A dam project of the Philippine Government was estimated to cost Php 340000000 during its construction. It was also determined that the dam will require Php2000000 maintenance and operating expenses every year and an additional cost of Php 16000000 of major repairs every 10 years. What will be the capitalized cost of all these expenses if money is worth 7% per year? 2.

A dam project of the Philippine Government was estimated to cost Php 340000000 during its construction. It was also determined that the dam will require Php2000000 maintenance and operating expenses every year and an additional cost of Php 16000000 of major repairs every 10 years. What will be the capitalized cost of all these expenses if money is worth 7% per year? 2.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
A bridge with initial cost of P50,000,000 has a life of 20 years. The bridge must be partially re-built at the end of each 20 years at a cost of P10,000,000. It will have an annual operating cost of P1,000,000 for the first 10 years and P500,000 thereafter. At 6% annual interest, compute its capitalized cost.
A cooling water pumping station at a manufacturing plant in Iligan City costs 30,000,000 php to construct, and it is projected to have a 25-year life with an estimated salvage value of 10% of the construction cost. Calculate the annual depreciation charge for year 10 (d10) using: a. Straight Line Method b. Declining Balance Method c. Double declining balance method d. Sinking Fund method at 10% e. Sum of the year's digits method 2. If the cooling water pumping station in Problem 1 will be book-depreciated to zero over a recovery period of 30 years, calculate year 10 (d10) manually using the double declining balance method.
The construction cost of a permanent water park is $550,000. Annual maintenance and operation costs are $100,000 per year. A) At an interest rate of 7% per year, find the capitalized cost of the park in present worth. (Hint: a capitalized cost is when every cost is brought to present worth, in this case the upfront construction costs are current). B) What would be the annualized cost if the whole project was to be financed over 25 years at 6% interest?
. A new engine will cost P12,000 with an estimated life of 15 years and a salvage value of P800 and guaranteed to have an operating cost of P3500 per year. The new engine is considered as a replacement of the old one. The old engine had a total annual cost of P5,200 to operate. Determine the rate of return of the new investment using 6% sinking fund to recover depreciation, if the old engine could be sold now for P2000.
A project requires an initial investment of $150,000, to be depreciated straight-line over 3 years to an expected salvage value of $0. In addition, working capital will increase during the life of the project and amount to 20% of next year’s revenues, with the investment in working capital to be made at the beginning of each year. The project will generate $150,000 additional annual revenues and $85,000 additional annual expenses. The tax rate is 25%. Cost of capital amount to 7,5%. Please calculate the Net Present Value of the project and show your calculations. Would you recommend the investment? Please explain your advice.