ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2080. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start in 2030 and take five years at a cost of $25 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $3 million, increasing by 2 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2080.arrow_forwardTonny is currently evaluating two mutually exclusive projects. Both projects have a cost of capital of 12% and can be replicated indefinitely with the same cash flows. Calculate the EAA (Equivalent Annual Annuity) payment for just Project L. t = 0 1 Project S: L A. $34.12 B. $36.91 C. $38.74 D. $40.23 E. $42.87 t = 0 Project L: (8700) 1 6500 2 2 2500 (8700) 1400 6800 3400arrow_forwardConsider a palletizer at a bottling plant that has a first cost of $150,000, operating and maintenance costs of $17,500 per year, and an estimated net salvage value of $25,000 at the end of thirty years. Assume an interest rate of 8%. What is the future equivalent cost of the investment if the planning horizon is thirty years? $3,517,000 $3,371,000 $3,623,000 $3,980,000arrow_forward
- Solo Corporation is evaluating a project with the following cash flows: Year 0,1, 2, 3, 4, 5 Cash Flow $ -29,600; 11,800; 14,500 ; 16,400; 13,500 and -10,000. The company uses an interest rate of 10 percent on all of its projects. Calculate the MIRR of the project using all three methods. a. MIRR using the discounting approach. b. MIRR using the reinvestment approach. c. MIRR using the combination approach.arrow_forwardPlease answer question 4 with details on how to do it. Thank you.arrow_forwardA regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take five years at a cost of $15 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $3 million, increasing by 2 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 6%. The present worth of this project is $ million. (Round to two decimal places as needed.)arrow_forward
- Calculating the IRR for Project Long Project Long is expected to provide five years of cash inflows and to require an initial investment of $100,000. The required rate of return or discount rate that is appropriate for valuing the cash flows of Project Long is 17 percent. What is Project Long's IRR, and is it a good investment opportunity?arrow_forward3. Sanders Corp. is considering three mutually exclusive alternatives for one of their production facilities. The cash flow details, which indicate the expected revenues for each possible capital investment (option) are shown in thousands of dollars in the table provided. Year 0 1 2 3 4 5 $ 6 GAGA $ $ $ $ LA CA $ Option #1 $ (8.00) $ GAGA 2.60 $ 2.60 $ 2.60 $ 2.60 $ 2.60 $ 2.60 $ Option #2 Option #3 Assuming a MARR rate of 12.0% per year and based on a rate of return analysis which (if any) of these alternatives should be implemented? What is the discounted payback period and annual worth of the preferred alternative (if any was selected). (13.90) $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ (24.00) 3.00 6.00 9.00 12.00 15.00arrow_forward
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