2- The manager of engineering at the 900- megawatt Hamilton Nuclear Power Plant has three options to supply personal safety equipment to employees. Two are vendors who sell the items, and a third will rent the equipment for $50,000 per year, but for no more than 3 years per contract. These items have relatively short lives due to constant use. The MARR is 10% per year. Initial cost, $ Annual upkeep cost, s/year Annual rental cost, $ per year Salvage value, $ Estimated life, years Vendor R -75,000 -27,000 0 0 2 Vendor T -125,000 -12,000 Rental 30,000 3 0 0 -50,000 0 Maximum of 3 a) Select from the two sales vendors using the LCM and PW analysis. b) Determine which of the three options is cheaper over a study period of 3 years.

2- The manager of engineering at the 900- megawatt Hamilton Nuclear Power Plant has three options to supply personal safety equipment to employees. Two are vendors who sell the items, and a third will rent the equipment for $50,000 per year, but for no more than 3 years per contract. These items have relatively short lives due to constant use. The MARR is 10% per year. Initial cost, $ Annual upkeep cost, s/year Annual rental cost, $ per year Salvage value, $ Estimated life, years Vendor R -75,000 -27,000 0 0 2 Vendor T -125,000 -12,000 Rental 30,000 3 0 0 -50,000 0 Maximum of 3 a) Select from the two sales vendors using the LCM and PW analysis. b) Determine which of the three options is cheaper over a study period of 3 years.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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your business just signed a 4 year contract with a cybersecurity services consultant; the contract is for level 4 service. the contract has an initial cost of $ 14,979 in year 1, with annual increases of 6% each year through year 4. using an interest rate of 6% per year, determine the annual equivalent cost that would be paid over the life of the contract an electronic manufacturer is considering the purchase of an automated machine for wiring circuit boards. the equipment will cost $9000 have life of nine years, annual maintenance costs of $400, and a salvage value of $1000. at an interest rate of 15% per year, what is the capital recovery lost of the machine? a. $9000 b. $1,800 c. $8000 d. $1,000 e. $1,600
A specialized machine essential for a company's operations costs $5,000 and has operating costs of $2,000 the first year. The operating costs increase by $1,000 each year thereafter. We assume that the operating costs occur at the end of each year. The interest rate is 20% and the company plans to stay in operation forever. You have an option to replace the machine periodically after a period of n years, where n must be an integer. The replacement cost is $5,000. Your objective is to select the replacement period n such that the present value of the total cost is minímized. Assume that due to its specialized nature, the machine has no salvage value. What is the optimal replacement period, n? Note n must be an integer.
Junker Rental Car has a contract with a garage for major repair service for $450 per car, every 6 months. Management estimates that for $350,000, the company could have its own facility, financed at 8% interest for 20 years, and a salvage value of $20,000. They will do their own car repairs at a cost of $200 per car, every 6 months. Ignoring taxes and other economic factors, what is the minimum number of cars needed to make the change feasible?
Multimodal Hub 1 is an industrial property in Pennsylvania with an in place 20 year-lease to a low credit company. The area is becoming a major warehouse hub. The tenant has 10 years left on the lease term. The property has 50,000 square feet and pays $1,000,000 of rent per year. The landlord pays expenses which start at $400,000 per year. Expenses and rent both grow at 4%. A management fee is due equal to 5% of rent. You are offered a 7-year loan at 4.5%, 25-year amortization. The maximum loan amount will be determined by the lesser of 55% LTV or 1.4x DSC. You intend to sell at the end of year 7. You expect you can buy the property at a 6% cap rate and sell it at a 5% cap rate.Since it is an industrial property land accounts for 35% of the purchase price. Depreciation is over 40 years. Your capital gains taxes are 20%, recapture is 25% and income taxes are 35%. You need to make 15% on your equity after taxes. Question: What is the NOI at year 5?
New Tech Corporation is a rapidly growing biotech company that has a required rate of return of 10%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete. The building contractor offered New Tech a choice of three payment plans, as follows: More Info • Plan I: Payment of $225,000 at the time of signing the contract and $4,800,000 upon completion of the building. The end of the second year is the completion date. • Plan II: Payment of $1,800,000 at the time of signing the contract and $1,800,000 at the end of each of the 2 succeeding years. • Plan III: Payment of $250,000 at the time of signing the contract and $1,500,000 at the end of each of the 3 succeeding years. 1. Using the net present value method, calculate the comparative cost of each of the three payment plans being considered by New Tech. 2. Which payment plan should New Tech choose? Explain. 3. Discuss the financial factors,…
A firm can lease a truck for 4 years at a cost of $38,000 annually. The lease includes maintenance. The firm can instead buy a truck at a cost of $88,000, with annual maintenance expenses of $18,000. The truck has no salvage value at the end of 4 years. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10% Round your answer to the nearest dollar and report it without the $ symboli
After spending $ 9 comma 100 on client-development, you have just been offered a big production contract by a new client. The contract will add $ 199 comma 000 to your revenues for each of the next five years and it will cost you $ 104 comma 000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $ 53 comma 000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $ 27 comma 000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $ 79 comma 000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at $ 42 comma 000 per year to help with the expansion. You will have to immediately increase your inventory from $ 20 comma 000 to $ 30 comma 000. It will return to $ 20…
A service center has installed a new computer costing 1.6 million dollars. The system is expected to serve for 8 years and straight-line depreciation is acceptable. There are additional fixed costs of $300,000 per year. The service repair charges a flat fee of $30 per customer. Variable costs are $20. What will profit be if annual volume is 75,000 units? Question 1 options: $1,000,000.00 $500,000.00 -$250,000.00 $250,000.00
You are building a new facility and are trying to determine which vendor you are going to use to install new windows. You get quotes from two vendors-Vendor A and Vendor B. The useful life of the windows is 9.1 years and the MARR is 14%. The annual worth from the quotes are given below. What should you do? Vendor A B AW Save for Later -$6300 -$3200 O Purchase windows from Vendor B. O Purchase windows from Vendor A O Do nothing. Attempts: 0 of 1 used Sand
The initial cost needed to set up your freelancing engineering design service is $50,000. The salvage value of the equipment you purchased is $2,500 after five years. You estimated that each hour of design would cost you $75 per day. If you offered your services online with a price of $310 per day, how many days per year must you work to break even if the interest rate is 10% per year?
A firm is considering leasing or buying a mower. The mower costs $1000 and can be depreciated and falls into the MACRS 3 year class (33%; 45%; 15% and 7%). A maintenance contract will be purchased for $200 per year payable at the start of each year for 4 years. The firms tax rate is 30%. The firm expects to sell the mower for $96 at the end of the 3rd year. What is the net sale price when the mower is sold?
A company is considering the purchase of a new electron beam welder at a price of $250,000. The company would initially pay a down payment of $16000 and would borrow the balance at i=10%, for 6 years (making a single end of year payment each year). If the electron beam welder is purchased, the company will obtain a new 6-year welding contract that will increase annual income by $40,000. Maintenance and operating costs for the new welder will amount to $2100 for the first year and will increase by $1000 each year that the welder is used. CCA depreciation will be used for tax purposes. The welding machine sales company has agreed to "buy the welder back" for $25,000, when the new contract is concluded after six years. The tax rate = 34%, the MARR is 12%, CCA=30%. Develop the cash flow/ investment including as many details as possible. What is the net cash flow over 6 years ? If there were working capital (WC) required for this project, which year or years does it show up in the…

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