North American location known for its high temperature ocean surface and its much lower ocean temperature 100 meters below the surface. Power can be produced based on this temperature differential. The initial investment is $100 million. Annual net profits are estimated to be $14 million in years 1 - 5 and $21 million in years 6 - 20. There is no value (or disposal cost) to be considered at the end of the 20 year study period and the MARR = 6% per year. D Question 3 Compute the AW of the solar sea power plant.

North American location known for its high temperature ocean surface and its much lower ocean temperature 100 meters below the surface. Power can be produced based on this temperature differential. The initial investment is $100 million. Annual net profits are estimated to be $14 million in years 1 - 5 and $21 million in years 6 - 20. There is no value (or disposal cost) to be considered at the end of the 20 year study period and the MARR = 6% per year. D Question 3 Compute the AW of the solar sea power plant.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
Randall's Ales & Porters S.A., is considering expanding into Costa Rica. As an incentive, Costa Rica agrees not to charge the company any taxes. The project has the following estimated data: price = $94 per unit variable costs = $50.76 per unit fixed costs = $7,600 required return = 16 percent initial investment = $11,000 life = three years depreciable life = three years, straight-line. Required: (a)What is the accounting break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥ (b)What is the cash break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥ (c) What is the financial break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥
A solar sea power plant (SSPP) is being considered in a North American location known for its high temperature ocean surface and its much lowerocean temperature 100 meters below the surface. Power can be produced based on this temperature differential. With high costs of fossil fuels, this particular SSPP may be economically attractive to investors. For an initialinvestment of $100 million, annual net revenues are estimated to be $15 million in years 1–5 and $20 million in years 6–20. Assume no residual market value for the SSPP. Solve, a. What is the simple payback period for the SSPP? b. What is the discounted payback period when the MARR is 6% per year? c. Would you recommend investing in this project?
Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Sales quantity Sales price per unit Variable cost per unit Fixed cost Multiple Choice O Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% What is the degree of operating leverage under the worst-case scenario? O O O .93 1.07 1.93 2.07 Lower Bound 9500 $9.75 $4.80 $15,000.00 1.63 Expected Value 10000 $10.00 $5.20 $18,000.00 Upper Bound 10500 $10.25 $5.60 $21,000.00
Question(3): A power plant is being considered in the dead sea location. For an initial investment of $170 million, annual net revenues are estimated to be $15 million in years 1–5 and $20 million in years 6–20. Assume no residual market value for the plant. a. What is the simple payback period for the plant? b. What is the discounted payback period when the MARR is 4% c. Using an equivalency technique (FW, PW, or AW), MARR is 4P% per year, would you recommend investing in this project? per year?
Problem: Lehigh Products Company is considering the purchase of new automated equipment. The project has an expected net present value of $250,000 with a standard deviation of $100,000. Question: 1. What is the probability that the project will have a net than $50,000, assuming that present value less net present value is normally distributed?
You are considering an investment project with the following financial information: Required investment = $500,000 Project life = 5 years Salvage value = $50,000 Depreciation method = straight-line deprecation (no half-year convention) Unit price = $40 Unit variable cost = $18 Fixed annual cost = $230,000 Annual sales volume = 100,000 units Tax rate = 35% MARR = 15% The company is concerned about the price estimate they have used to calculate the rate of return. Using sensitivity analysis, how much can the price vary to still break-even? The company believes that their estimates for unit price, demand, variable cost, fixed cost, and salvage value are accurate to +/- 10%. Using scenario analysis compare the base case to the best-case and worst-case scenarios.
Lehigh Products Company is considering the purchase of nen automated equipment. The project has an expected set present value of $250,000 with a standard deviation of $100,000. Question: 1. What is the probability that the project will have a net present value less than $50,000, assuming that net present value is normally distributed?
Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Sales quantity Sales price per unit Variable cost per unit Fixed cost Multiple Choice J Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% .93 What is the degree of operating leverage under the worst-case scenario? 1.07 1.93 Lower Bound 2.07 9500 $9.75 $4.80 $15,000.00 1.63 Expected Value 10000 $10.00 $5.20 $18,000.00 Upper Bound 10500 $10.25 $5.60 $21,000.00
Suppose the MARR is 10% with probability 0.25, 12% with probability 0.50, and 15% with probability 0.25; what is the probability that Alternative A is the most economic alternative? Two investment alternatives are being considered. Alternative A requires an initial investment of $15,000 in equipment; annual operating and maintenance costs are anticipated to be normally distributed, with a mean of $5,000 and a standard deviation of $500; the terminal salvage value at the end of the 8-year planning horizon is anticipated to be normally distributed, with a mean of $2,000 and a standard deviation of $800. Alternative B requires endof-year annual expenditures over the planning horizon. The annual expenditure will be normally distributed, with a mean of $8,000 and a standard deviation of $750. Using a MARR of 15%, what is the probability that Alternative A is the most economic alternative?
Glenora Inc. is considering the following project: The equipment has a 4-year project life. This equipment fall into class 43 with a CCA rate of 30% and would have zero salvage value. The firm has other assets in asset class 43. No new working capital would be required. Revenues and cash operating costs are expected to be constant over the project's 4-year life. What is the project's NPV? WACC Net investment cost Sales revenues, each year Cash operating costs Tax rate Oa. $16,284 O b. $23,401 O c. $28,499 d. $19,417 10.0% $65,000 $60,000 $25,000 35.0%
Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of thesealternatives must be selected. The estimated cash flows for each alternative are as shown. Solve, a. Which environmental protection equipmentalternative should be selected? The firm’s MARR is 20% per year. Assume the equipment will be needed indefinitely. b. Assume the study period is shortened to five years. The market value of Alternative B after five years isestimated to be $15,000. Which alternative would you recommend?