ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 44P
(a)
To determine
The capital expenditure for the project.
(b)
To determine
The effect on capital expenditure due to increase in interest rate.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
U.S. route 83 passes through the village of Burr Ridge, IL. The engineers of the Transportation Department have proposed constructing a new highway through existing farmland to bypass the city for use by through traffic. The new bypass would however entail an initial construction cost of $40 million and an average annual maintenance cost of $50,000. Assuming the overall user and non-user costs (associated with the positive and negative impacts) of the new project amount to $2 million per year, facility life of 25 years, and an annual nominal discount rate of 6% compounded quarterly, determine whether the project is worthwhile on the basis of agency costs, user costs, and non-user costs.
The construction cost of the bypass is $20 million, and $500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be $2.7 million. If the study period is 50 years and the state’s interest rate is 8% per year, should the bypass be constructed?
Juba city council is considering to construct a sewage management system, the construction of this system will take 3 years before commissioning. the initial capital outlay is estimated to be $10m after commissioning, the juba city council will incur an annual operation and maintenance cost in the amount of $500,000. the sewage management system will generate an annual benefit of $ 2.5m.
the sewage management system will have useful life of 27 years. the city council use 5% discount rate to appraise public project.
Required.
1- compute the present value of the cost and benefits?
2-perform cost benefit analysis to determine whether the project should be undertaken by the City council?
3-Assume you are consulted on this project, advice the city council on how to governed the project.
4- In addition to monetary conditions, what are the other factors to be considered in deciding whether or not the project would be taken?
Chapter 16 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 16 - Prob. 1QTCCh. 16 - Prob. 2QTCCh. 16 - Prob. 3QTCCh. 16 - Prob. 4QTCCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Prob. 3PCh. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Prob. 6P
Ch. 16 - Prob. 7PCh. 16 - Prob. 8PCh. 16 - Prob. 9PCh. 16 - Prob. 10PCh. 16 - Prob. 11PCh. 16 - Prob. 12PCh. 16 - Prob. 13PCh. 16 - Prob. 14PCh. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Prob. 18PCh. 16 - Prob. 19PCh. 16 - Prob. 20PCh. 16 - Prob. 21PCh. 16 - Prob. 23PCh. 16 - Prob. 24PCh. 16 - Prob. 25PCh. 16 - Prob. 26PCh. 16 - Prob. 27PCh. 16 - Prob. 28PCh. 16 - Prob. 29PCh. 16 - Prob. 30PCh. 16 - Prob. 31PCh. 16 - Prob. 32PCh. 16 - Prob. 33PCh. 16 - Prob. 34PCh. 16 - Prob. 35PCh. 16 - Prob. 36PCh. 16 - Prob. 37PCh. 16 - Prob. 38PCh. 16 - Prob. 39PCh. 16 - Prob. 40PCh. 16 - Prob. 41PCh. 16 - Prob. 42PCh. 16 - Prob. 43PCh. 16 - Prob. 44PCh. 16 - Prob. 45PCh. 16 - Prob. 46PCh. 16 - Prob. 47PCh. 16 - Prob. 48PCh. 16 - Prob. 49P
Knowledge Booster
Similar questions
- Kwame Nkrumah University of Cape Coast, Legon spent GHS1.8 million to install solar panels atop a parking garage. These panels will have a capacity of 500 kw, have a life expectancy of 20 years and suppose the discount rate is 10%.a. If electricity can be purchased for costs of GHS0.10 per kwh, how many hours per year will the solar panels have to operate to make this project break even?b. If efficient systems operate for 2,400 hours per year, would the project break even?c. The university is seeking a grant to cover capital costs. How big of a grant would make this project worthwhile (to the university)?arrow_forwardThe 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)arrow_forwardDescribe in detail why a project with a Present Worth (PW) equal to or greater than zero is economically justifiablearrow_forward
