Evaluate the following using the present worth comparison method. Use an annual interest rate of 10% and a period of 20 years for both cases. a) An initial cost of $87,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,000,000, increasing by $250,000 annually. The expected revenue in the first year is $6,900,000, increasing by 8% annually. b) An initial cost of $101,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,300,000, increasing by $300,000 annually. The expected revenue in the first year is $8,800,000, increasing by 8% annually. c) Which option is better?
Evaluate the following using the present worth comparison method. Use an annual interest rate of 10% and a period of 20 years for both cases. a) An initial cost of $87,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,000,000, increasing by $250,000 annually. The expected revenue in the first year is $6,900,000, increasing by 8% annually. b) An initial cost of $101,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,300,000, increasing by $300,000 annually. The expected revenue in the first year is $8,800,000, increasing by 8% annually. c) Which option is better?
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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Evaluate the following using the present worth comparison method. Use an annual interest rate of 10% and a period of 20 years for both cases.
a) An initial cost of $87,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,000,000, increasing by $250,000 annually. The expected revenue in the first year is $6,900,000, increasing by 8% annually.
b) An initial cost of $101,000,000 investment with a first-year operation and maintenance (O&M) cost at $2,300,000, increasing by $300,000 annually. The expected revenue in the first year is $8,800,000, increasing by 8% annually.
c) Which option is better?
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