A natural gas well is projected to produce $200,000 in profit during its first year of operation,
Question:
A natural gas well is projected to produce $200,000 in profit during its first year of operation, $190,000 the second year, $180,000 the third year, and so on, continuing this pattern. If the well is expected to produce for a total of 10 years, and the effective annual interest rate if 8%, which of the following most closely represents the future worth of the well?
$1,770,000
$3,256,000
$1,082,000
$3,821,000
$1,253,000
$1,169,000
$2,708,000
$2,336,000
$1,508,000
2. Consider palletizer at a bottling plant that has a first cost of $138,202, has operating and maintenance costs of $16,910 per year, and an estimated net salvage value of $54,539 at the end of 30 years. Assume an interest rate of 8%. What is the future worth of this project?
3. Kermit is considering purchasing a new computer system. The purchase price is $106,430. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $6,293 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $74,790 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. What is the net present worth for this new computer system?
4.The annual income from an apartment complex is $20,664. The annual expense is estimated to be $3,414. The apartment complex could be sold for $146,499 at the end of 10 years. If your MARR is 10%, how much should you pay for the apartment complex if you were to buy it now?
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson