Question: Looking for help on question 2. I already got question 1 but need the information from it to solve question 2. 1. Parts 4 U,
Looking for help on question 2. I already got question 1 but need the information from it to solve question 2.
1. Parts 4 U, 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%
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