The second question: Explain the feasibility of the construction project below by finding the net present value. The project includes the purchase and installation of production equipment at the beginning of the first year at a value of $75,000, and an annual rent of $1,000. Payment starts from the end of the first year, increases by $50 annually to become at the end of the second year $1,050 and at the end of the third year, 1100 and so on.. The project requires maintenance of all 5 years at a cost of $ 4000 starting from the end of the sixth year. The project generates an annual profit of $30,000, and the recoverable value of the equipment is $5,000. The useful life is 30 years, the annual interest is 40%, to be installed every three months

The second question: Explain the feasibility of the construction project below by finding the net present value. The project includes the purchase and installation of production equipment at the beginning of the first year at a value of $75,000, and an annual rent of $1,000. Payment starts from the end of the first year, increases by $50 annually to become at the end of the second year $1,050 and at the end of the third year, 1100 and so on.. The project requires maintenance of all 5 years at a cost of $ 4000 starting from the end of the sixth year. The project generates an annual profit of $30,000, and the recoverable value of the equipment is $5,000. The useful life is 30 years, the annual interest is 40%, to be installed every three months

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

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