A project has been proposed that will involve making anexpenditure of $300,000 today to control phosphorousrunoff in agricultural lands of the Fox-Wolf Watershed.Assume this effort would not pay off until 25 years fromnow, at which time it would reduce $1.5 million inenvironmental damages by eliminating a "dead spot" inthe Bay of Green Bay. Choose the discount rate(s)below that would result in a favorable decision on thisproject.O 1%O 1% and 3%O 1%, 3%, and 5%O 1%, 3%, 5%, and 7%O 1%, 3%, 5%, 7%, and 9%

Underlying theory: If the net present value (NPV) is greater than 0, then the project is favorable…

Answered: A project has been proposed that will…

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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management of Penfold Corporation is considering the purchase ofa machine that would cost $380,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $85,000 per year. The company requires a minimum pretax return of 13% on all investment projects. The Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): Multiple Cholce $(81,055) $(6,055) $(166,055) $(379.997) Prev 1 of 4 Next > 9:44 AM ype here to search 49°F Mostly sunny 20 10/19/2021 DELL F11 F12 PrtScr Insert Delete PgUp PgDn Home End F3 F4 F5 F6 F7 F8 F9 F10 %24 & Num Lock Backspace 大

An Army Corps of Engineers project for improving navigation on theOhio River will have an initial cost of $6,500,000 and annualmaintenance of $130,000. Benefits for barges and paddle wheel touringboats are estimated at $820,000 per year. The project is assumed to bepermanent and the discount rate is 8% per year. Determine if theCorpsshould proceed with the project.
Officials from the City of Galveston and State of Texas gathered to celebrate the start of a beach restoration project that involves dumping sand and adding antierosion structures. The first cost of the project is $30 million with annual maintenance estimated at $340,000. If the restored/expanded beaches attract visitors who will spend $6.2 million per year, what is the conventional B/C ratio at the social discount rate of 8% per year? Assume the State wants to recover the investment in 20 years.
A piece of land may be purchased for $610,000 to be strip-mined for the underlying coal. Annual net income will be $200,000 for 10 years. At the end of 10 years, the surface of the land will be restored as required by a federal law on strip-mining. The reclamation will cost $1.5 million more than the land’s resale value after it is restored. Is this a desirable project, if the minimum attractive rate of return is 10%?
One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount rate of 8% per year over a 20-year study period to determine which alternative should be selected. For analysis purposes only, assume the flood damage would be prevented in years 3, 9, and 18 of the study period. Retention Pond Channel Initial cost, $ 880,000 2,900,000 Annual maintenance, $/year 92,000 30,000 Reduced flood damage, $ 200,000 600,000
The federal government is planning a hydroelectric project for a river basin. Inaddition to producing electric power, this project will provide flood control, irrigation, and recreational benefits. The estimated benefits and costs expected to be derived from the three alternatives under consideration are listed as follows: The interest rate is 10%, and the life of each project is estimated to be 50 years.(a) Find the benefit-cost ratio for each alternative.(b) Select the best alternative, according to BC(i).
A proposed cost-saving device has an installed cost of $730,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $140,000, the marginal tax rate is 22 percent, and the project discount rate is 10 percent. The device has an estimated Year 5 salvage value of $101,000. What level of pretax cost savings do we require for this project to be profitable? (MACRS schedule) (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Pretax cost savings $ 216,693.04
A proposed cost-saving device has an installed cost of $905,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $65,000, the tax rate is 22 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $125,000. What level of pretax cost savings do we require for this project to be profitable? (MACRS schedule) Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Required cost savings
One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount rate of 6% per year over a 20-year study period to determine which alternative should be selected. For analysis purposes only, assume that the benefits of reduced flood damage are available in years 5, 13, and 18 of the study period. Retention Pond Channel Initial Cost, $ 960,000 2,600,000 Annual Maintenance , $/Year 92,000 30,000 Reduced Flood Damage, $ 200,000 550,000 The AB/C ratio is The alternative that should be selected is the retention pond v
A proposed cost-saving device has an installed cost of $835,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $95,000, the tax rate is 25 percent, and the project discount rate is 11 percent. The device has an estimated Year 5 salvage value of $145,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
A proposed cost-saving device has an installed cost of $765,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $67,000, the tax rate is 21 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $103,000. What level of pretax cost savings do we require for this project to be profitable?
The management of Kunkel Company is considering the purchase of a $20,000 machine that would reduce operating costs by $5,000 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 13%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the net present value of the investment in the machine. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Use the appropriate table to determine the discount factor(s).) Net present value

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