A company has borrowed 40,500,000TL per annum for 10 years with a monthly capital cost of...

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A company has borrowed 40,500,000TL per annum for 10 years with a monthly capital cost of 45% per annum. With the investment, 1,600,000 units will be produced annually. The production amount will remain constant for the first 10 years and will decrease by 2% annually for the second 10 years. The product will be sold at a price of 20 TL/unit. The annual price escalation is expected to be 30% for the first 10 years and 22% for the remaining years. For one unit of product, 1 kg of raw material will be used. The price of raw material is 2.2 TL/kg. The annual escalation of the raw material price is 45% for the first 10 years and 20% for the second 10 years. A total of 100 kW of electric power will be consumed in the production system. The company will work 5600 hours per year. Electricity price is 5 TL/kWh. Electricity price escalation is estimated to be 42% for the first 5 years, 35% for the second 5 years and 20% for the remaining period. The production system will employ 10 personnel. The average monthly cost of a staff is 15,000 TL and the annual escalation is 35%. Every 5 years there will be a major maintenance cost. The cost in the 5th year is 5,000,000 TL. The 5-year escalation of this cost is 200%; a) Determine the annual effective value of the capital cost and the present value of the investment cost. b) Find the value of raw materials, electricity, labor and income in the first year. c) Determine the compound escalation of income and the compound escalation of raw material cost for the second decade. calculate. d) Using the Payback Rate method, determine whether the investment is economically viable. A company has borrowed 40,500,000TL per annum for 10 years with a monthly capital cost of 45% per annum. With the investment, 1,600,000 units will be produced annually. The production amount will remain constant for the first 10 years and will decrease by 2% annually for the second 10 years. The product will be sold at a price of 20 TL/unit. The annual price escalation is expected to be 30% for the first 10 years and 22% for the remaining years. For one unit of product, 1 kg of raw material will be used. The price of raw material is 2.2 TL/kg. The annual escalation of the raw material price is 45% for the first 10 years and 20% for the second 10 years. A total of 100 kW of electric power will be consumed in the production system. The company will work 5600 hours per year. Electricity price is 5 TL/kWh. Electricity price escalation is estimated to be 42% for the first 5 years, 35% for the second 5 years and 20% for the remaining period. The production system will employ 10 personnel. The average monthly cost of a staff is 15,000 TL and the annual escalation is 35%. Every 5 years there will be a major maintenance cost. The cost in the 5th year is 5,000,000 TL. The 5-year escalation of this cost is 200%; a) Determine the annual effective value of the capital cost and the present value of the investment cost. b) Find the value of raw materials, electricity, labor and income in the first year. c) Determine the compound escalation of income and the compound escalation of raw material cost for the second decade. calculate. d) Using the Payback Rate method, determine whether the investment is economically viable.

Answer rating: 100% (QA)

a To determine the annual effective value of the capital cost and the present value of the investment cost we need to calculate the present value of the loan and the present value of the operating cos... View the full answer