Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $12 million and the M&O cost is estimated at $1.6 million per year. Alternatively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $16 million, but less contamination will render the M&O cost lower at $0.4 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better—ponds or tubes? Use a present worth analysis. The present worth of lined ponds is $ ____million and that of plastic tubes is $ ____million. ____ (Lined ponds or plastic tubes) are used to grow algae.

Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $12 million and the M&O cost is estimated at $1.6 million per year. Alternatively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $16 million, but less contamination will render the M&O cost lower at $0.4 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better—ponds or tubes? Use a present worth analysis. The present worth of lined ponds is $ million and that of plastic tubes is $ million. (Lined ponds or plastic tubes) are used to grow algae.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 20P: The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting,...

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Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $11 million and the M&O cost is estimated at $2.3 million per year. Alternatively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $20 million, but less contamination will render the M&O cost lower at $0.5 million per year. At an interest rate of 12% per year and a 5-year project period, which system is better-ponds or tubes? Use a present worth analysis. The present worth of lined ponds is $ million and that of plastic tubes is $ imillion. Lined ponds v are used to grow algae.
Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an al- ternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost is $13 million and the M&O cost is estimated at $2.1 million per year. Alterna- tively, if long plastic tubes are used for growing the algae, the initial cost will be higher at $18 million, but less contamination will render the M&O cost lower at $0.41 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better—ponds or tubes? Use a present worth analysis.
Oil from a particular type of marine microalgae can be converted to biodiesel that can serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost will be $13 million and the maintenance & operating (M&O) cost will be $2.1 million per year. If long plastic tubes are used for growing the algae, the initial cost will be higher at $18 million, but less contamination will render the M&O cost lower at $0.41 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better, ponds or tubes? Use a present worth analysis.
Two membrane systems are under consideration for treating cooling tower blowdown to reduce its volume. A low-pressure seawater reverse osmosis (SWRO) system will operate at 500 psi and produce 720,000 gallons of permeate per day. It will have a fixed cost of $465 per day and an operating cost of $485 per day. A higher-pressure SWRO system operating at 800 psi will produce 950,000 gallons per day at a cost of $1280 per day. The fixed cost of the high-pressure SWRO system will be only $328 per day because fewer membranes will be required. How many gallons of blowdown water will require treatment each day for the two systems to break even?
In a bio-based material recycling company, the operation managers are considering a twin-screw extruder with a price of 12,000 OMR and another 2,000 OMR will be spent for shipping and installation of the extruder. The estimated net income generated from this machine is 3,500 OMR per year. The extruder will be used for 5 years, and then it will be sold for an estimated market value of 2,500 OMR. The extruder MARCS property class is 5 years. If the effective income tax rate (t) is 40% and the after-tax MARR is 10%. (a) What is the after-tax IRR for this project? (use trial and error procedure and GDS) (b) Should this extruder be purchased by the company?
The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The two alternatives are (1) a conveyor system with a high initial cost but low annual operating costs and (2) several forklift trucks, which cost less but have considerably higher operating costs. The decision to construct the plant has already been made, and the choice here will have no effect on the overall revenues of the project. The cost of capital for the plant is 8%, and the projects’ expected net costs are listed in the following table: What is the IRR of each alternative? What is the present value of the costs of each alternative? Which method should be chosen?
A chemical reactor, which will contain corrosive liquids, has been designed. The reactor may be made of mild steel or stainless steel. The initial cost, including installation, of a mild steel reactor is expected to be P 72,000 and would last 5 years. Stainless steel is more resistant to the corrosive action of the liquids, but is more expensive and will cost P 120,000. Assuming that both types of reactors will have no salvage or scrap value at the end of their useful lives and could be replaced at the same costs as before, and if money is worth 12% compounded annually, what should the useful life of the stainless reactor be so that the capitalized costs are equal?
A consulting engineer is considering two methods for lining landfill for municipal solid waste management in Bannock County, Idaho. A geosynthetic bentonite clay liner (GCL) will cost $2.0 million to install, and if it is renovated after 4 years at a cost of $400,000, its life can be extended another 2 years. Alternatively, a high-density polyethylene (HDPE) geomembrane can be installed that will have a useful life of 12 years. At an interest rate of 6% per year, how much money can be spent on the HDPE liner for the two methods to break even?
An engineer is considering two different liners for an evaporation pond that will receive salty concentrate from a brackish water desalting plant. A plastic liner will cost $0.90 per square foot and will have to be replaced in 20 years when precipitated solids have to be removed from the pond using heavy equipment. A rubberized elastomeric liner is tougher and, therefore, is expected to last 30 years, but it will cost $2.20 per square foot. The pond covers 110 acres (1 acre = 43,560 square feet). Which liner is more cost effective on the basis of an annual worth analysis at an interest rate of 8% per year? Solve using (a) tabulated factors, and (b) a calculator.
A chemical reactor, which will contain corrosive liquids has been designed. The reactor maybe made of mild steel or stainless steel. The initial cost, including installation, of a mild steel reactor isexpected to be P72,000 and would last 5 years. Stainless steel is more resistant to the corrosive action ofthe liquids, but is more expensive and will cost P120,000. Assuming that both types of reactors will have nosalvage or scrap value at the end of their useful lives and could be replaced at the same costs as before,and if money is worth 7.5% compounded annually,3.1 what is the amount needed today using mild steel?3.2 what should the useful life of the stainless reactor be so that the capitalized cost are equal?
The Philippines’ Bench clothing has just completed a feasibility study of what to do with the 16,000 kg of overruns, rejects, and remnants it produces every year. The company’s CEO launched the feasibility study by asking, why pay someone to dig coal out of the ground and then pay someone else to put our waste into a landfill? Why not just burn our own waste? The company is proposing to build a P10 million power plant to burn its waste as fuel, thereby saving P2.8 million a year in coal purchases. Company engineers have determined that the waste burning plant will be environmentally sound, and after its four-year study period the plant can be sold to a local electric utility for $5 million. What is the IRR of this proposed power plant? If the firm’s MARR is 15% per year, should this project be undertaken?
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal, but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $240 million, and the expected cash inflows would be $80 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $84 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk-adjusted WACC is 17%. a. Calculate the NPV and IRR with and without mitigation. b. How should the environmental effects be dealt with when evaluating this project? c. Should this project be undertaken? If so, should the firm do the mitigation? Why or why not?