University Grants Commission (UGC) is planning to award a grant of Rs 25,000,000 to UET texila to upgrade its engineering education. The grant will extend over a period of 12 years and will create an estimated savings of 500,000 per year in faculty salaries and student-related expenses. UGC uses a rate of return of 7% per year on all grants award. This grant will share UGC funding with ongoing activities, so an estimated 200,000 will be removed from other program funding. To make this program successful, 150,000 per year operating cost will be incurred from the regular maintenance and operation budget. Use the B/C method and modified B/C method to determine if the grant is economically justified.

University Grants Commission (UGC) is planning to award a grant of Rs 25,000,000 to UET texila to upgrade its engineering education. The grant will extend over a period of 12 years and will create an estimated savings of 500,000 per year in faculty salaries and student-related expenses. UGC uses a rate of return of 7% per year on all grants award. This grant will share UGC funding with ongoing activities, so an estimated 200,000 will be removed from other program funding. To make this program successful, 150,000 per year operating cost will be incurred from the regular maintenance and operation budget. Use the B/C method and modified B/C method to determine if the grant is economically justified.

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

See similar textbooks

Similar questions

You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
Kara, Incorporated, imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available. Year Cash Flow (A) 0 -$56,000 1 2 3 4 22,500 29,600 24,500 10,500 Cash Flow (B) -$ 101,000 a. Project A Project B b. Project acceptance 24,500 29,500 29,500 239,000 a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. Which, if either, of the projects should the company accept? years years
The Kookaburra Golf Resort is redoing its golf course at a cost of $2,744,320. It expects to generate cash flows of $1,223,445, $2,007,812, and $3,147,890 over the next three years. If the appropriate discount rate for the company is 13 percent, what is the NPV of this project? a. $7,581,072 b. $2,092,432 c. $4,836,752 d. $3,112,459
Since the beginning of the fiscal year 2009, Texas Department of Transportation invest one million each year to build up the transportation management database system in one of the Southern Texas city regions. TxDot is planning to transfer this database system to the city authority by the end of the fiscal year 2020. If the rate of return is 12% per year during the investment period, what is the total value of this database system when transferring?
A public university system wants to apply the concept of the WACC to developing its interest rate for analyzing capital projects. It has an endowment of $850 million which is earning 6.3% interest. It is paying 4.5% interest on $300 million in bonds. It believes that $120 million in general funds from the taxpayers should be assigned an interest rate of 13% What is the university’s cost of capital? Note that only new bonds or the interest on the endowment is available to fund capital projects.
The initial investment in a government-funded city flood control system is $500,000. From the initial year to the endless future, materials, maintenance, electric power, and other running expenditures are estimated to reach $10,000 per year. Every five years, major repairs and rehabilitations will be carried out at a cost of $100,000. What is the project's equivalent capitalized cost if the interest rate is 10% per year?
The highway department expects the maintenance cost for a piece of heavy construction equipment to be 5,000 Ghana cedis in a year 1, 5500 in year 2 and to increase by 10%annually through year 10. At an interest rate of 15% per year, show up he cash flow diagram for the maintenance programme and determine the present worth of 10 years of maintenance costs
Under a government environment incentive plan companies installing air-pollution control equipment are entitled to a 50% grant to offset the purchase and maintenance costs. Company ABC decides to avail of this incentive by acquiring equipment costing Php 500,000. The maintenance costs are estimated to be Php 40,000 in the first year, rising annually by Php 3,000. If the equipment’s useful life is 10 years, and annual interest rate is 6% compounded half-yearly, how much will the grant be? 18. Under a government environment incentive plan companies installing air-pollution control equipment are entitled to a 50% grant to offset the purchase and maintenance costs. Company ABC decides to avail of this incentive by acquiring equipment costing Php 500,000. The maintenance costs are estimated to be Php 40,000 in the first year, rising annually by Php 3,000. If the equipment’s useful life is 10 years, and annual interest rate is 6% compounded half-yearly, how much will the grant be?
Mansukhbhai
You have been tasked with recommending one of the two investment projects for acceptance by your company. Project 1 costs $100,000 to implement today (it is a cost), it will bring subsequent positive cash flows of $50,000 at the end of year one; and subsequently $30,000; $45,000; $8,000. Project 2 initial cost is $14,000, and subsequent cash flows are $7,000 per year for 3 years. Your company is using WACC of14% for both projects. a. Calculate NPV and IRR for each project, and decide which one to recommend. b. Calculate MIRR for projects A and B. Which project would you recommend based on MIRR? c. Find the crossover rate. What does this rate represent? Describe in YOUR OWN words.
The general city population is set to benefit in travel-time savings from a municipal road project amounting to $80,000. The local government will incur an initial spending of $2,500,000 and an operating and maintenance cost of $30,000 per year. This new road will reduce accidents, representing medical savings of $135,000. Consider a 15- year period and an interest rate of 5%. What is the modified benefit-cost ratio of this project?
A firm wants to sponsor a new engineering lab at a local university. This requires $4M to construct the lab, $1.5M to equip it, and $750,000 every 6 years for new equipment. What is the required endowment if the university will earn 8% interest on the funds? Answer: $6,777,957

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS