Finance for Engineers - Can some please answer the questions below:

Start with a new Excel file and answer each question on a separate sheet within your file. You will have 5 sheets in your file. Please make sure you use cell references wherever appropriate (everywhere possible). As in the example Excel file and Excel video files on Moodle, list the model inputs (the information provided in the question) at the top, perhaps showing the numbers entered in a different color; type in the input numbers based on the information given. Once you start working on developing your model below the inputs, you should NOT be typing any numbers or answers in your cells; instead all cells should include cell references and Excel functions wherever possible. DO NOT use discount factors within your Excel file; use Excel functions whenever you need to compute a future value or present value. Perform all of your calculations directly in the Excel cells; do not calculate anything outside of Excel; Excel functions you may need to use: PV, FV, PMT, RATE, NPER, NPV, and IRR.

Question 4

Millennium Freight is evaluating the possibility of adding a new shipping route, which would require an acquisition of a new delivery vehicle, with several models available. If accepted, the new route is expected to be serviced for many years, and therefore an infinite life can be assumed for the analysis in parts b) and c) below. Assume minimum attractive rate of return of 14%. Pease include a written answer with each part of the question. a) Calculate the present worth of the new route assuming the El Grande vehicle model is chosen. The purchase price of the vehicle is $250,000; the vehicle will require annual maintenance and operating costs of $12,000; it is expected to be sold for $70,000 in 10 years. The new route is expected to result in additional annual net revenues of $62,000. Calculate the present worth of the new route for the 10-year period of one cycle. Explain whether the new route should be accepted or rejected and why. b) Assume the management ultimately decides to consider two vehicle models for the new route, the El Grande from part a), and Bandito. Assume the vehicle model choice has no impact on revenues (ignore revenues, and only compare costs and the salvage values). The Bandito model purchase price is $350,000, its annual maintenance and operating costs are $9,000, and it is expected to be used for 15 years, and then sold for $100,000. Assuming whichever model is chosen, the vehicle will be replaced with the same model (same cash flows) when sold, use the Least Common Multiple method in conjunction with the Present Worth method to determine which of the two models should be chosen. Explain your answer. c) Repeat part b), except this time, use the Annual Worth method, instead of the Least Common Multiple Present Worth method. Explain your answer again.Page 3 of 3

Question 5

Friendly Tests Inc. is a commercial testing lab, performing a variety of lab tests for hospitals in the area. The management is considering an addition of a new type of test. There is plenty of room in its existing lab facility, but the new test would require an acquisition of new test equipment. The purchase price of the equipment is $215,000. It will be depreciated using MACRS 7-year recovery period (use the rates listed in Table 16-2 in the textbook). The management expects the demand for the new test type to only last 6 years, and therefore the project is expected to end in 6 years, and the equipment to be sold for $60,000 at the end of year 6. The company will also need to hire a part-time lab technician, for $30,000 in the first year of the project, with an annual pay increase of 5% each year after. Equipment maintenance and operating cost is expected to be $4,000 per year. It is also expected additional supplies will be needed, costing $10,000 per year. The additional revenues from the new test are expected to be $70,000 in year 1, $80,000 in year 2, $90,000 in year 3, $100,000 in year 4, $85,000 in year 5, and $65,000 in year 6. Compute the after-tax cash flows for each year of the project. Assume 30% tax rate, and 9% minimum attractive rate of return. Determine whether the company should launch the new testing service, and explain why. Please include a written answer.