An aircraft hangar requires a new high-efficiency HVAC system for environmental control and reducing heating and cooling expenses. The cost of the HVAC system is $5.0 million, and the annual savings are expected to be $400,000. The useful life of the HVAC system is 20 years, and its residual value is zero. a) What is the simple payback period? b) What is the internal rate of return? (Note: You can use the tables in the book or Excel to find the IRR, but in either case show work and/or cut & paste a spreadsheet. If using the tables an approximate answer will be acceptable)

d. Calculate the rate of utilization of each option?e. Considering the information calculated, which option is best in your opinion? Is there a third option you could implement?

You are considering getting a Little Nero Caesar Salad Franchise, because your boss (the owner of a Down Under Sandwich Shoppe) seems to be making it big.  The Down Under Shoppe grosses an average of $380,000 sales annually.  You estimate that your business will gross an average of 95% of Down Under’s sales.  You must borrow $320,000 from the bank.  The bank will charge you 12% per annum interest on this loan.  You also will invest $50,000 of your savings in the business (thus you will no longer receive the 4% per annum interest from this). NOTE: neither the bank loan principal nor the $50,000 of your savings you invest is an explicit or implicit cost.  However, the interest paid on the bank loan is explicit and the interest foregone on your savings is implicit.  Other estimated explicit expenses are: labor $130,000 per year; rent $12,000 a year; utilities $4,000 a year; and salad ingredients $140,000 a year.  An explicit expense you will have to pay Little Nero, Inc., is a franchise…

An engineering student intends to purchase a new computer. He plans to pay $300 down and finance the remainder over a 12 month period. The maximum amount that he can repay each month is $100.   a. What is the most expensive computer he can purchase, assuming an interest rate of 2% per month (compounded monthly)?   b. Draw the Cash Flow Diagram for this problem.