Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The cash flow of an energy management opportunity is estimated as follows:
Initial cost:$12,000
Energy saving:$2,700/year for 12 years
Maintenance cost:$1,200/year for 12 years
Salvage value:$2,500@the end of 12 years
If the interest rate is 10%,
1) What is the simple payback period (SPP) (in years)?
(a)5.2
(b)4.2
(c)4.6
(d)8.0
2) With an annual discount rate is 10%, what is the discounted payback period (in years)?
(a)9.5
b) 15.1
(c)8.1
(d) 16.9
(e) 6.5
3)With an annual discount rate is 10%, what is the benefit-cost ratio (BCR)? (Hint: Benefit = Annual saving-Maintenance; Cost= Initial investment - Salvage)
(a) 1.04
(b) 0.80
(c) 1.25
(d) 1.12
(e) 1.43
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