Question

In: Finance

A contractor was doing the 10-year planning for a construction business, which uses a MARR of...

A contractor was doing the 10-year planning for a construction business, which uses a MARR of 15% per year. The contractor anticipates income of $150,000 per year for years 1-5, and income of $200,000 per year for years 6-10.

  1. Draw the cash flow diagram.
  2. What is the future value (in year 10) of the income? (show steps and calculations)

Solutions

Expert Solution

Part A:

Part B:

FV = Sum [ CF * FVF(r%, n ]

FVF(r%, n ) = (1+r)^n

r = MARR

n = No. of Years.

Year Bal Yrs CF FVF@15% FV of CFs
1 9 $ 1,50,000.00     3.5179 $    5,27,681.44
2 8 $ 1,50,000.00     3.0590 $    4,58,853.43
3 7 $ 1,50,000.00     2.6600 $    3,99,002.98
4 6 $ 1,50,000.00     2.3131 $    3,46,959.11
5 5 $ 1,50,000.00     2.0114 $    3,01,703.58
6 4 $ 2,00,000.00     1.7490 $    3,49,801.25
7 3 $ 2,00,000.00     1.5209 $    3,04,175.00
8 2 $ 2,00,000.00     1.3225 $    2,64,500.00
9 1 $ 2,00,000.00     1.1500 $    2,30,000.00
10 0 $ 2,00,000.00     1.0000 $    2,00,000.00
FV of Net Income $ 33,82,676.80

Pls do rate, if the answer is correct and Comment, if any further assistance is required

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A contractor was doing the 10-year planning for a construction business, which uses a MARR of...
A contractor was doing the 10-year planning for a construction business, which uses a MARR of 15% per year. The contractor anticipates income of $150,000 per year for years 1-5, and income of $200,000 per year for years 6-10. Draw the cash flow diagram. What is the future value (in year 10) of the income?
QUESTION 7 Which has the greatest NPV assuming a 25 year planning horizon and MARR =...
QUESTION 7 Which has the greatest NPV assuming a 25 year planning horizon and MARR = 12%? Install a $20,000 solar system that will last 25 years, and generate 38,000 kWh/year at $0.10/kWh. Install a $25,000 Ground-Source Heat pump that will last 50 years and save $3,500/year. Both options has equal NPV Not possible to be calculated
Which has the greatest NPV assuming a 25 year planning horizon and MARR = 12%? Install...
Which has the greatest NPV assuming a 25 year planning horizon and MARR = 12%? Install a $20,000 solar system that will last 25 years, and generate 38,000 kWh/year at $0.10/kWh. Install a $25,000 Ground-Source Heat pump that will last 50 years and save $3,500/year. Both options has equal NPV Not possible to be calculated _______________________________ The following instruments will be required to measure the efficiency of a pump (excluding the motor) Pressure gauges, flow meter, electrical power meter Pressure...
Consider three alternatives, each with a 10-year useful life. If the MARR is 10%, which alternative...
Consider three alternatives, each with a 10-year useful life. If the MARR is 10%, which alternative should be selected? Solve the problem by benefit-cost analysis. Alt Alt B Alt C Cost $800 $300 $150 Uniform Annual Benefit $142 $60 $33.50
If we are given the following investment opportunities, which is preferred at a MARR of 10%?...
If we are given the following investment opportunities, which is preferred at a MARR of 10%? Be sure to use both IRR and incremental analysis. Alternative Investment A Investment B Investment C Investment D Initial Investment $4,000 $15,000 $5,000 $19,000 Year 1 cash flow 0 0 0 0 Year 2 cash flow $9,500 $22,100 $4,100 $25,700
1. A contractor needs water at a remote construction site for a five year project. A...
1. A contractor needs water at a remote construction site for a five year project. A pipeline from a river,six miles away, will supply the water. The cost of the pipeline and the cost of pumping the water will vary with pipe size. See table below. The contractor uses a MARR of 7%. The contractor plans to work 2000 hours per year, and that is the time the pump will run each year. At the end of five years the...
Roland Inc. is planning to expand their business by entering in the construction industry as a...
Roland Inc. is planning to expand their business by entering in the construction industry as a panel formwork supplier. The potential number of forthcoming projects, you forecasted that within two years, your fixed cost for producing formworks is $ 292,000. The variable unit cost for making one panel is $ 18. The sale price for each panel will be $ 50. The company’s income statement from last month is as follows: Sales Revenue Total $600,000 Per Unit $50 Variable expenses...
On January 1, Year 1, Company ABC hired a general contractor to begin construction of a...
On January 1, Year 1, Company ABC hired a general contractor to begin construction of a new office building. ABC negotiated a $900,000, five-year, 10% loan on January 1, Year 1, to finance construction. Payments made to the general contractor for the building during Year 1 amount to $1,000,000. Payments were made evenly throughout the year. Construction is completed at the end of Year 1, and ABC moves in and begins using the building on January 1, Year 2. The...
A company uses the percentage-of-completion method to account for a 4-year construction contract. Which of the...
A company uses the percentage-of-completion method to account for a 4-year construction contract. Which of the following should be used in the calculation of the income recognized in the first year? Select one: a. Progress Billings, but not Collections on Progress Billings b. Collections on Progress Billings, but not Progress Billings c. Both Progress Billings and Collections on Progress Billings d. Neither Progress Billings nor Collections on Progress Billings
Q3- For two mutually exclusive projects, the cash flows are given. If MARR is 10%, which...
Q3- For two mutually exclusive projects, the cash flows are given. If MARR is 10%, which project should we select? please show all steps and all work N(year) P1 P2 0 -$3000 -$12000 1 $1350 4200 2 1800 6225 3 1500 6330
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT