A new project is being planned for a study period of 8 years. It will require P250,000 for the start-up and after the end of the first year, P13,500 shall be paid for its innovation. The board then requires to add another modified technology which will cost P25,000 by the end of the second year. After the end of third year, the project will start to earn P57,500 annually. Calculate the annual effective interest rate using ERR method if the interest rate external to this project (e) is 13.75%. Please solve using economics formula. Activate Windows Go to Settings to activate Wi

A new project is being planned for a study period of 8 years. It will require P250,000 for the start-up and after the end of the first year, P13,500 shall be paid for its innovation. The board then requires to add another modified technology which will cost P25,000 by the end of the second year. After the end of third year, the project will start to earn P57,500 annually. Calculate the annual effective interest rate using ERR method if the interest rate external to this project (e) is 13.75%. Please solve using economics formula. Activate Windows Go to Settings to activate Wi

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Mr. Kim Seon Ho is renting out a piece of equipment, from which he earns an income pf $130,000 per year. The income decreases at a uniform amount of $5,000 each year after the first year. The expected life of the equipment is 12 years. The investment cost is $800,000 and interest rate is 8% per year. Assume that the investment occurs now (time zero), and the annual income is first received at the end of the second year. (a) Draw Mr. Kim's cash flow diagram. (b) Determine if this is a good investment for Mr. Kim. Use PW Method.
A firm is considering which of twodevices to install to reduce costs. Both devices have useful lives of 5 years and no salvage value. Device A costs $10,000 and can be expected to result in $3000 savings annually. Device B costs $13,500 and will provide cost savings of $3000 the first year but will increase $500 annually, making the second-year savings $3500, the third-year savings $4000, and so forth. For a 7% MARR, which device should the firm purchase?
I have purchased a machine worth P1,700,801.00. And it needs maintenance every 6 months starting from its purchased date for the first 10 years of its useful life. The maintenance cost is equivalent to the 2% of the total machine cost. How much money should be prepare today to finance the requirement if the interest rate is 0.10 compounded quarterly? note:answer should be 400,000 and up
A trust fund is to be established for providing the costs associated with a small engineering laboratory for the Engineering College. The following costs are required for the engineering laboratory: (1) The construction cost is$1,500,000and the initial equipment cost is$900,000; (2) The annual laboratory operating cost is$250,000for the first 3 years and$200,000thereafter; (3) The cost of equipment replacement is$350,000every 6 years, beginning 6 years from now. How much money is required in the trust fund now to build the engineering laboratory and maintain its perpetual operation and equipment replacement? The interest rate is 8%per year.
Find the net present worth of the following cash flow series at an interest rate of8%. End of Period Cash Flow 0 -$1,0001 -2,0002 3,0003 4,5004 1,500 (a) $4,067(b) $6,000(c) $4,394(d) $6,549
Compute the equivalent annual cost of the tube pipe whena tube indicator pipe was construct using line pipe thatcosts ₱145,000 with useful life of 18 years. If the money isworth 12% compounded annually.
A young man has decided to go into business at the age 40. He wishes to accumulate P 200,000.00 at that age. On his twenty-fifth birthday he deposits a certain amount and will increase the deposit by 10% each year until the fortieth year. If the funds can be invested at 9.6% compounded annually, how much should his initial investment be? ANS. P 3,074.85
A small business earns a baseline profit of $500 a year for 5 years. In addition, its profits increase by $500 each year after Year 1. In Years 4 and 5 the business has some unplanned gains and losses. After the cash flow schedule shown below and at the end of Year 5, the future value of the small business is $2200. Determine the unknown Year 4 cash flow, "CF4", if i = 10%. Year Cash Flow 0 0 1 $500 2 $1000 3 $1500 4 "CF4" 5 -$7500 Group of answer choices $5,291 $7110 $6700 $3196 $5822
Liam O’Kelly is 20 years old and is thinking about buying a term life insurance policy with his wife as the beneficiary. The quoted annual premium for Liam is $8.48 per thousand dollars of insurance coverage. Because Liam wants a $100,000 policy (which is 2.5 times his annual salary), the annual premium would be $848, with the first payment due immediately (i.e., at age 21). A friend of Liam’s suggests that the $848 annual premium should be deposited in a good mutual fund rather than in the insurance policy. “If the mutual fund earns 10% per year, you can become a millionaire by the time you retire at age 65,” the friend advises. Solve, a. Is the friend’s statement really true? b. Discuss the trade-off that Liam is making if he decides to invest his money in a mutual fund.
Problem Solving: Pls. Include your cash flow diagram. Show complete solution.1. A newly-built business property, containing space for a store and two offices, can bepurchased for P1, 200, 000. A prospective buyer estimates that during the next 10 years hecan obtain annual rentals of at least P458, 460 from the property and that the annual out-of-pocket disbursements will not exceed P60, 000. He believes that he should be able todispose of the property at the end of 10 years at not less than P700, 000. Annual taxes andinsurance will total 2.5% of the first cost.(a) Assume he has sufficient equity capital to purchase the property, and that the averagereturn he is obtaining from his capital is 20%. Would you recommend the investment? UseROR method. (b) What recommendation would you make if he had to borrow 25% of the required capital,on the basis of a 10-year amortization with interest of 18%? Use Annual Worth Method(c) If the entire capital can be obtained by floating bonds at 15% that…
A small company heats its building and spends $8000 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 10% per year starting one year from now (ie. the first cash flow is $8800 at EOY 1). Their maintenance on the gas furnace is $345 per year, and this is expense is expected to increase by 15% per year starting one year from now. If the planning horizon is 15 years, what is the total annual equivalent expense for operating and maintaining the furnace? Interest rate is 18% per year. please draw the cash flow diagram please follow the instructions to hit up thanks ib advance
A sewage pump equipment initially costs P95,000. Annual maintenance costs are P1850. The equipment’s salvage value is 10 percent of the initial cost in 20 years. Using 8% interest, what is the annual cost of the equipment?