3 Current Attempt in ProgressA county will invest $3,600,000 to clean up a chemical spill that occurred following a natural disaster. At the end of the 12-yearplanning horizon, an additional $700,000 will be spent in restoring the site to an environmentally acceptable condition. Theinvestment is expected to produce net annual benefits that will decrease by 28% each year. The net annual public benefit in the 1styear is estimated to be $1,900,000. Determine the B/C ratio for the investment using a 6% 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.

The Benefit to Cost ratio is used to find out how risky the project is and to compare equivalent…

Answered: Current Attempt in Progress A county…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 12P

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Similar questions

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.
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.
Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
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.
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 initial investment in a government-funded city flood control system is $500,000. From the initial year to the endless future, materials, maintenance, electric power, and other running expenditures are estimated to reach $10,000 per year. Every five years, major repairs and rehabilitations will be carried out at a cost of $100,000. What is the project's equivalent capitalized cost if the interest rate is 10% per year?
A certain government funded city flood control system has an initial investment cost of $500,000. Cost of materials, maintenance, electric power and other operating costs are expected to total $10,000 per year beginning from the first year until the infinite future. Major repairs and rehabilitations will occur every 5 years at a cost of $100,000. If the interest rate is 10% per year, what is the equivalent capitalized cost of this project?
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
After seeing its neighboring village obtain a new water tower, the city board of East Dubuque begins planning to replace its water towers. The board estimates that it will need $1,750,000 to build the new water towers in 20 years. At this time, the city board plans to assess its 2753 homeowners with a one-time flat fee surcharge and the n invest the money received in a CD paying 9% interest compounded daily(use n=360) for 20 years. a.) How much money will the board need to raise at this time to meet the city’s water tower needs at the end of 20 years? b.) Before applying the surcharge, the city board receives a federal grant of $100,000 toward the water tower investment. Taking this grant into account, how much should the surcharge be on each homeowner?
Rare Agri-Products Ltd. is currently evaluating a potential new project that is expected to have a duration of seven (7) years. This project falls under the government's subsidy program aimed at promoting local agricultural products, making it eligible for a one-time rebate of 25% on the initial equipment investment. The cost of the initial equipment (IE) is estimated to be $41,000,000. Additionally, at the end of year 3, an additional equipment (AE) costing $3,500,000 will be required. It is worth noting that at the end of the seven (7) years, the original equipment (IE) will have no resale value, while the supplementary equipment (AE) can be sold for $50,000. Furthermore, a working capital of $1,350,000 will be necessary for the project. Sales projections for agri-products over the seven-year period are as follows: Year 1: 70,000 unitsYear 2: 100,000 unitsYears 3-5: 250,000 unitsYears 6-7: 325,000 unitsThe expected selling price per unit is $150 for the first two years, which will…
The Public Service Board (PSB) awarded two contracts worth a combined $3.07 million to increase the depth of a retention basin and reconstruct a spillway that was severely damaged in a flood 2 years ago. The PSB president stated that, surprisingly, the bids were $1,150,000 lower than PSB engineers estimated. If the projects are assumed to have a 20-year life, what is the annual worth of the savings at an interest rate of 5% per year?

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