticket price per person so that 1he city can break even'?
A city is evaluating the installation of a garbage incinerator on the outskirts of town. The cost of the unit is $2 million. Environmental impact studies cost $25,000 to be paid prior to construction begins. Annual costs are estimated to include: Plant operating expenses: $30,000. Environmental remediation expenses: $32,000. As a benefit of the incinerator, a cost reduction of $12 per year is estimated to be on the bill of the company's 35,000 customers. The equipment is estimated to have a lifespan of 10 years, after which the incinerator will be dismantled at a cost of $45,000. Assuming the money is raised at 4% interest, how much is the profit ratio at cost of this project? a. 1.625 b. 1.597 c. 1.634 d. 1.651 e. None of the above

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