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Question 17 Koda Agriculture is doing a CBA (cost benefit analysis) on a investment project renewing the machinery used on the farm. The old machinery is sold in the beginning of the project for 33.000 euro. The investment must have positive NPV (net present value) within 5 years. In the end of the period (5 years) the planned reselling value (scrap value) of the equipment is 100.000 euro. The rates used are 8% and inflation is estimated to be 3% a year. List of cost items and benefit items are listed below: What is the NPV? New equipment Initial investment Quantity Cost/item (€) Benefits/year (C) Total improved yield better products labor cost reduction 23.000 tractors conveyor belt threshing machine grain separator irrigation system 3- 50.000 25.000 1- 2- 2- 25.000 23.000 7.000 19.000 1- 60.000 Cost per year Quantity Cost/item (e) operation cost facility cost insurance cost 1- 6.000 1- 12- 3.000 700

Question 17 Koda Agriculture is doing a CBA (cost benefit analysis) on a investment project renewing the machinery used on the farm. The old machinery is sold in the beginning of the project for 33.000 euro. The investment must have positive NPV (net present value) within 5 years. In the end of the period (5 years) the planned reselling value (scrap value) of the equipment is 100.000 euro. The rates used are 8% and inflation is estimated to be 3% a year. List of cost items and benefit items are listed below: What is the NPV? New equipment Initial investment Quantity Cost/item (€) Benefits/year (C) Total improved yield better products labor cost reduction 23.000 tractors conveyor belt threshing machine grain separator irrigation system 3- 50.000 25.000 1- 2- 2- 25.000 23.000 7.000 19.000 1- 60.000 Cost per year Quantity Cost/item (e) operation cost facility cost insurance cost 1- 6.000 1- 12- 3.000 700

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter10: Project Cash Flows And Risk
Section: Chapter Questions
Problem 8PROB
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Question 17 Koda Agriculture is doing a CBA (cost benefit analysis) on a investment project renewing the machinery used on the farm. The old machinery is sold in the beginning of the project for 33.000 euro. The investment must have positive NPV (net present value) within 5 years. In the end of the period (5 years) the planned reselling value (scrap value) of the equipment is 100.000 euro. The rates used are 8% and inflation is estimated to be 3% a year. List of cost items and benefit items are listed below: What is the NPV? New equipment Initial investment Quantity Cost/item (€) Benefits/year (C) improved yield better products Total 23.000 tractors 3- 50.000 25.000 conveyor belt threshing machine grain separator irrigation system 1- 25.000 labor cost reduction 23.000 2- 7.000 2- 1- 19.000 60.000 Cost per year Quantity Cost/item (€) operation cost facility cost insurance cost 6.000 1- 3.000 12- 700
Transcribed Image Text:Question 17 Koda Agriculture is doing a CBA (cost benefit analysis) on a investment project renewing the machinery used on the farm. The old machinery is sold in the beginning of the project for 33.000 euro. The investment must have positive NPV (net present value) within 5 years. In the end of the period (5 years) the planned reselling value (scrap value) of the equipment is 100.000 euro. The rates used are 8% and inflation is estimated to be 3% a year. List of cost items and benefit items are listed below: What is the NPV? New equipment Initial investment Quantity Cost/item (€) Benefits/year (C) improved yield better products Total 23.000 tractors 3- 50.000 25.000 conveyor belt threshing machine grain separator irrigation system 1- 25.000 labor cost reduction 23.000 2- 7.000 2- 1- 19.000 60.000 Cost per year Quantity Cost/item (€) operation cost facility cost insurance cost 6.000 1- 3.000 12- 700
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