04 Jun Question 1) What is the smallest acceptable annual in
Question
1) What is the smallest acceptable annual income from a project which has a $91,440 investment cost and a $82,161 salvage value is the life is 15 years and the MARR is 15%?
2) A tax exempt municipality is considering the construction of a new municipal waste water treatment facility. Two different sites have been selected as technically, politically, socially, and financially feasible. The city council uses 6% interest rate for all analyses for public projects. The expected cash flow for the two alternatives are as follow:
Year Alt. A Alt. B
0 – $12,977,005 – $27,517,264
1 – 75 $2,185,061/year $3,123,272/year
What is the incremental benefit/cost ratio?
3)
Find the payback period for the following project:
First Cost $10,000
Maintenance $500 in Year 1, increasing by $200/year
Income $3,000/year
Salvage $4,000
Useful Life 10 years
MARR 10%
4)
The MARR is 15%. Three alternatives are available and the associated cash flow is as follow:
Year A B C
First Cost $1,700 $2,100 $3,750
Annual Benefit $1,000 $1,000 $1,000
Useful Life 2 3 6
Answer the following in this format: 1.23
The payback period for Alternative A is Blank 1
The payback period for Alternative B is Blank 2
The payback period for Alternative C is Blank 3
Based on Payback period analysis, Alternative Blank 4 should be selected. (Enter only the letter)
5) A manufacturing company is considering a capacity expansion investment at the cost of $260,131 with no salvage value. The expansion would enable the company to produce up to 34,286 parts per year and the useful life of the additional capacity is seven years. Each part would generate $4.1 net profit and annual operating and maintenance costs are estimated at $29,604 per year. The market demand for the parts is unlimited, all parts produced will be sold. The MARR of the firm is 10%.
6)
A manufacturing company is considering a capacity expansion investment at the cost of $250,000 with no salvage value. The expansion would enable the company to produce up to 30,000 parts per year and the useful life of the additional capacity is seven years. Each part would generate $2 net profit and annual operating and maintenance costs are estimated at $25,000 per year. The market demand for the parts is unlimited, all parts produced will be sold. The MARR of the firm is 10%.
Hypothetically speaking, if the minimum annual production rate to breakeven is 50,000, should the company invest in the capacity expansion and why or why not?
Check all that apply.
At this rate, the benefit of the expansion project outweigh the cost.
At this rate, the cost of the expansion project outweigh the benefit.
Not enough information to make a decision.
The breakeven unit is less than the expanded capacity.
Yes, the company should invest in the capacity expansion.
The breakeven unit is more than the expanded capacity.
No, the company should not invest in the capacity expansion.
The minimum annual production rate to make this investment justifiable is:
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