Method and (b) Future worth Method if interest rate is 10% per year? Machine nitial Cost (Php) Annual Operating Cost A B 146,000 220,000 15,000 80,000 10,000 10,000 75,000 25,000 Annual Revenue Salvage Value Jseful Life (years) 3 6
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- Calculate the Equivalent X(4) for a project with the following cash flows: First Cost (F.C) = JD 13000, Annual Income for the last 6 years= JD 2400 Operating Cost (O.C.) = JD 30 Income, at the end of the 4th year = JD 5000, Salvage Value (S.V.) = 1800. If n= 9 years and i=7% per year. ( show the CFD and calculations)The table bellow shows the cash flow for an engineering project, if the reinvestment rate of return e is 6% per year, the external rate of rate (EER) is EOY Cash flow $ 13000 14 2000 5 to 10 80001. Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5 Salvage value P10, 000 Annual benefits P60, 000 Annual O and M P22, 000 Interest rate, % 15 Ans: B/C = 1.16
- Using the below informtion answer: 5.1 Payback Period of Project Tan (expressed in years, months and days). 5.2 Net Present Value of Project Tan.5.3 Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). INFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you: PROJECT COS PROJECT TANNet Profit Net ProfitYear R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculatedusing the straight-line method.Investment If $5000 is invested for 6 years atinterest rate r (as a decimal), compounded annually, the future value of the investment is given byS = 5000(1 + r) 6dollars.a. Find the future value of this investment for selectedinterest rates by completing the following table. b. Graph this function for 0 <= r <= 0.20.c. Compute the future value if the rate is 10% and20%. How much more money is earned at 20%?The following information relates to machines A and B. Year Machine A Machine B Shs Shs 0 (100,000) (120,000) 1 60,000 50,000 2 40,000 50,000 3 20,000 50,000 Find the Internal Rate of Return (IRR) of the project at rates 10%)
- Alternatives A, B associated with a project have data as in the following figure, MARR=12% /year, Study period is 6 years. Find: Which alternatives should be selected? A B Capital investment $2800 $5000 Annual cash flow 1100 1400 Useful life (years) 3 6 Market value at end of useful life 0 0Whats the paybck period & discounted payback period for a project with costof 2OO,OOO that generates an annualcash infloww of 3O,OOO for the first 2years, 4O,OOO per year for years 3to5, & 5O,OOO per year for years 6through9?Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Biofuel Equipment Year 1 2 3 4 Year 1 2 The wind turbines require an investment of $513,900, while the biofuel equipment requires an investment of $1,093,320. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest 12% 0.893 1.690 2.402 3.037 3.605 3 4 5 Wind Turbines 6 7 8 9 10 Required: $180,000 180,000 180,000 180,000 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 $360,000 360,000 360,000 360,000 5.759 6.145 4.111 4.564 4.968 5.328 5.650 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 1a. Compute the net present value for each project. Use…
- 1. Determine the B/C ratio for the following project First Cost P100, 000 Project life, years 5 Salvage value Annual benefits P10, 000 P60, 000 Annual O and M Interest rate, % P22, 000 15 Ans: B/C = 1.16 2. Data for two alternatives are as follows: Alternatives A В Investment Р35, 000 P50, 000 Annual benefits P20, 000 P25, 000 Annual O and M Estimated life, years Net salvage value Ре, 450 P13, 830 4 8. Р3, 500 Using an interest rate of 20%, which alternative should be chosen? Ans: Alternative A is referred over Alternative BRequired: 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment Present value of annual net cash flows $ Less amount to be invested Net present value 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index Wind Turbines Biofuel Equipment 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines Biofuel Equipment Present value factor for an annuity of $1 Internal rate of return % %The following two alternatives are given. Data A B. First Cost $8,200 $5,600 Annual Cost $1,000 $800 Annual Benefit $2,700 $2,100 Life, Years 7. Salvage Value $2,800 $1,000 Assume that MARR is 15%. Use the incremental rate of return analysis to determine which alternative (A or B) one should choose. Find the AIRR, or a range of AIRR. O 10% O 10-12% O 12-15% O > 15%