Use Excel® to solve the following problem. An eight-year life project has an initial capital expenditure of $450,000, annual income of $300,000 beginning at the end of year 1, and annual operating costs of $80,000 beginning at the end of year 1. Calculate the I RR for the following cases: (a) Assume the cash flows given are in escalated dollars and the escalated dollar MARR is 10%, 20%, and 30%.
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- 2.5. An electric cooperative is considering the use of a concrete electric pole in the expansion of its power distribution lines. A concrete pole costs P18,000 each end will last 20 years. The company is presently using creosoted wooden poles which cost P12,000 per pole and will last 10 years. If money is worth 12 per cent, which pole should be used. Assume annual taxes amount to 1 per cent of first cost and zero salvage value in both casesGiven the following cash flows for project X and project Y, Year Project X Project Y 0 -55000 -100000 1 20000 15000 2 13500 17000 3 11000 19000 4 10000 25000 5 9000 30000 6 7500 35000 Calculate the NPV, IRR, MIRR and traditional payback period for each project, assuming a required rate of return of 7 percent If the projects are independent, which project(s) should be selected? If they are mutually exclusive, which project should be selected?MARR = 8%. Your consultancy business signs on with a new client. The client pays you $5000 up front as deposit toward future work. One year later the client makes another payment of $5000. The year after that you invest $16,000 into the project. The following year, in the third year, the client pays you the remaining balance of $5388. The project's precise ERR is within 0.5% of a) 12% b) 13% c) 4% d) 15% e) None of the above
- A small manufacturing firm is considering the purchase of a new machine to modernize one of its current production lines. Two types of machines are available on the market. The lives of machine A and machine B are 4 years and 6 years, respectively, but the firm does not expect to need the service of either machine for more than 5 years. The machines have the following expected receipts and disbursements. Item Machine A (USD) Machine B(USD) First cost 325k 425k Service life 4 years 6 years Estimated Salvage Value 30k 50k Annual Opertaing & Maintenance Costs 40k 26k Oil Filter Change every other year 5k NONE Enginer Overhaul 10k every 3 years 14k every 4 years The firm always has another option: To lease a machine at 150k a year, fully maintained by the leasing company. After four years of use, the salvage value for machine B will remain at 50k. How many decision alternatives are there?…Net present value (NPV) of the project =Single payoff x PVIAF (10.20%, 9 years) - initial outlay = $6,947 x 0.42340 - $2,182 = $759.39 What's the equation for the bolded item?A colleague of yours is planning to start a small, plastic components manufacturing business. He has invited you to be a partner. Best estimates for the total depreciable capital for equipment is $500,000. Expected sales amount to $250,000 annually and total manufacturing costs without depreciation was estimated to be about $96,500 yearly. If equipment can be purchased and installed in one year and the project has a ten year life, perform a complete discounted cash flow analysis and make a decision if you should invest or not. Assume straight-line depreciation for ten years at which point the equipment salvage value will be zero. Also assume that you can invest at 10% interest in other opportunitites for comparison
- Use the following cash flows to find the NPW, IRR, PI, and PBPYou are looking at a new project and you have estimated the followingcash flows:◦ Year 0: CF = -165,000◦ Year 1: CF = 63,120;◦ Year 2: CF = 70,800;◦ Year 3: CF = 91,080;Your required return for assets of this risk is 12%Please use a financial calculator to solve. Be sure to list your steps. You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three-year life, and has pretax operating costs of $62, 000 per year. The Techron II costs $ 415,000, has a five - year life, and has pretax operating costs of $ 35,000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $39, 000. If your tax rate is 21 percent and your discount rate is 8 percent, compute the EAC for both machines. (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)Consider a proposed project that has the following costs and benefits. Using linear interpolation, what is the project's simple or conventional payback period? Year Costs Benefits 0 $4,000 1 2,000 2 $1,500 3 1,500 4 1,500 5 2,300 6 2,300 A. 6.58 years B. 4.65 years C. 3.98 years D. 5.41 years
- How do you calculate the PVIFA for the equation: EAC = NPV / Annutiy factor How would you use the financial calculator to solve for EAC and PVIFA? You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a three-year life, and has pre-tax operating costs of $69,000 per year. The Techron II costs $475,000, has a five-year life, and has pre-tax operating costs of $36,000 per year. Both milling machines are in Class 8 (CCA rate of 20 percent per year). Assume a salvage value of $45,000. If your tax rate is 35 percent and your discount rate is 10 percent, compute the EAC for both machines. Which do you prefer? Why?Your boss has just presented you with the summary (below) of project costs and annual revenues for a new product line. He asks you to determine whether this investment opportunity would be economically justifiable using FW method at MARR=10%. What will you present to your boss? Note: Signs represents the cash flow. Year Net Cash flow 0 -450,000 1 -42,500 2 92,800 3 386,000 4 614,600 5 -202,200The company uses a 10% discount rate and the total-cost approach to capital budgeting analysis. The working capital required under the new system would be released for use elsewhere at the conclusion of the project. Both alternatives are expected to have a useful life of ten years.1. The net present value of the overhaul alternative (rounded to the nearest hundred pesos) is: P(750,300) P(987,400) P(725,800) P(975,800) 2. The net present value of the new system alternative (rounded to the nearest hundred pesos) is: P(552,900) P(758,400) P(862,900) P(987,400)