- A small Queensland farming company is contemplating whether to invest in a new irrigation system for their farmland. Currently their crop yields 45 tonnes that can be sold at $950 per tonne. The investment is projected to boost crop yields by 10% per year for a decade. The irrigation project entails an initial investment of $100,000 and requires an annual maintenance cost of $20,000 per year. The company has already spent $50,000 on a previous project that was unsuccessful. Assume a discount rate of 4% and a tax rate of 30%. a) Find the Market Perspective result. NPV = $ IRR = % Show your calculations in your spreadsheet.arrow_forwardA municipality is investigating the maintenance and refurbishment of the main road through the town . They can either resurface the road every 10 years , or resurface every 15 years but with higher maintenance costs . The municipality uses a 5 % interest rate for their appraisals to include in their applications for the Municipal Infrastructure Grant ( MIG ) . The funding will be available such that construction can be completed by the end of the current financial year . They have determined the following data , but they need you to carry out an economic appraisal as the basis from which to advise them : 10 - year resurfacing cycle Resurfacing : R15 000 000 Maintenance schedule : Year 1-5 : zero Year 6 : R300 000 Year 7 : R600 000 Year 8-10 : R800 000 15 Year resurfacing cycle : Resurfacing : R15 000 000 Maintenance schedule : Year 1-5 : zero Year 6 : R300 000 Year 7 : R600 000 Year 8-10 : R800 000 Year 11-15 : R1 000 000arrow_forwardA city planning commission is analyzing a project to determine its capitalized cost. The project is a water park that has an initial cost of $11,000,000.00 and operating and mainte- nance costs of $100,000.00 in the first year increasing by $10,000.00 a year for five years, and then the operating and maintenance costs return to $100,000.00 per year for the infinite life. The water park will generate profits of $1,300,000.00 per year. The interest rate is 13%. Determine the capitalized cost of the water park using net present worth analysis.arrow_forward
- Engineering economy - ENGR 3322 A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $18,000 per year over the six-year study period. At MARR of 19%, calculate the benefit-cost ratio of the project a. 53 b. 63 c. 73 d. None of the choicesarrow_forwardA company is currently paying its employees$0.56 per mile to drive their own cars on companybusiness. The company is considering supplyingemployees with cars, which would involve purchasing at $25,000 with an estimated three-year life, a netsalvage value of $8,000, taxes and insurance at a costof $1,200 per year, and operating and maintenanceexpenses of $0.30 per mile. If the interest rate is 10%and the company anticipates an employee’s annualtravel to be 30,000 miles, what is the equivalent costper mile (neglecting income taxes)arrow_forwardThe city of Oakmont is interested in developing some lake front property into a sports park (picnic facilities, boat docks, swimming area, etc.). A consultant has estimated that the city would need to invest $3 million in this project. In return, the developed property would return $500,000 per year to the city through increased tax revenues and recreational benefits to the public. Whatwould the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 6% per year.arrow_forward
- The investor-developer would not be comfortable with a 7.8 percent return on cost because the margin for error is too risky. If construction costs are higher or rents are lower than anticipated, the project may not be feasible. The asking price of the project is $4,600,000 and the construction cost per unit is $80,400. The current rent to justify the land acqusition is $1.3 per square foot. The weighted average is 900 square feet per unit. Average vacancy and Operating expenses are 5% and 35% of Gross Revenue respectively. Use the following data to rework the calculations in Concept Box 16.2 in order to assess the feasibility of the project: Required: a. Based on the fact that the project appears to have 9,360 square feet of surface area in excess of zoning requirements, the developer could make an argument to the planning department for an additional 10 units, 250 units in total, or 25 units per acre. What is the percentage return on total cost under the revised proposal? Is the…arrow_forwardThe city of Oak Ridge is considering the construction of a four kilometer (km) greenway walking trail. It will cost $1,000 per km to build the trail and $300 per km per year to maintain it over its 20-year life. If the city’s MARR is 7% per year, what is the equivalent uniform annual cost of this project? Assume the trail has no residual value at the end of 20 years.arrow_forwardThe annual benefits of $4,000 every year for three years may be obtained for an investment on a production equipment costing $20,000 with a salvage value of $5,000. If the interest rate is 6%, choose the right equation to determine the NPW. Group of answer choices NPW = -20,000 + 4,000(P/A, 6%, 3) + 5,000(P/F, 6%, 3) NPW = -20,000(P/F, 6%, 3) + 4,000(P/A, 6%, 3) + 5,000(P/F, 6%, 3) NPW = 20,000(F/P, 6%, 3) + 4,000(F/A, 6%, 3) + 5,000 NPW = 20,000(P/F, 6%, 3) + 4,000(F/A, 6%, 3) + 5,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning