Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $360 million. The annual upkeep is expected to amount to $730,000. The turf will have to be replaced every 9 years at a cost of $940,000. Painting every 6 years will cost $94,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i= 7% per year? The estimated capitalized cost is $ [

Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $360 million. The annual upkeep is expected to amount to $730,000. The turf will have to be replaced every 9 years at a cost of $940,000. Painting every 6 years will cost $94,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i= 7% per year? The estimated capitalized cost is $ [

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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Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $200 million. The annual upkeep is expected to amount to $830,000. The turf will have to be replaced every 11 years at a cost of $840,000. Painting every 8 years will cost $70,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at /= 7% per year? The estimated capitalized cost is $ 201673626.70
Seattle is attempting to revive its NBA team. Seattle is planning to build a new stadium that will costP250 billion. Annual upkeep is expected to amount to P8,000,000. The turf will have to be replaced every 10 years at a cost of P9,500,000.Painting every 5 years will cost P750,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i = 8%per year?
InterCell Company wants to participate in the upcoming World's Fair in Korea. To participate, the firm needs to spend $1.5 million in year 0 to develop a showcase. The showcase will produce a cash flow of $3.75 million at the end of year 1. Then at the end of year 2, $2.31 million must be expended to restore the land on which the showcase was presented to its original condition. Therefore, the project's expected net cash flows are as follows (in thousands of dollars): N Cash flow0 -$1,SOO1 $3,7502 -$2,310(a) Plot the present worth of this investment as a function of i.(b) Compute the i*s for this investment. Is this a pure investment?( c) Would you accept this investment at MARR= 14 % ?
InterCell Company wants to participate in the upcoming World's Fair in Korea. To participate, the firm needs to spend $1.5 million in year 0 to develop a showcase. The showcase will produce a cash flow of $3.75 million at the end of year 1. Then at the end of year 2, $2.31 million must be expended to restore the land on which the showcase was presented to its original condition. Therefore, the project's expected net cash flows are as follows (in thousands of dollars): (a) Plot the present worth of this investment as a function of i.(b) Compute the i*s for this investment. Is this a pure investment?( c) Would you accept this investment at MARR= 14 % ?
To promote sports in Qatar, the National Olympic committee is planning to construct a new handball stadium, with the initial cost of $10 million and an upgrade cost of $478 thousand in year 3. The annual operating costs are expected to be $125 thousand. It is expected to bring an overall benefit to the public worth $1.2 million each year. However, it is also anticipated that disbenefits of $191 thousand each year is due to utilization of extra resources. If the project life is given to be 9 years for analysis purpose, determine the B/C ratio using the conventional benefit-to-cost ratio method. Use an interest rate of 12% per year.
New York City is evaluating the construction of a new train station to serve a new high-speed rail system. The Capital Projects Team is responsible for evaluating whether the project is economically acceptable. The Capital Projects Team estimates that the new train station will generate $1B in annual revenue, and provide $1B a year in cost savings. The new train line will cannibalize some of the existing revenues the City receives from its current train system. The value of this cannibalization is estimated at $500 MM a year. The new station's costs of Maintenance and Operation are anticipated to amount to be $250 MM per year. The initial investment required to design and build the train station is expected to be $15 B. New York City is considered to be a high credit and can borrow long-term in the capital markets at a rate of 6%. The Capital Projects Team evaluates these types of projects over a study period of 25 years. What is the Modified B/C Ratio? .94 1.00 1.07 1.10
You own a coal mining company and are considering opening a new mine. The mine itself will cost $120 million to open. If this money is spent immediately, the mine will generate $21 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.9 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? (Hint: Consider the number of sign changes in the cash flows.) If the cost of capital is 8.2%, what does the NPV rule say? What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) The IRR is 10.41%, so accept the opportunity Accept the opportunity because the IRR is greater than the cost of capital. There are twoIRRs, so you cannot use the IRR as a criterion for accepting the opportunity. Reject the opportunity because the IRR is lower than the 8.2%…
You own a coal mining company and are considering opening a new mine. The mine itself will cost $116.1 million to open. If this money is spent immediately, the mine will generate $21.2 million for the next 10 years. After that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $1.9 million per year in perpetuity. What does the IRR rule say about whether you should accept this opportunity? If the cost of capital is 8.2%, what does the NPV rule say? What does the IRR rule say about whether you should accept this opportunity? (Select the best choice below.) A. There are two IRRS, so you cannot use the IRR as a criterion for accepting the opportunity. B. Accept the opportunity because the IRR is greater than the cost of capital. C. The IRR is r= 11.65%, so accept the opportunity. D. Reject the opportunity because the IRR is lower than the 8.2% cost of capital. The NPV using the cost of capital of…
Richard XYZ Company., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $5.3 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $7.7 million aftertax if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $29.3 million to build, and the site requires $1.41 million worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?Thank you for your help very appreciated.
The city of Columbia is considering extending the runways of its municipal airport so that commercial jets can use the facility. The land necessary for the runway extension is currently a farmland that can be purchased for $350,000. Construction costs for the runway extension are projected to be $600,000, and the additional annual maintenance costs for the extension are estimated to be $22,500. If the runways are extended, a small terminal will be constructed at a cost of $250,000. The annual operating and maintenance costs for the terminal are estimated at $75,000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of $100,000. Annual bemefits of the runway extension have been estimated as follows: Rental receipts from airlines leasing space at the facility $325,000 $65,000 Airport tax charged to passengers $50,000 $50,000 Convenience benefit for residents of Columbia Additional tourism dollars for Columbia Apply the…
A proposed bridge on the interstate highway is being considered at the cost of 4 million dollars. It is expected that the bridge will have a life of 30 years. Construction costs will be paid by government agencies. Operation and maintenance costs are estimated to be $250,000 per year. Benefits to the public are estimated to be $900,000 per year. The building of the bridge will result in an estimated cost of $250,000 per year to the general public. The project requires a return of 5%. Determine the benefit/cost (B/C) ratio.
The city of Columbia is considering extending the runways of its municipal airport so that commercial jets can use the facility. The land necessary for the runway extension is currently a farmland that can be purchased for $350,000. Construction costs for the runway extension are projected to be $600,000, and the additional annual maintenance costs for the extension are estimated to be $22,500. If the runways are extended, a small terminal will be constructed at a cost of $250,000. The annual operating and maintenance costs for the terminal are estimated at $75,000. Finally, the projected increase in flights will require the addition of two air traffic controllers at an annual cost of $100,000. Annual benefits of the runway extension have been estimated as follows (shown): Apply the B–C ratio method with a study period of 20 years and a MARR of 10% per year to determine whether the runways at Columbia Municipal Airport should be extended.

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