An investment with a first cost of $265,000 leads to annual benefits of $51,000 over a period of ten years. Determine the benefit cost ratio for this investment assuming an interest rate of 10% per year and no salvage value.
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An investment with a first cost of $265,000 leads to annual benefits of $51,000 over a period of ten years. Determine the benefit cost ratio for this investment assuming an interest rate of 10% per year and no salvage value.
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- No written by hand solution and no image Dawn is preparing a home office to perform subcontract projects for midsized architect firms. She plans to use $13,000 of her own funds, which currently generate a return of 4% per year. The remainder of financing will be provided by a $14,000 bank loan carrying a 9% per year interest rate. She hopes to realize a return of 3% above the average cost of capital to establish her office, and she realizes that the factors of inflation and risk should also be considered. Her decision is to add another 4% per year to compensate for these elements. What is the MARR she should use when evaluating projects? The MARR she should use isKen Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing therobotics used on the heavy truck gear line will produce total benefits of $516,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $387,000 (also in today's dollars) over that same timeperiod. An initial cash investment of $206,400 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginal cost-benefit analysistechniques to determine the following:a. The marginal benefits of the proposed new robotics.b. The marginal cost of the proposed new roboticsc. The net benefit of the proposed new robotics.Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Show how Ken will apply marginal cost-benefit analysis techniques to determine the following: The marginal (added) benefits of the proposed new robotics is $______________ The marginal (added) cost of the proposed new robotics is $__________________ The net benefit of the proposed new robotics is
- Find the capitalized cost of a present cost of $350,000, annual costs of $35,000, and periodic costs every 5 years of $75,000. Use an interest rate of 12% per year. (Use the right sign and also use two digits after the decimal points)A financial services consulting company bought an office building for $900,000. The company has 10 professional staff members. Monthly expenses for salaries, utilities, grounds maintenance, etc. are $1.1 million. The average billing rate per professional is $90 per hour. Use an interest rate of 1% per month and assume the building will have a resale value of $1.5 million after 10 years. (a) How many hours per month must be billed in order to make a profit of $15,000 per month? (b) How many hours per professional per month must be billed? (c) There are 260 eight-hour workdays per year. Of the total work hours available per month, what percentage does the hours per professional in part (b) represent?Two automatic systems for dispensing maps are being compared by the state highway department. The accompanying breakeven chart of the comparison of these systems (System I vs. System II) shows total yearly costs for the number of maps dispensed per year for both alternatives. Answer the following questions. (a) What is the fixed cost for System I? (b) What is the fixed cost for System II? (c) What is the variable cost per map dispensed for System I? (d) What is the variable cost per map dispensed for System II? (e) What is the breakeven point in terms of maps dispensed at which the two systems have equal annual costs? (f) For what range of annual number of maps dispensed is System I recommended? (g) For what range of annual number of maps dispensed is System II recommended? (h) At 3000 maps per year, what are the marginal and average map costs for each system?
- Evaluate a combined cycle power plant on the basis of the FW method when the MARR is 12% per year. Pertinent cost data are as follows : Power Plant (thousands of $) Investment cost $13,000 Useful life 15 years Market value (EOY 15) $3,000 Annual operating expenses $1,000 Overhaul cost—end of 5th year $200 Overhaul cost—end of 10th year $550 WITH DIAGRAM CASH FLOW THANK YOUA chemical processing corporation is considering two methods to dispose of a non-hazardous chemical sludge: land application and fluidized-bed incineration. The estimates for each method are shown below. Use the Annual Worth (AW) method at interest 10% per year to select the better alternative Land Application Incineration First cost, $ - 130,000 - 900,000 Annual operating cost, $ - 95,000 - 60,000 Salvage value, $ 25,000 300,000 Life, years 3 10% TABLE 15 Discrete Cash Flow: Compound Interest Factors 10% Single Payments Uniform Serles Payments Arithmetic Gradients Compound Amount Present Sinking Fund Compound Amount Capital Recovery A/P Gradient Present Worth P/G Gradient Uniform Series A/G Present Worth Worth F/P P/F A/F F/A P/A 1.00000 1.0000 2.1000 1.10000 0.57619 0.40211 1.1000 0.9091 0.9091 0.8264 0.7513 2 1.2100 0.47619 1.7355 0.8264 0.4762 2.4869 2.3291 4.3781 6.8618 9.6842 1.3310 0.30211 3.3100 0.9366 1.3812 0.31547 0.26380 0.22961 0.20541 0.21547 4.6410 3.1699 0.6830 0.6209 4…Which of the following is closest to the equivalent annual worth of a project with an initial cost of $40,000, annual costs of $8,000 and a salvage value of $10,000 after 5 years? Assume an interest rate of 8% per year.
- QUESTION 8 A professional photographer who specializes in wedding-related activities paid $48,000 for equipment that will have a $2000 salvage value after 5 years. He estimates that his costs associated with each event amount to $65 per day. If he charges $350 per day for his services, how many days per year must he be employed in order to break even at an interest rate of 6% per year? The number of days required for break even, (in days per year) Round to the nearest three (3) decimal placesYour brother, a new college graduate, wants to be his own boss. He wants to open a restaurant in a small strip center or acquire and operate a food truck, an increasingly popular mode of eating, especially in larger cities. The restaurant space can be rented for $2200 per month. Modest furnishings and used equipment will have a first cost of $26,000. Income is expected to be $15,100 per month, with expenses for utilities, labor, taxes, etc. expected to average $3700 per month. Alternatively, a kitchen-ready food truck will cost $17,900 to purchase and $900 per month to operate. Income is expected to be $6300 per month. If the salvage values are assumed to be 10% of the first cost for the restaurant and 35% of the first cost of the truck after a 5-year planning period, which alternative is better on the basis of an AW(per month) comparison at an interest rate of 12% per year, compounded monthly?custom-designed home, FD, the prime contractor, realized he was not going to make the big profit that he had anticipated due to the many unique features of the home for which he had not correctly estimated the cost to the owners. The contract was fixed-price with no more than 10% override on the total cost. As time proceeded, FD took the choices of the owners on appliances, finishing work on the floors and walls, and many other features and purchased look-alike substitutes from questionable-quality, internationallybased manufacturers and vendors. After living in the house for only 3 years, the owners were so disappointed with the quality of work that they decided to bring a law suit against FD and his company for breach of contract. However, they needed sound reasons upon which to base their legal claims against FD, were the case to go to court. One of the owners, being an engineer, decided to consult the Code of Ethics for Engineers to gain insight into what may be substantial…