The Public Service Board (PSB) awarded two contracts worth a combined $3.07 million to increase the depth of a retention basin and reconstruct a spillway that was severely damaged in a flood 2 years ago. The PSB president stated that, surprisingly, the bids were $1,150,000 lower than PSB engineers estimated. If the projects are assumed to have a 20-year life, what is the annual worth of the savings at an interest rate of 5% per year?
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The Public Service Board (PSB) awarded two contracts
worth a combined $3.07 million to increase
the depth of a retention basin and reconstruct a
spillway that was severely damaged in a flood
2 years ago. The PSB president stated that, surprisingly,
the bids were $1,150,000 lower than PSB
engineers estimated. If the projects are assumed to
have a 20-year life, what is the annual worth of the
savings at an interest rate of 5% per year?
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- A bulk-water supplier has been awarded by a city to supply their potable water for the next 10 years. The city will pay the supplier $150,000 per year during the 10-year contract.. The supplier needs to set-up an additional water purification facilities that will have a first cost of $250,000 with an estimated salvage value of 10% of its first cost after 10 years. The operating cost is difficult to estimate, but company engineers have made optimistic, most likely, and pessimistic estimates. The optimistic estimate is that the operating cost will just be constant at $75,000 per year. The most likely estimate is that it will be $75,000 initially and will increase by $5,000 per year. The pessimistic estimate is that it will be $75,000 initially increasing at a rate of 10% per year. Determine if at which operating scenario the supplier will be able to make the most profit. The before tax MARR is 18% per year.Athena Books Company is contemplating the installation of a wastewater recycling system. The amount to be invested in this system is $400,000. The system is expected to last 8 years and has no salvage value. Which of the following situations supports the installation of the recycling system? Assume the present value factor for an annuity of $1 at 10% for 8 periods is 5.3349 and the present value factor for $1 at 10% for 8 periods is 0.4665. The total cash flow savings expected from the recycling system is $700,000. The annual maintenance cost for the system is $40,000. The annual maintenance cost for the system is equal to the cost of the existing water system. The recycling system will yield a savings of $78,000 per year.A state government is considering construction of a flood control dike having a life span of 15 years. History indicates that a flood occurs every five years and causes $600,000 in damages, on average. If the state uses aMARR of 12% per year and expects every public-works project to have a B–C ratio of at least 1.0, what is the maximum investment that will be allowed for the dike? Assume that the flood occurs in the middle of each five-year period. (a) $1,441,000 (b) $643,000 (c) $843,000 (d) $4,087,000 (e) $1,800,000.
- A local municipality is considering investing $270,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shown in the cash flow profile given below (in thousands of dollars). Notice, an intermediate investment of $180,000 is anticipated in the 6th year of the investment. Based on a MARR of 6%, calculate the benefit-cost ratio of the investment. Round answer to two decimal placesStriped Potato is evaluating a project that would require the purchase of a piece of equipment for $365,000 today. During year 1, the project is expected to have relevant revenue of $216,000, relevant costs of $57,000, and relevant depreciation of $84,000. Striped Potato would need to borrow $365,000 today to pay for the equipment and would need to make an interest payment of $14,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $44,000. What is the tax rate expected to be in year 1?Sheldon Coopers Lab Services (SCLS) is bidding upon a service contract to maintain and upgrade 5 of the University's science labs per year for the next six years. The contract will require purchasing $972,000 in equipment that will be depreciated using straight-line depreciation to a zero book value over the project's life. The equipment can be sold for $325,000 at the end of the service contract. They will also need $140,000 in net working capital over the life of the contract. While performing the contract work, they expect to incur fixed costs of $500,000 per year and a variable cost of $226,000 per lab. They will also face a corporate tax rate of 21%. If the required rate of return is 15%, what is the minimum offer they can make per lab and still turn an economic profit?
- A newly constructed water treatment facility costs $2 million. It is estimated that the facility will need revamping to maintain the original design specification every 30 years at a cost of $1 million. Annual repairs and maintenance costs are estimated to be $100,000. At an interest rate of 8%, determine the capitalized cost of the facility, assuming that it will be used for an indefinite period.Robertson Construction Company is considering two projects upon which to bid. The first is for 5-year renovation of an aging government building. For Robertson to do this job they will need to invest $1.2 million into various equipment (with the total salvage value being approximately $50,000, with yearly operations cost beginning at $5,000 in year 1, and increasing by $500 each year of the project). The second is the building of a library which is expected to take 7 years and will require a $1.6 million dollar investment (salvage being $80,000 at the end of 7 years with yearly operations cost at $4,000). Assume that almost identical renovation projects come up every 5 and 7 years respectively. Robertson has a MARR of 10% a) Robertson has been asked to quote an annual price that each project will cost. What is the minimum annual price Robertson should ask for if each project will be worth their while? Include all your calculations for this.b) If these projects were mutually exclusive…A local municipality is considering investing $210,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 15-year period as shown in the cash flow profile given below in thousands of dollars. Notice, an intermediate investment of $130,000 is anticipated in the 6th year of the investment. Based on a MARR of 3%, use benefit-cost ratio analysis to determine whether the investment should be made. (All values in thousand dollars) End-of Year Net Cash Costs Benefits Flow 0 $210 -$210 1 $70 $115 $45 2 $70 $125 $55 3 $70 $135 $65 4 $70 $145 $75 5 $70 $155 $85 67 $200 $165 -$35 $70 $155 $85 8 $70 $145 $75 6 $70 $135 $65 10 $70 $125 $55 11 $70 $115 $45 12 $70 05 $35 W 13 $70 $95 $25 14 $70 $85 $15 15 $70 $75 $5 Click here to access the TVM Factor Table calculator. B/C- final answer to 4 decimal places. The tolerance is 10.0003.
- A local municipality is considering investing $220,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 7-year period as shownin the cash flow profhle given below in thousands of dollars. Notice, an intermediate investment of $140,000 is anticipated in the 6th year of the investment. Based on a MARR of 5%, calculate the benefit-cost ratio of the investment. Round answer to two decimal places. (All values in thousand dollars) End-of Year Costs Benefits Net Cash Flow $220 -$220 $70 $120 $50 $70 $130 $60 $70 $140 $70 4 $70 $150 $80 $70 $160 $90 $210 $170 -$40 7. $70 $160 $90 1.45 2. inXYZ is evaluating a project that would require the purchase of a piece of equipment for $440,000 today. During year 1, the project is expected to have relevant revenue of $786,000, relevant costs of $201,000, and relevant depreciation of $132,000. XYZ would need to borrow $440,000 today to pay for the equipment and would need to make an interest payment of $33,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $337,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 21.96% but less than 26.61% A rate less than 21.96% or a rate greater than 46.34% A rate equal to or greater than 31.02% but less than 38.39% A rate equal to or greater than 38.39% but less than 46.34% A rate equal to or greater than 26.61% but less than 31.02%The Transportation Service Directorate of a Municipality wants to purchase a newsoftware system to charge and track toll fees. The director wants to know the total capitalized cost ofthe software system. The system has an initial installment cost of 150 000 pbr and an additional cost of50 000 pbr after 10 years. Annual software maintenance cost is 8000 pbr and starts at year five. Inaddition, there is expected to be a recurring major upgrade cost of 15000 pbr every 13 years. Assumethat i=5% per year. If the new system will be used for the indefinite future, draw the cash flowdiagram and find the capitalized cost of the investment.