Consider the following sets of investment projects. All projects have a 3-year investment life. Period (n) Project's Cash Flow (Pesos) 0 1 2 3 A -25,000 54,000 144,000 72,000 B -10,000 -30,000 10,000 30,000 (a) Compute the net present worth of each project at i=13% (b) Which project is the most acceptable с 25,000 -70,000 20,000 40,000
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- FIRST COST ANNUAL COST SALVAGE VALUE ANNUAL INTEREST RATE STUDY PERIOD Power Line 20,000 1,950.90/month × 12= 23,410.8/year Solar 25,000 × 7= 125,000+10,000= 135,000 3,000 0 1.5% 25 0 3.5% 25 ALTERNATIVE A: A solar panel costs 25,000. 7 solar panels are needed in a company. The installation fee is 10,000 and will have a useful 25 years with no salvage value. The maintenance per year is 5,000. The annual interest rate for solar panel is 2%. ALTERNATIVE B: A new power line will cost 20,000, with power costs expected to be 1,950.90 per month. Th annual increase rate of electric bill is about 3.5%. Which alternative should be selected on the basis of a future worth analysis? Illustrate the cash flow diagram. USE MS EXCEL IN COMPUTATION and SHOW THE SOLUTION PROPERLY.Determine feasibility of the project using FW Method. Use MARR = 10%. %3D Alternatives A В C D Capital investment -$150,000 -$85,000 -$75,000 -$120,000 Annual revenues $28,000 $16,000 $15,000 $22,000 Annual expenses -$1,000 -$550 -$500 -$700 Market Value (EOL) $20,000 $10,000 $6,000 $11,000 Life (years) 10 10 10 10 Round off your answer to the NEAREST WHOLE NUMBER Ex. 12345 FW of Alt. A is Blank 1 FW of Alt. B is Blank 2 FW of Alt. C is Blank 3 FW of Alt. D is Blank 42-A company has requested price offers from two companies for the equipment they will purchase. Estimated cash flows based on the price offers of both companies are as follows. MCFO = %10 А В Initial investment cost,$ -1500000 -2250000 Annual operating cost, $ -700000 -600000 Scrap value, $ Service Life, $ 100000 50000 8 8 a)Using Annual Value Analysis, find out which option will be more economical. b) Solve with esent value analysis.
- Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold A B $28,000 $55,000 Capital Investment Annual Expenses Annual Revenues MV at EOY 10 Useful life ACapital Investment AMarket Value AAnnual Income (REV - EXP) Blank 1 15,000 AIRR 23,000 4 PW 6,000 8,000 10,000 10 years 10 years 10 years Use incremental analysis to determine the best alternative on the basis of PW method & IRR method. Is increment justified? 13,000 28,000 Blank 1 Blank 4 Blank 7 Blank 10 Blank 13% Blank 16 C $40,000 Blank 19 22,000 32,000 Blank 2 Blank 5 Blank 8 Blank 11 Blank 14% Blank 17 Blank 20 Blank 3 Blank 6 Blank 9 Blank 12 Blank 15% Blank 18 Blank 21Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR = 15% per year. "Do Nothing" is not an option. A B C Capital investment $15,000 $16,000 $13,500 $18,100 Annual costs 260 290 450 110 Market value at EOY 10 900 1,350 1,700 2,050 FW (15%) - $65,062 - $69,267 ??? - $73,408A firm is considering the development of several new products. The products under consideration are listed here; the products in each project group are mutually exclusive. Project group Products Development costs (P) Net annual cash flow (P) A A1 500,000 90,000 A2 650,000 110,000 A3 700,000 115,000 B B1 600,000 105,000 B2 675,000 112,000 C C1 800,000 150,000 C2 1,000,000 175,000 At most one product from each group will be selected. The firm has MARR of 10% per year and a capital investment budget limitation on development costs of P2,100,000. the life of all products is assumed to be ten (10) years. Assume no market values at the end of 10 years.
- 2-17 Consider the accompanying breakeven graph for an investment, and answer the following questions. $40 $35 $30 Total Revenue $25 $20- Total Cost $15 $10 -- $5 $0 0. 250 500 750 1000 1250 1500 1750 Output (units/year) (a) Give the equation for total revenue for x units per year. (b) Give the equation for total costs for x units per year. (c) What is the "breakeven" level of x? :11 ou hove a Dollars (X104)A company has $100,000 to spend on the various projects listed. Using these projects only, what should this company consider its minimum attractive rate of return to be? project investment required ($) expected return (%) ABCDEFG I 10,000 25,000 50,000 40,000 25,000 30,000 20,000 14 10 12 16 11 10 12A start up business is considering two types of equipment - data are as follows: TYPE A ΤΥΡE Β First Cost P200,000.00 P300,000.00 Annual operating cost 32,000.00 24,000.00 Annual labor cost 50,000.00 32,000.00 Insurance and property taxes 3% 3% Payroll taxes 4% 4% Estimated life 10 10 The minimum required rate of return is 15%. Using present worth cost method, determine the value of alternative A and alternative B: ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2 Blank 1 Add your answer Blank 2 Add your answer
- 3. PEMEX, Mexico's petroleum corporation, has an estimated budget for oil and gas exploration that includes equipment for three offshore platforms as shown. Use the PW to select the best alternative at a MARR of 14% per year. Platform X Y Ꮓ Initial Cost, $ million 300 450 510 M&O, $ million per year 320 290 230 Salvage Value, $ million 75 50 90 Estimated Life, years 20 20 20PART 2 - C PROBLEM SOLVING PROBLEM NO.1 Compute the PW: $3500 market value productivity attributable to equipment per year (Operating costs have already been deducted fron the revenue) $8500 $8500 $8500 $8500 $8500 1 2 3 End of Year i= 18%/yr $23500 investment cost 5.FIRST COST ANNUAL COST SALVAGE VALUE ANNUAL INTEREST RATE STUDY PERIOD Power Line 20,000 1,950.90/month × 12= 23,410.8/year Solar 25,000 X 7= 125,000+10,000= 135,000 3,000/year 0 3.5% 25 ALTERNATIVE A: A solar panel costs 25,000. 7 solar panels are needed in a company. The installation fee is 10,000 and will have a useful 25 years with no salvage value. The maintenance per year is 5,000. The annual interest rate for solar panel is 1.5%. 0 1.5% 25 ALTERNATIVE B: A new power line will cost 20,000, with power costs expected to be 1,950.90 per month. The annual increase rate of electric bill is about 3.5%. Which alternative should be selected on the basis of a future worth analysis? Illustrate the cash flow diagram. USE MS EXCEL IN COMPUTATION and SHOW THE SOLUTION PROPERLY.