a river. The estimated cost and benefits are listed below. (i) If a 6% per year rate applies and dam life is infinite for analysis purpose, select the one best location using the B/C method. If no site is acceptable, other sites will be determined later. (ii) If more than one dam site can be selected, which sites are acceptable, using B/C method?

a river. The estimated cost and benefits are listed below. (i) If a 6% per year rate applies and dam life is infinite for analysis purpose, select the one best location using the B/C method. If no site is acceptable, other sites will be determined later. (ii) If more than one dam site can be selected, which sites are acceptable, using B/C method?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 20P: The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting,...

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The Water Regulatory Agency is considering five mutually exclusive alternatives for providing a sewage-treatment facility. The annual equivalent costs and estimated benefits of the alternatives are as follows: Using the problem above, which plan, if any, should be adopted if the Water Regulatory Agency wishes to invest if, and only if, the B–C ratio is at least 1.0? Use AW.
The federal government is planning a hydroelectric project for a river basin. Inaddition to producing electric power, this project will provide flood control, irrigation, and recreational benefits. The estimated benefits and costs expected to be derived from the three alternatives under consideration are listed as follows: The interest rate is 10%, and the life of each project is estimated to be 50 years.(a) Find the benefit-cost ratio for each alternative.(b) Select the best alternative, according to BC(i).
An environmental engineer is considering three methods for disposing of a non-hazardous chemical sludge: land application, fluidized-bed incineration, and private disposal contract. The estimates for each method are below. (a) Determine which has the least cost on the basis of an annual worth comparison at 10% per year. (b) Determine the equivalent present worth value of each alternative using its AW value.
A new storm drainage system must be constructed right away to reduce periodic flooding that occurs in a city that is in a valley. Five mutually exclusive designs have been proposed, and their present worth (in thousands of dollars) of costs and benefits are the following. Solve, a. Which system has the greatest B–C ratio? b. Which system has the largest incremental B–C ratio(based on differences between alternatives)? c. Which system should be chosen ?
As supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new, medium-sized truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. MARR is at 15% per year. You can use the assumption of repeatability in this case. Show that the same selection is made for the following methods: a. PW method b. FW method c. EUAC method Alternative A B Capital investment ALTERNATIVE A $272,000 ALTERNATIVE B $346,000 Annual expenses ALTERNATIVE A $28,800 1 ALTERNATIVE B $9,300 Useful life (years) ALTERNATIVE A =6 ALTERNATIVE B =9 Salvage value ALTERNATIVE A $ 25,000 ALTERNATIVE B $40,000
The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage values over a 5-year planning horizon are shown below. Using a future worth analysis with a MARR of 20%/year, determine the preferred gate.
A town in northern Colorado is planning on investing in a water purification system. Three mutually exclusive systems have been proposed, and their capital investment costs and net annual benefits are the following (salvage values are negligible). If the town’s MARR is 10% per year, use the B–C ratiomethod to determine which system is best.
When considering which values to use in Investment Appraisal, only “Relevant Costs” are used. A company has identified the following costs involved in a project: (a) Project Manager salary £40,000. The Project Manager is currently an accountant paid £33,000 – when the project starts, a new accountant will be employed at a cost of £24,000. (b) The Project Office will be located in a current office; rent is £5,000. (c) The additional income is expected to be £500,000 before tax, which is payable at 25% The Relevant Costs are:
You have been given the construction and marketing studies for the proposed project. Several sites have been selected, but a decision has not been made. Your boss needs to know how much he can afford to pay for the land and still manage to return 16% on the entire project. The strategic plan calls for a construction phase of 1 year and an operation phase of 5 years, after which time the property will be sold. The staff says that a 1.3-acre site will be adequate because the studies indicate that this site will support the project with a gross leasable area (GLA) of 26,520 square feet. The gross building area (GBA) will be 31,200 square feet, giving a leasable ratio of 85%. The staff further assures you that the space can be rented for $20.4 per square foot. The head of the construction division maintains that all direct costs (excluding interest carry and all loan fees) will be $3.5 million. The Grace bank will provide the construction loan for the project. The bank will finance all of…
Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice.Required: Which of the following statements is correct about relevant costs and relevant revenues. a. The sunk cost of $75,000 is relevant b. The projected revenues are relevant to the decision c. The only relevant item are the costs as they differ between alternative d. The initial investment of $250,000, the projected revenues, and the projected costs are all relevant
show calculations please Suppose that a dam was built at a very high cost. At the time of construction, the estimated cost energy produced by the dam was £10 per unit. Of these £10, £5 contributed to the amortization of the initial investment and the other £5 to the variable recurrent cost. Now suppose that after the completion of the investment, a new energy source is discovered that allows the production of energy at a cost of £7 per unit. Should the dam be abandoned in favour of the alternative energy source? Please elaborate on your answer by showing calculations
Two methods of carrying away surface runoff water from a new subdivision are being evaluated:(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 ofredigging and shaping would be required at five-year intervals forever.(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)