The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 4 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 24 years, what is the present worth of the desalting option revenue at an interest rate of 7% per year?
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- Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 6 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 24 years, what is the present worth of the desalting option revenue at an interest rate of 5% per year? The present worth of the desalting option revenue at an interest rate of 5% per year is determined to be $
- The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 4 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 20 years, what is the present worth of the desalting option revenue at an interest rate of 6% per year?San Antonio is considering various options for providing water in their 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 4 years, after which less production will decrease revenue by 10% each year. If the aquifer will be totally depleted in 20 years, what is the present worth of the desalting option at an interest rate of 6% per year?A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $35,000 and replaced by a new pump. The purchase price of the replacement pump is $50,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming theMARR is 10%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced.
- A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2080. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take five years at a cost of $15 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 2 percent per year thereafter. At an interest rate of 8 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2080.A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start in 2030and take five years at a cost of $25 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $3 million, increasing by 1 percent per year thereafter. At an interest rate of 8 percent, what is the presentworth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070.Click the icon to view the table of compound interest factors for discrete compounding periods when i=8%. Worth of the project in milion ???A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070.To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take fivefive years at a cost of $15 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070. The present worth of this project is how many million. (2 decimal places)
- In building a highway, the district engineer is faced with the alternatives of building a four-lane underpass that would take care of all future needs of building a two-lane underpass now and a second two-lane underpass 20 years later. The four-lane underpass would cost 400,000 and has a maintenance cost of 10,000 per year during the 40 years it is expected an underpass will be needed. The two-lane underpass will cost 270,000 each and each would have a maintenance cost of 8,000 per year. if financing costs are 5%, which alternative should be adopted and compute the difference of its equivalent present worth. assume zero salvage value for each alternative at the end of 40 years. Use present worth method.The city of Peachtree is comparing the following two plans for supplying water to a newly developed subdivision:1 Plan A will manage requirements for the next 15 years; at the end of thatperiod, the initial cost of $1,500,000 will have to be doubled to meet the requirements of subsequent years. The facilities installed in years 0 and15 may be considered permanent; however, certain supporting equipmentwill have to be replaced every 30 years from the installation dates at a costof $200,000. Operating costs are $91,000 a year for the first 15 years and$182,000 thereafter. Beginning in the 21st year, they will increase by $3,000a year.2 Plan B will supply all requirements for water indefinitely into the future,although it will operate at only half capacity for the first 15 years. Annualcosts over this period will be $105,000 and will increase to $155,000 beginning in the 16th year. The initial cost of Plan Bis $1,950,000; the facilities can be considered permanent, although it will be…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?