7. The Trust for Public Land (TPL) is a national organization that purchases and oversees theimprovement of large land sites for government agencies at all levels. All TPL projects are evaluated at7% per year, and TPL reserve funds earn 7% per year.One of the U.S. states, which has long-term groundwater problems, asked the TPL to manage thepurchase of aquifer recharge land and the development of parks on the land. The land will be bought inincrements over the next 5 years with $4 million given immediately on purchases. Total annual purchaseamounts are expected to decrease 25% each year through year 5 and then finish for this project.The engineers working on the park plan intend to complete all the development over a 3-year periodstarting in year 4, when the amount budgeted is $550,000. Increases in construction costs are expectedto be $100,000 each year through year 6.a) Draw the cash flow for this project.b) If the state plans to make annual payments to TPL in 6 years, what should be the equivalentannual amount of payment?

To draw the cash flow for this project, we need to consider the purchases of aquifer recharge land,…

Answered: 7. The Trust for Public Land (TPL) is a…

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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The government plans to increase the capacity of her existing water transmission lines in Cebu City. Two plans are under consideration. Plan A requires the construction of a parallel pipeline, the flow being maintained by gravity. The initial cost is P182,947,337 and the life is 50 years, with an annual operating cost of P5,725,635 for the 1st 25 years and P11,441,794 for the next 25 years. Plan B requires the construction of a booster pumping station costing P100M with the life of 50 years. The pumping equipment cost an additional amount of P25M, it has a life of 25 years and a salvage value of P2M. The annual operating cost is P5M. Using the Present Value (PV) Method and an interest of 23% cpd. annually, what is the PV of Plan A?
There are two mutually exclusive proposals for a for a flood control project in Illinois. The first proposal involves an initial outlay of $1,350,000 and annual expenses of $110,000. This plan is assumed to be permanent. The second proposal requires an initial outlay of $700,000, followed by $200,000 every 12 years thereafter. Annual expenses for the second proposal are estimated to be $95,000 for the first 12 years and $150,000 each year there after. Annual benefits are identical for both projects, and terminal salvage values are negligible. The interest rate is 6% per year. Which proposal should be recommended?
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.C) At the same time as the interchange is being constructed, the bridge project must also be underway. The bridge is projected to cost $48 million. It will also need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $5.5 million. The 1st phase is expected to need the entire 18…
Two landfill construction plans are being considered by a planning committee.They are:1) Plan A: Landfill with a groundwater protection system.2) Plan B: Landfill constructed with a geosynthetic liner to minimize leachates from the landfill and protectgroundwater sources.Annual amortized capital costs and risks of failure for the systems are presented in the table below:The cleanup cost, if the groundwater system should fail, is estimated to be $8,000,000.a) Determine the annual social cost of failure of each of the two plans.b) Determine to total cost per year for the two plans.c) If minimum total annual cost is the criterion for selecting a option, what plan should be chosen? Clearly justifyyour choice.
The Government is considering a multi-purpose river valley project in which would involve construction of a dam, a reservoir, a power house, and several irrigation canals. The project would supply water for irrigation, generate electricity, and provide a measure of protection against floods. The following information has been gathered by the project control board. The project will require the following during the construction stage: i) locally produced power equipment costing Ks 200 million; ii) imported power equipment costing $ 10 million; iii) 20,000 tonnes of steel produced locally and made available to the project at Ks 6000 a tonne; iv) 350,000 tonnes of cement produced locally and made available to the project at Ks 800 a tonne; v) other construction materials (sand, bricks, ballast, etc.) costing Ks 100 million; vi) 25 million man-days of unskilled labour for which the project control board has decided to pay a daily wage rate of Ks 10; and vii) skilled labour costing Ks…
The state is considering three proposals for increasing the capacity of the main drainage canal in an agricultural region. Proposal A requires dredging the canal. The state is planning to purchase the dredging equipment and accessories for $650,000. The equipment is expected to have a 10-year life with a $17,000 salvage value. The annual operating costs are estimated to total $50,000. To control weeds in the canal itself and along the banks, environmentally safe herbicides will be sprayed during the irrigation season. The yearly cost of the weed control program is expected to be $120,000.Proposal B is to line the canal walls with concrete at an initial cost of $4 million. The lining is assumed to be permanent, but minor maintenance willbe required every year at a cost of $5000. In addition, lining repairs will have to be made every 5 years at a cost of $30,000.Proposal C is to construct a new pipeline along a different route. Estimatesare: an initial cost of $6 million, annual…
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.The roadway to be constructed is projected to cost $125,000 per lane mile. It will need to begin construction 12 months prior to the project’s estimated completion date. Your government controls the permitting process for the roadway and has already issued the necessary permits. The total roadway project will be paid for at its completion
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.a. The interchange is projected to cost $50 million. It will need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $2.5 million. The 1st phase is expected to need the entire 18 months prior to the start of construction and must be completed before construction can begin. The 2nd…
1. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.a. The interchange is projected to cost $50 million. It will need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $2.5 million. The 1st phase is expected to need the entire 18 months prior to the start of construction and must be completed before construction can begin. The 2nd phase is projected to cost the remaining $47.5 million. It is expected to be completed at the end of the 2-year period following planning &…
Assume that, as a part of its economic development program, your governmental agency has committed to provide access to a new regional industrial park. This project must fund the construction of an on/off-interchange from an adjacent highway, a 2-mile length of 4-lane divided roadway, and a bridge that will cross a 500-foot wide river. The entire project is estimated to require 2 years to complete following planning & design.a. The interchange is projected to cost $50 million. It will need to begin construction in 18 months. Rights-of-way acquisition, surveying, and permitting have already been completed and paid for by the program. There will be 2 additional project phases: 1) planning & design, 2) construction. Each will require payment at the end of the phase. The projected cost of the 1st phase of the project is $2.5 million. The 1st phase is expected to need the entire 18 months prior to the start of construction and must be completed before construction can begin. The 2nd…
Department of Agriculture is considering three proposals for increasing the capacity of the maindrainage canal in Baguio City.Proposal 1 requires dredging the canal. The state is planning to purchase the dredgingequipment and accessories for $650,000. The equipment is expected to have a 10-year life with a$17,000 salvage value. The annual operating costs are estimated to total $50,000. To control weedsin the canal itself and along the banks, environmentally safe herbicides will be sprayed during theirrigation season. The yearly cost of the weed control program is expected to be $120,000.Proposal 2 is to line the canal walls with concrete at an initial cost of $4 million. The lining isassumed to be permanent, but minor maintenance will be required every year at a cost of $5000. Inaddition, lining repairs will have to be made every 5 years at a cost of $30,000.Proposal 3 is to construct a new pipeline along a different route. Estimates are an initial costof $6 million, annual maintenance…
b) ABC Company obtained a grant of GHe 10 million from a government agency for an investment project to construct a manufacturing plant of at least GH488 million. The principal term is that the grant payments relate to the level of capital expenditure. The secondary intention is to safeguard 300 jobs. The grant will have to be repaid pro-rata if there is underspending on capital. Twenty percent of the grant will have to be repaid if the jobs are not safeguarded within 18 months after the date of the last asset purchase. The plant was completed on 1 January 2008 at a total cost of GH490 million. The plant had an expected useful life of 20 years and is depreciated on a straight-line basis with nil residual value. ABC Company adopts the policy of setting government grants up as deferred income. Required: Show the relevant Statement of Profit or Loss and Statement of financial position extracts as well as the relevant disclosures in the 2008 final accounts.

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