The owners of a new planned unit development have installed a package sewage treatmentplant that will be paid for by rates charged to the users.package sewage treatment plant cost new = $1,000,000life of the plant = 240 months%3Dsalvage value at EOM 240 = 50O & M cost =gradient in O & M = $400/month/month$40,000/month%3Dperiodic overhaul every 10 months(first at EOM 4, last at EOM 234) = $100,000/cachgradient in periodic overhaul = $5,000each/10 monthsnumber of customers = 6,000charge per customer = $16.00/month%3DThe owners borrowed money at 1 percent per month interest in order to construct theplant, so while they do not expect to make a big profit, they do want the plant to earm arate of return of at least 1 percent. Is the rate shown above sufficient to carn 1 percent rateof return?(Ans. At a trial i= 1%, the NAW=+$930/month, so the plant earns more than 1% rate ofreturn.)

The Net Present Worth: The net present worth of a project is the net of the present value of cash…

The owners of a new planned unit development have installed a package sewage frealment plant that will be paid for by rates charged to the users. package sewage treatment plant cost new = $1,000,000 life of the plant = 240 months salvage value at EOM 240 = s0 O & M cost = $40,000/month gradient in O & M = $400/month/month periodic overhaul every 10 months (first at EOM 4, last at EOM 234) = S100,000/each gradient in periodic overhaul = $5,000leach/10 months number of customers 6,000 charge per customer = $16.00/month The owners borrowed money at 1 percent per month interest in order to construct the plant, so while they do not expect to make a big profit, they do want the plant to earm a rate of return of at least 1 percent. Is the rate shown above sufficient to earn 1 percent rate of return? lel 16 she NAW +5930/month so the plant carms more than 1% rate of

The owners of a new planned unit development have installed a package sewage frealment plant that will be paid for by rates charged to the users. package sewage treatment plant cost new = $1,000,000 life of the plant = 240 months salvage value at EOM 240 = s0 O & M cost = $40,000/month gradient in O & M = $400/month/month periodic overhaul every 10 months (first at EOM 4, last at EOM 234) = S100,000/each gradient in periodic overhaul = $5,000leach/10 months number of customers 6,000 charge per customer = $16.00/month The owners borrowed money at 1 percent per month interest in order to construct the plant, so while they do not expect to make a big profit, they do want the plant to earm a rate of return of at least 1 percent. Is the rate shown above sufficient to earn 1 percent rate of return? lel 16 she NAW +5930/month so the plant carms more than 1% rate of

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 19P

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