A road resurfacing project costs $250,000, lasts 5 years and saves $150,000 annually in patching costs....

A road resurfacing project costs $250,000, lasts 5 years and saves $150,000 annually in patching costs. MARR is 12%. Determine the future worth (in $).

Expert Solution

Cost = $250,000

MARR = 12%

Net cost after 5 years would be [Cost * (1 + MARR)^^Years] = [250,000 * (1 + 0.12)^⁵] = 440,585.4

Saving per year = $150,000

Savings in first year can be deposited in bank for 4 years, saving of second year can be deposited for 3 years and so on....

Future value can be calculated as: [Savings * (1 + MARR)^^{Year for which amount is deposited}]

Future value of saving of first year is = [150,000 * (1 + 0.12)^⁴] = 236,027.9

Future value of saving of second year is = [150,000 * (1 + 0.12)^³] = 210,739.2

Future value of saving of third year is = [150,000 * (1 + 0.12)^²] = 188,160

Future value of saving of forth year is = [150,000 * (1 + 0.12)^¹] = 168,000

Future value of saving of fifth year is = [150,000 * (1 + 0.12)^⁰] = 150,000

Sum of future value for 5 years is 236,027.9 + 210,739.2 + 188,160 + 168,000 + 150,000 = 952,927.1

Future value of project = Sum of future value - Net cost after 5 year = 952,927.1 - 440,585.4 = 512,341.7

Rahul Sunny answered 2 years ago

A road resurfacing project costs $200,000, lasts 5 years and saves $100,000 annually in patching costs....

A road resurfacing project costs $200,000, lasts 5 years and saves $100,000 annually in patching costs. MARR is 10%. Determine the BCR (round off to 3 decimal places) of the project.

69. Machine costs $150,000, and lasts 10 years with salvage value of $15,000. Annual operating costs...

69. Machine costs $150,000, and lasts 10 years with salvage value of $15,000. Annual operating costs are $50,000. If you want to make a 20% return on investment, what is the minimum annual revenue required from this machine? Show all work for full credit.

Machinery costs $1 million today and $100,000 per year to operate. It lasts for 5 years....

Machinery costs $1 million today and $100,000 per year to operate. It lasts for 5 years. What is the equivalent annual annuity if the discount rate is 5%? Enter your answer in dollars and round to the cent. Remember that costs are negative cash flows; so, include the negative sign.

TPG Inc. is evaluating an investment project that lasts for four years. The project has the...

TPG Inc. is evaluating an investment project that lasts for four years. The project has the cost of capital of 10% and requires an initial investment of $4 million today. The size of the annual cash flows will depend on future market conditions. There is a 40% probability that the market conditions will be good, in which case the project will generate free cash flows of $3 million per year during the next four years. There is also a 60%...

QUESTION 17 TPG Inc. is evaluating an investment project that lasts for four years. The project...

QUESTION 17 TPG Inc. is evaluating an investment project that lasts for four years. The project has the cost of capital of 15% and requires an initial investment of $5 million today. The size of the annual cash flows will depend on future market conditions. There is a 30% probability that the market conditions will be good, in which case the project will generate free cash flows of $4 million per year during the next four years. There is also...

QUESTION 10 ABC Inc. is evaluating an investment project that lasts for three years. The project...

QUESTION 10 ABC Inc. is evaluating an investment project that lasts for three years. The project has the cost of capital of 10% and requires an initial investment of $3 million. There is a 60% chance that the project would be successful and would generate annual free cash flows of $2 million per year during the next three years. There is a 40% chance that the project would be less successful and would generate only $1 million per year during...

Inside vs Outside Recruiter Outsource recruitment of programmers costs $250,000 annually. Hiring an internal recruiter costs...

Inside vs Outside Recruiter Outsource recruitment of programmers costs $250,000 annually. Hiring an internal recruiter costs you $175,000 annually. Tax rate is 40%. You have to buy out his business for $150,000. What is the NPV and IRR over a 5 year period? WACC is 11%. If you can not meet his asking price, how much would you be willing to pay him in order to meet your cost of capital?

Suppose a customer’s house increased in value over five years from $150,000 to $250,000. What was...

Suppose a customer’s house increased in value over five years from $150,000 to $250,000. What was the annual growth rate of the property value during this five- year interval? Three local banks pay different interest rates on time deposits with one-year maturities. Rank the three banks from highest to lowest in terms of the depositor’s return. Bank 1—4.5 percent per year compounded annually Bank 2—4.3 percent per year compounded quarterly Bank 3—4.1 percent per year compounded daily

A firm is considering a new project that costs $10,000 that will last 5 years and...

A firm is considering a new project that costs $10,000 that will last 5 years and will have no salvage value. The project would save $3,000 per year in salaries and would be financed with a loan that will accrue interest costs of 15% per year. The firm’s tax rate is 40%, its cost of capital is 20%, and the firm will use the straight-line method of depreciation. What is the NPV of the project? Should the firm invest in...

What is the ATCF rate of return for machine that costs 300,000, lasts for 8 years,...

What is the ATCF rate of return for machine that costs 300,000, lasts for 8 years, has zero salvage value, and is classified as 5 year MACRS property? The machine will be purchased with a 20.0% down payment and a four year loan for the remaining amount at an annual interest rate of 11.50%. The machine produces net revenues after deducting direct and indirect expenses but not depreciation of 46,000 in year 1, 120,000 in years 2 to 6, 60,000...

Question