5 The National Park Service is considering two plans for rejuvenating the forest and landscape of a large tract of public land. The study period is indefinitely long, and the Park Service's MARR is 9% per year. You have beenasked to compare the two plans using the present worth method.The first plan (Skyline) calls for an initial investment of $500,000, with expenses of $25,000 per year for the first 20 years and $35,000 per year thereafter. Skyline also requires an expenditure of $200,000 twenty years afterthe initial investment, and this will repeat every 20 years thereafter.The second plan (Prairie View) has an initial investment of $650,000 followed by a single (one-time) investment of $310,000 thirty years later. Prairie View will incur annual expenses of $9,000 forever.Based on the present worth method, which plan would you recommend? Note that the present worth of an alternative when N = infinity is known as "Capitalized Worth (CVW)".%3DClick the icon to view the interest and annuity table for discrete compounding when i = 9% per year......The CW of the Skyline is $thousand. (Round to the nearest whole number.)The CW of the Prairie View is $thousand. (Round to the nearest whole number.)Which plan would you recommend? Choose the correct answer below.SkylinePrairie View

Introduction and Given Information The CW method will take into the usage of the Present value…

Answered: nvestment, and this will repeat every…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Adams Construction Company is bidding on a project to install a large flood drainage culvert from Dandridge to a distant lake. If they bid $2,000,000 for the job, what is the benefit-cost ratio in view of the following data? The MARR is 6% per year, and the project’s life is 30 years.
A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4,231 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit. Identify seven combinations of project investments and a bank deposits which exhaust the budget. Which of the above combinations should the firm choose when the bank deposit rate is (i) 15% or (ii) 20%? Explain your answer and show your work. Suppose there is no option to deposit in the bank, but the projects are "divisible" (e.g. you may have 25% of project A). Which combination should the firm choose? Explain your answer and show your work. Use 15% as the deposit rate (discount rate).
Bawal gumamit ng excel( Don't use Excel) A small company has P20,000 in surplus capital that it wishes to invest in new revenue producing projects. Three independent sets of mutually exclusive projects have been developed. The useful life of each is five years and all market values are zero. You have been asked to perform an IRR analysis to select the best combination of projects. If the MARR is 12% per year, which combination of projects would you recommend?
A piece of new equipment has been proposed by engineers to increase the productivity 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. If the firm’s MARR is 20% per year, is this proposal a sound one? Use the PW method.
To remedy the traffic situation at a busy intersection in Quezon City, two plans are being considered. Plan A is to build a cloverleaf costing P 9,200,000 which would provide all the needs during the next 30 years. Maintenance costs are estimated to be P 24,000 a year for the first 15 years and P 42,000 a year for the second 15 years. Plan B is to build a partial clover-leaf at a costs of P 6,500,000 which would be sufficient for the next 15 years. At the end of 15 years, the cloverleaf will be completed at an estimated cost o P 7,500,000. Maintenance would cost P 16,800 a year during the first 15 years and P 36,000 a year for the second 15 years. If money is worth 18%, which of the two plans would you recommend?
A government-funded wind-based electric power generation company in the southern part of the country has developed the following estimates (in $1000) for a new turbine farm. The MARR is 10% per year and the project life is 25 years. Benefits: $45,000 in year 0; $30,000 in year 5 Government savings: $2,000 in years 1 through 20 Cost: $50,000 in year 0 Disbenefits: $3000 in years 1 through 10 What is the conventional B/C ratio
A bridge is to be constructed now as part of a new road. Engineers have determined that traffic density on the new road will justify a two-lane road and a bridge at the present time. Because of uncertainty regarding future use of the road, the time at which an extra two lanes will be required is currently being studied. The two-lane bridge will cost $220,000 and the four-lane bridge, if built initially, will cost $420,000. The future cost of widening a two-lane bridge to four lanes will be an extra $220,000 plus $26,000 for every year that widening is delayed. The MARR used by the highway department is 18% per year. The following estimates have been made of the times at which the four-lane bridge will be required:
Six projects have been identified for possible implementation by a company that makes dry ice blasters, machines that propel tiny dry ice pellets at supersonic speeds so they flash freeze and then lift grime, paint, rust, mold, asphalt, and other contaminants off in-place machines and a wide range of surfaces. The present worth of each project has been determined. Identify all acceptable mutually exclusive bundles if the budget limitation is $32,000. Arrange the acceptable bundles in such a way that the total PW values are in ascending order. Project Project PW at 15%, $ L 29,000 M 11,000 N 41,000 O 35,000 P 6,000 Q 2,000
The International Parcel Service has installed a new radio frequency identification system to help reduce the number of packages that are incorrectly delivered. The capital investment in the system is $65,000, and the projected annual savings are tabled below. The system’s market value at the EOY five is negligible, and the MARR is 18% per year. Calculate the payback period of the project.
The sheriff of Los Lunas county along the Arizona- Mexico border asked the county to build a new minimum security detention facility for personscaught while attempting to enter the United States illegally. The construction cost will be $22 million, with annual operating costs of $2.1 million. The new facility will create jobs that produce benefits for many local businesses including realtors, restaurants, etc. The benefits are estimated to be $5 million in years 1 and 2, $2.8 million in year 3, and $1.12 million per year beginning in year 4 and continuing through the 30-year life of the facility. At a discount rate of 8% per year, does the conventional B/C ratio indicate that the project is economically justified?
Two designs are suitable for housing track and field events. Design N costs $800,000 with annual upkeep costs including maintenance, repair, heat, and janitor service, of $25,000 a year. Its life is expected to be permanent. Design T costs $450,000 with annual upkeep costs for the previous items of $35,000 a year. However, with this design, repairs costing $15,000 will be required every 5 years, and the life will be 25 years with a probable salvage at that date of $50,000. The minimum required rate of return is 10%. Use present worth analysis to compare these two alternatives.
Three mutually exclusive alternatives are being considered for the production equipment at a tissue paper factory. The estimated cash flows for each alternative are given here. (All cash flows are in thousands.)Which equipment alternative, if any, should be selected? The firm’s MARR is 20% per year. Please state your assumptions.

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