Suppose that Engie has sent their energy engineers like Bryce across campus and they have developed a list of potential energy conservation measures. Knowing that they have a $50 million budget to spend next year on CAPEX, what independent projects would you recommend for them. Select all that you recommend to maximize the total value to the university. Project Number/Title 1. North Rec HVAC Improvement 2. Old Med Center Building Energy Savings 3. South Campus old residence hall upgrades 4. West Campus Greenhouse systems enhancements 5. Sports training complex Solar CAPEX $ Millions Project NPV $9.60 $0.50 $14.20 $10.30 $2.10 $1.70 $9.30 $2.50 $0.25 $6.60 6. Central Chilled Water delivery to Innovation District $16.20 $6.60 7.. Hot water insulation in OSU Central core $0.66 $0.80
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- A local university decides to install motion detection light switches in the faculty offices. The cost savings associated with these switches is $1.44 per year for each year of a switch’s 15 year life. This gives a total cost savings of $21.60 per switch. The purchase cost of each light switch was $20. What should the university keep in mind about this decision to install motion-detection light switches in the faculty offices?Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required:1. Assuming the cost of capital is 12%, complete the table below by computing the payback period, NPV, profitability index, and internal rate of return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate…Individual industries will use energy as efficiently as it is economical to do so, and there are several incentives to improve the efficiency of energyconsumption. To illustrate, consider the selection of a new water pump. The pump is to operate 800 hours per year. Pump A costs $2,000, has an overall efficiency of 82.06%, and it delivers 11 hp. The other available alternative, pump B, costs $1,000, has an overall efficiency of 45.13%, and delivers 12.1 hp. Both pumps have a useful life of five years and will be sold at that time. (Remember 1 hp = 0.746 kW.) Pump A will use SL depreciation over five years with an estimated SV of zero. Pump B will use the MACRSdepreciation method with a class life of three years. After five years, pump A has an actual market value of $400, and pump B has an actual market value of $200. Using the IRR method on the after-tax cash flows and a before-tax MARR of 16.67%, is the incremental investment in pump A economically justifiable? The effective income…
- The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $490,000. The estimated net cash flows from each project are as follows: Net Cash Flows Year Office Expansion Servers 1 $125,000 $165,000 2 125,000 165,000 3 125,000 165,000 4 125,000 165,000 5 125,000 6 125,000 The committee has selected a rate of 12% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $180,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432…A large water utility is planning to upgrade its SCADA system for controlling well pumps, booster pumps, and disinfection equipment so that everything can be centrally controlled. Phase I will reduce labor and travel costs by $28,000 per year. Phase II will reduce costs by an additional $20,000 per year, that is, $48,000. Phase I savings should occur in years 0, 1, 2, and 3 and phase II savings should occur in years 4 through 10. Let i = 8% per year. (a) Determine the present worth of the upgraded system for years 1 to 10. (b) The utility General Manager had hoped for a present worth of at least $400,000. Determine the interest rate at which this would be correct.The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade to computer servers. The projects have different useful lives, but each requires an investment of $1,104,000. The estimated net cash flows from each project are as follows: Net Cash Flow Year OfficeExpansion Server 1 $308,000 $407,000 2 308,000 407,000 3 308,000 407,000 4 308,000 407,000 5 308,000 6 308,000 The committee has selected a rate of 15% for purposes of net present value analysis. It also estimates that the residual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion's residual value would be $385,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5…
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- Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juiceproduct. Assume that you were recently hired as assistant to the director of capital budgeting, and youmust evaluate the new project.The lemon juice would be produced in an unused building adjacent to Allied’s Fort Myers plant; Alliedowns the building, which is fully depreciated. The required equipment would cost $450,000, plus anadditional $38,000 for shipping and installation. In addition, inventories would rise by $40,000, whileaccounts payable would increase by $10,000. All of these costs would be incurred at t = 0. By a specialruling, the machinery could be depreciated under the MACRS system as 4-year property. The applicabledepreciation rates are 40%, 30%, 20%, and 10%.The project is expected to operate for 4 years, at which time it will be terminated. The cash inflows areassumed to begin 1 year after the project is undertaken (t = 1), and to continue out to t = 4. At the endof…Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juiceproduct. Assume that you were recently hired as assistant to the director of capital budgeting, and youmust evaluate the new project.The lemon juice would be produced in an unused building adjacent to Allied’s Fort Myers plant; Alliedowns the building, which is fully depreciated. The required equipment would cost $450,000, plus anadditional $38,000 for shipping and installation. In addition, inventories would rise by $40,000, whileaccounts payable would increase by $10,000. All of these costs would be incurred at t = 0. By a specialruling, the machinery could be depreciated under the MACRS system as 4-year property. The applicabledepreciation rates are 40%, 30%, 20%, and 10%.The project is expected to operate for 4 years, at which time it will be terminated. The cash inflows areassumed to begin 1 year after the project is undertaken (t = 1), and to continue out to t = 4. At the endof…Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juiceproduct. Assume that you were recently hired as assistant to the director of capital budgeting, and youmust evaluate the new project.The lemon juice would be produced in an unused building adjacent to Allied’s Fort Myers plant; Alliedowns the building, which is fully depreciated. The required equipment would cost $450,000, plus anadditional $38,000 for shipping and installation. In addition, inventories would rise by $40,000, whileaccounts payable would increase by $10,000. All of these costs would be incurred at t = 0. By a specialruling, the machinery could be depreciated under the MACRS system as 4-year property. The applicabledepreciation rates are 40%, 30%, 20%, and 10%.The project is expected to operate for 4 years, at which time it will be terminated. The cash inflows areassumed to begin 1 year after the project is undertaken (t = 1), and to continue out to t = 4. At the endof…