Use i-9% to find the total EUAC of Plan A which has a total investment of $200,000. Out of this, $120,000 Is for land, and $80,000 is for building. Building requires a renewal every 30 years for $80,000 with no salvage value. Operating cost per year is as follows: $15,000 per year for the firs 10 years and $10,000 per year thereafter, n Infinity. Most nearly numbers for answer. O 35,000 O 31,475 O 30,420 O 45,200 O No correct answer
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- Capital recovery (CR) is the equivalent annual amount that an asset, process, or system must earn each year to just recover the first cost and a stated rate of return over its expected life. Salvage value is considered when calculating CR. True FalseYou are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $300 per unit and sales volume to be 1,000 units in year 1, 1,250 units in year 2, and 1,325 units in year 3. The project has a three-year life. Variable costs amount to $200 per unit and fixed costs are $50,000 per year. The project requires an initial investment of $150,000 in assets that will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $25,000. NWC requirements at the beginning of each year will be approximately 10 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What will the free cash flow for this project be in year 2? Multiple Choice $53,000 $102,450 $107,250 $49,950eBook Net Present Value Method—Annuity Take a Load Off Hotels is considering the construction of a new hotel for $12,000,000. The expected life of the hotel is 6 years with no residual value. The hotel is expected to earn revenues of $12,400,000 per year. Total expenses, including straight-line depreciation, are expected to be $10,000,000 per year. Take a Load Off's management has set a minimum acceptable rate of return of 12%. a. Determine the equal annual net cash flows from operating the hotel.$fill in the blank 1 b. Calculate the net present value of the new hotel, using the present value factor of an annuity of $1 table below. If required, round to the nearest dollar. If the net present value is negative, enter the amount using a minus sign. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791…
- A financial investor has an investment portfolio. A bond in her investment portfolio will mature next month and provide her $25,000 to reinvest. The choices for reinvestment have been narrowed to the following two options:Option 1: Reinvest in a foreign bond that will mature in one year. Thistransaction will entail a brokerage fee of $150. For simplicity, assume thatthe bond will provide interest over the one-year period of $2,450, $2,000, or $1,675 and that the probabilities of these occurrences are assessed to be 0.25, 0.45, and 0.30, respectively.Option 2: Reinvest in a $25,000 certificate with a savings and loan association.Assume that this certificate has an effective annual rate of 7.5%.Which form of reinvestment should the investor choose in order to maximize her expected financial gain?You purchased a building five years ago for $100,000. Its annual maintenance expense has been $5,000 per year. At the end of five years, you sold the building for $80,000. During the period of ownership, you rented out the building for $10,000 per year at the beginning of each year. Evaluate this investment when MARR is 8% per year. The payback period is, a. 4 years b. 5 years c. 2 years d. 3 yearsElectric posts and transmission lines must be installed in a new industrial park. It has been estimated that 23 km of transmission lines will be needed and each kilometer of line costs P14,000.00 including the installation. In addition a pole must be placed every 100 meters on the average to support the lines, and the cost of the pole and its installation is P2,100.00 including labor. What is the cost of the entire project?
- Calculate the capitalized cost of a project that has an initial cost of P3,500,000 and an additional cost of P1500, 000 at the end of every 10 yrs. The annual operating costs will be P150, 000 at the end of every year for the first 5 years and P180, 000 thereafter. In addition, there is expected to be recurring major rework cost of P400, 000 every 13 yrs. Assume i =18% a.Php 4,467,564.367 b.Php 5,673.467.567 c.Php 5,534,673.123 d.Php 4,813,109.563You invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it will be worth $15,000 at the end of two years. The machine will be used for 4,000 hours during the first year and 6,000 hours during the second year. The expected savings associated with the use of the piece of equipment will be $28,000 during the first year and $40,000 during the second year. Your interest rate is 10%.(a) What is the capital recovery cost?(b) What is the annual equivalent worth?(c) What is net savings generated per machine-hour?A machine that costs $12,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $2,331 per year before taxes and depreciation. The company depreciates its assets on a straight-line basis and has a marginal tax rate of 40 percent. The firm’s cost of capital is 14 percent. What is the internal rate of return (IRR) for the machine? Based on the IRR criterion, should this machine be purchased?
- You are considering the following project: It pays you $2,500 at the end of the first year, costs $8,500 by the end of the second year and brings $6,800 a year after. What is the project's internal rate of return(s), exact external rate of return and the approximate external rate of return it current MARR is 14%?You are considering making an $80,000 investment in a process improvement project. Revenues are expected to grow from $50,000 in 1 year by $30,000 each year for the next four years ($50,000 first Year, $80,000 second year, $110,000 third year and so forth) while cost are expected to increase from $20,000 in year 1 by $10,000 each year. If there is no salvage value at the end of five years. at MARR of 11%, What is the NFW of the investment?Two 150-horsepower (HP) motors are being considered for installation at amunicipal sewage treatment plant. The first costs $4,500 and has an operating efficiency of 83%. The second costs $3,600 and has an operating efficiency of 80%. Both motors are projected to have zero salvage value after a life of 10 years. All the annual charges, such as insurance and maintenance, amount to a total of 15% of the original cost of each motor. If power cost is a flat 5 cents per kilowatt-hour, which alternative should be chosen at 5,000 operating hours per year? Assume an interest rate of 6%. (A conversion factor you might find useful is IHP = 746watts = .746kilowatts.)