A company wants to build a spare parts storage facility. A plant engineer has identified three different location options. The initial cost of carstweek and pecto building and the an estimates were detailed in the following table. The annual net cash flow series vary due to differences in maintenance, labor costs, transportation charp Table 1: Cash flow estimates for the potential locations A Anal cash flow, $ per year Life, you -200,000 +22,000 30 B -275,000 +35,000 30 с -190,000 +19,500 30 sent the cash flow for all three options? 2. Use the estimates made to perform an annual worth (AW) evaluation for each option. What is the best option that you recommend? 3. What is rate of return for each option? Justify your answer 4 Donnine which option should be selected if you are using the rate of return analysis? Justify your answer. s. If the life duration of the study changes from 30 years to infinite. Will your recommendation change if you compare it with your answer in question 27 Justify your 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
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A company wants to build a spare parts storage facility. A plant engineer has identified three different location options. The initial cost of carstwork and perfib building and the an
estimates are detailed in the following table. The annual net cash flow series vary due to differences in maintenance, labor costs, transportation charges, etc. The MARR ir 10%
Table 1: Cash flow estimates for the potential locations
A
Initial cost, S
Annual cash flow, $ per year
Life, your
-200,000
+22,000
30
B
-275,000
+35,000
30
C
-190,000
+19,500
30
1.Represent the cash flow for all three options?
2. Use the estimates made to perform an annual worth (AW) evaluation for each option. What is the best option that you recommend?
3. What is the rate of return for each option? Justify your answer.
4. Determine which option should be selected if you are using the rate of return analysis? Justify your answer.
s. If the life duration of the study changes from 30 years to infinite. Will your recommendation change if you compare it with your answer in question 27 Justify your a
Transcribed Image Text:A company wants to build a spare parts storage facility. A plant engineer has identified three different location options. The initial cost of carstwork and perfib building and the an estimates are detailed in the following table. The annual net cash flow series vary due to differences in maintenance, labor costs, transportation charges, etc. The MARR ir 10% Table 1: Cash flow estimates for the potential locations A Initial cost, S Annual cash flow, $ per year Life, your -200,000 +22,000 30 B -275,000 +35,000 30 C -190,000 +19,500 30 1.Represent the cash flow for all three options? 2. Use the estimates made to perform an annual worth (AW) evaluation for each option. What is the best option that you recommend? 3. What is the rate of return for each option? Justify your answer. 4. Determine which option should be selected if you are using the rate of return analysis? Justify your answer. s. If the life duration of the study changes from 30 years to infinite. Will your recommendation change if you compare it with your answer in question 27 Justify your a
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