A project costing P250,000 yields a yearly benefit of P80,000 for a period of 10 years with no salvage value. At an interest rate of 6%, what is the conventional benefit cost ratio using present worth?
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- A project costing P250,000 yields a yearly benefit of P80,000 for a period of 10 years with no salvage value. At an interest of 6%, what is the conventional benefit cost ratio using present worth?A fast-acting brake on a fast-turning lathe is estimated to save seven seconds per piece produced since the operator (paid at a rate of $15/hour) does not have to wait as long for the lathe to stop. 40,000 pieces are produced annually. Assuming a three-year life, no salvage value, and an 8% interest rate, what should be the maximum purchase price of the brake?A manufacturer invests $50,000 in a new production line that is expected to generate $70,000 in revenue over its useful life. If the effective interest rate on the investment is 12% per year, what is the net present value of the project?
- An expenditure of $20,000 is made to modify a material-handling system in a small job shop. This modification will result in first-year savings of $2,000, a second-year savings of $4,000, and a savings of $5,000 per year thereafter. How many years must the system last if an 18% return on investment is required? The system is tailor made for this job shop and has no market (salvage) value at any time.A syndicate wishes to purchase an oil well which estimates indicate, will produce a net income of P2M per year for 30 years. What should be the syndicate pay for the well if out of this net income, a return of 10% of the investment is desired and a sinking fund is to established at 3% interest to recover this investment.Project A requires an immediate investment of $8000 and another $6000 in three years. Net returns are $4000 after two years, $12,000 after four years, and $8000 after six years. Project B requires an immediate investment of $4000, another $6000 after two years, and $4000 after four years. Net returns are $3400 per year for seven years. Determine the net present value at 10%. Which project is preferable according to the net present value criterion?
- Please provide the complete solution What is the value of a perpetuity of P100 per year if the discount rate is 5% and the cash flows donot begin until two years from now? Answer: P = P1,814.05A piece of new equipment has been proposed by engineers to increase theproductivity of a certain manual welding operation. The investment cost is$25,000, and the equipment will have a market value of $5,000 at the endof a study period of five years. Increased productivity attributable to theequipment will amount to $8,000 per year after extra operating costs havebeen subtracted from the revenue generated by the additional production.A cash-flow diagram for this investment opportunity is given below. If thefirm’s MARR is 20% per year, is this proposal a sound one? Use the PWmethod.A steel highway bridge must either be reinforced or replaced. Reinforcement would cost Rs. 6,60,000 and would make the bridge fit for an additional five years of service. If it is reinforced, it is estimated that its net salvage value would be Rs. 4,00,000 at the time it is retired from service. The new prestressed concrete bridge would cost Rs. 15,00,000 and would meet the foreseeable requirements of the next 40 years. Such a bridge would have no salvage value. It is estimated that the annual maintenance cost of the reinforced bridge would exceed that of the concrete bridge by Rs. 96,000. If the bridge is replaced by a new prestressed concrete bridge, the scrap value of the steel would exceed the demolition cost by Rs. 4,20,000. Assume that the money costs the state 10%. What would you recommend?
- A piece of new equipment has been proposed by engineers to increase theproductivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. A cash-flow diagram for this investment opportunity is given below. If the firm’s MARR is 20% per year, is this proposal a sound one? Use the PW method.Ten years ago, Johnson Recovery purchased a wrecker for $330, 000 to move disabled 18-wheelers. He received a salvage value of $25, 000 after 10 years of use. During this 10-year period, his average annual revenue totaled $60, 000. a) Did he recover his investment at 12% per year return? In other words, does the Annual Equivalent Value of the benefits exceed the Capital Recovery cost at an interest rate of 12%? b) Suppose Johnson moves, on average, 250 disabled 18-wheelers each year. What is his average equivalent benefit/cost per vehicle moved? c) Now, incorporate annual operating and maintenance costs into your analysis. If the annual O&M cost was $5, 000 the first year and increased by a constant 10% per year, what is the annual equivalent worth at 12% per year?Consider palletizer at a bottling plant that has a first cost of $140,855, has operating and maintenance costs of $13,484 per year, and an estimated net salvage value of $70,966 at the end of 30 years. Assume an interest rate of 8%. What is the future worth of this project?