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

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

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 2STP

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Suppose that a dam was built at a very high cost. At the time of construction, the estimated cost of 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 favor of the alternative energy source? Please elaborate on your answer
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The average annual cost of damages caused by flooding to a subdivision nearPasig River is estimated at P 5M. To build a gravity dam to protect the area from flooding would cost P 25M and would cost an annual maintenance cost of P 2M. Interest is 11%. How many years will it take for the dam to pay itself?
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You are appraising a four-year project with sales equal to £100,000 per year and operating costs equal to £50,000 per year. It requires an initial investment in machinery of £80,000, and an initial investment in working capital of £10,000. No other investments are required during the life of the project. To operate the project, your firm will use a field currently owned by the company. The company is not planning to use this field for other projects, but can rent it out for four years for £10,000 per year. The machinery is depreciated to zero using the straight-line method over four years. The corporate tax rate is 30%. Taxes are paid in the same year as when the profits are made. The risk free rate of return and the expected return on the market portfolio are 5% and 10%, respectively. The company beta and project beta are, respectively, 1.5 and 1. The cost of capital is 10%. All cash flows occur at year end, except the initial investment which takes place today. Calculate the free…
Mountain Frost is considering a new project with an initial cost of $205,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $20,000, $20,900, $24,600, and $16,900, respectively. What is the average accounting return? Please make sure its correct
Q) The average annual cost of damages caused by floods to Camella subdivision is estimated to be ₱500,000. To build a gravity dam to protect the area from floods would cost ₱3,000,000 and would involve an annual maintenance cost of ₱25,000. With the interest rate of 8% compounded annually, how many years would it take for the dam to pay for itself? Solve it correctly. And not solve in excel works. Typed or handwriting use onlys.