a manufacturing company, is considering expanding to a new facility. The financial division of the company...

Transcribed Image Text:

a manufacturing company, is considering expanding to a new facility. The financial division of the company has reviewed records for the last few years, and they report fairly stable annual cash flows: the company spends about $120,000 annually on operating costs and maintenance at the current facility and generates about $880,000 of income annually. For a 10-year period and assuming a modest interest rate of 5%. Determine the equivalent present worth of the current facility. 2. Parts 4 U has found a vacant property that would be a favorable site for the new facility mentioned in Question 1. The site would require construction of the new facility that would take 2 full years to construct at an estimated cost of $3,500,000. By the end of the construction, the company is expected to spend $180,000 in the first year on operating costs to match the current facility. They anticipate a $20,000 increase in costs each year after as they begin to expand production and buy additional machinery. However, the company expects to generate $1,200,000 in the first year of operation, and have steady 3% increase each year after. a. Draw the cash flow for this new facility b. Determine the 10-year Present worth of the new facility if interest is 5% a manufacturing company, is considering expanding to a new facility. The financial division of the company has reviewed records for the last few years, and they report fairly stable annual cash flows: the company spends about $120,000 annually on operating costs and maintenance at the current facility and generates about $880,000 of income annually. For a 10-year period and assuming a modest interest rate of 5%. Determine the equivalent present worth of the current facility. 2. Parts 4 U has found a vacant property that would be a favorable site for the new facility mentioned in Question 1. The site would require construction of the new facility that would take 2 full years to construct at an estimated cost of $3,500,000. By the end of the construction, the company is expected to spend $180,000 in the first year on operating costs to match the current facility. They anticipate a $20,000 increase in costs each year after as they begin to expand production and buy additional machinery. However, the company expects to generate $1,200,000 in the first year of operation, and have steady 3% increase each year after. a. Draw the cash flow for this new facility b. Determine the 10-year Present worth of the new facility if interest is 5%

Answer rating: 100% (QA)

The detailed ... View the full answer