Use an effective annual interest rate of 5%. A. Create a single cash flow table for...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Use an effective annual interest rate of 5%. A. Create a single cash flow table for the three projects described below (5,5, and 10 years, respectively). Also include 10 year cash flows for A and B. That is 6 columns, including "End of Year". Cash Type Project A Project B Project C Capital Cost, KS 30 45 75 Revenue, kS/yr 15 12 7 3 5 5 O&M, KS/yr Salvage Value, kS A+G(A-8 & G-2) 4 5 10 9 Lifetime, yr 5 "Project C Revenue = 8,000 first year & increases 2000/year thereafter (i.e., 8,000, 10,000, 12,000,...) B. Determine the Present Worth of the three alternatives. Use 10 yr cash flows. (Partial Solution: Project A = $20,850) (Check your answers with Excel NPV formula) c. Determine the Annual Cash Flow of each Project. Use the project lifetime cash flow table. D. Determine the Rate of Return (i*) of each project by 1st plotting present worth vs interest rate in Excel to obtain an approximate solution and 2nd using trial & error to determine final answers to the tenth place. E. Determine the undiscounted payback period for each project. Use the 10-year cash flows. Partial Solution: Project C = Year 8) F. Determine the discounted payback period for each project. Use the 10-year cash flows. (Partial Solution: Project C = Year 9) G. Which project has the maximum net benefit (Present or annual)? Which has the best return rate? The best discounted payback period? Why can these methods give different answers? Use an effective annual interest rate of 5%. A. Create a single cash flow table for the three projects described below (5,5, and 10 years, respectively). Also include 10 year cash flows for A and B. That is 6 columns, including "End of Year". Cash Type Project A Project B Project C Capital Cost, KS 30 45 75 Revenue, kS/yr 15 12 7 3 5 5 O&M, KS/yr Salvage Value, kS A+G(A-8 & G-2) 4 5 10 9 Lifetime, yr 5 "Project C Revenue = 8,000 first year & increases 2000/year thereafter (i.e., 8,000, 10,000, 12,000,...) B. Determine the Present Worth of the three alternatives. Use 10 yr cash flows. (Partial Solution: Project A = $20,850) (Check your answers with Excel NPV formula) c. Determine the Annual Cash Flow of each Project. Use the project lifetime cash flow table. D. Determine the Rate of Return (i*) of each project by 1st plotting present worth vs interest rate in Excel to obtain an approximate solution and 2nd using trial & error to determine final answers to the tenth place. E. Determine the undiscounted payback period for each project. Use the 10-year cash flows. Partial Solution: Project C = Year 8) F. Determine the discounted payback period for each project. Use the 10-year cash flows. (Partial Solution: Project C = Year 9) G. Which project has the maximum net benefit (Present or annual)? Which has the best return rate? The best discounted payback period? Why can these methods give different answers?
Expert Answer:
Answer rating: 100% (QA)
A Cash Type Project A Project B Project C Capital Cost KS 30 45 75 Revenue kSyr 15 12 AGA8 G2 OM kSyr 7 3 4 Salvage Value KS 9 5 5 Lifetime yr 5 5 10 Project C Revenue 8000 first year increases 2000ye... View the full answer
Related Book For
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
Posted Date:
Students also viewed these accounting questions
-
John and Ellen Brite (SSN 000-00-1111 and 000-00-2222, respectively) are married and file a joint return. They have no dependents. John owns an unincorporated specialty electrical lighting retail...
-
John and Ellen Brite (SSN 000-00-1111 and 000-00-2222, respectively) are married and file a joint return. They have no dependents. John owns an unincorporated specialty electrical lighting retail...
-
a. What is the percentage depletion amount if the IDCs are expensed? b. What is the percentage depletion amount if the IDCS are capitalized? c. What is the depletion deduction amount assuming that...
-
Episode 1: A New War Begines Vanderbilt How did Vanderbilts upbringing affect his business attitudes? Which product Vanderbilt decided to sell, as he knew good entrepreneur find something that...
-
A little girl picks out crayons (without replacement) from her 24-pack of Crayolas until she gets to the pink crayon. How many crayons are needed?
-
The following solidliquid equilibrium data are available for a binary mixture of C and metastable Fe. From these data estimate the melting point and enthalpy of fusion of Fe. T[C] 1148 1154 1200 1250...
-
In the case of diesel engine, the fuel and air are mixed in (a) injector (b) inlet manifold (c) carburettor (d) engine cylinder
-
Bill Holliday is not sure what she should do. He can either build a quadplex (i.e., a building with four apartments), build a duplex, gather additional information, or simply do nothing. If he...
-
Calculate the maximum stress in a 5 mm thick steel plate with an 1 8 mm diameter round hole, given h gross = 1 2 cm and the tensile load is 8 . 5 kN . ( Final answer in MPa ) P h gross d
-
David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant, specializing in retail management and...
-
Compute the cash back period for each project from the following data Year 1 2 3 4 5 6 7 8 9 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826...
-
A dc battery can deliver 45 mA at 9 V. What is the power rating?
-
Tanya and Luca are married. They are not self-employed and work in New Jersey. They take a standard deduction on their taxes. Tanya earns $156,750/year; Luca earns $227,210/year. They have the...
-
If an apartment complex will need painting in 3 years and the job will cost $115,000, what amount needs to be deposited into an account now in order to have the necessary funds? The account pays 2%...
-
Joshua purchases 100 shares of McDonalds (MCD) stock on April 13, 2015 at $83.98 per share. Three years later on April 13, Joshua sells the 100 shares for $152.12 per share. In addition, Joshua...
-
What are some methods that you use to ensure accurate information is being inputted into devices and systems that you use?
-
Your neighbors, who've avoided work all their lives and lived off unfairly obtained government disability payments, have just won the lottery for $236 million. They want you to share their joy and...
-
Consider a game of poker being played with a standard 52-card deck (four suits, each of which has 13 different denominations of cards). At a certain point in the game, six cards have been exposed. Of...
-
Digital Com Company, a communications equipment manufacturer, recently fell victim to a fraud scheme developed by one of its employees. To understand the scheme, it is necessary to review Digital...
-
On January 1, 2010, Valuation Allowance for Trading Investments has a credit balance of $1,200. On December 31, 2010, the cost of the trading securities portfolio was $99,600, and the fair value was...
-
Why should the factors under the control of the investment center manager (revenues, expenses, and invested assets) be considered in computing the rate of return on investment?
-
How did the Fed hit its target for the federal funds rate in the pre-2008 scarce-reserves regime?
-
Draw a demand and supply graph for the federal funds market to show the demand and supply of reserves in the current ample-reserves regime. How can the Fed increase the federal funds rate? Show the...
-
What is the zero lower bound in monetary policy? What tools can the Fed use if it wants to implement an expansionary monetary policy at the zero lower bound?
Study smarter with the SolutionInn App