What is the present value of costs for a 30-year project that has annual maintenance costs...

What is the present value of costs for a 30-year project that has annual maintenance costs of $1.1 million per year, but also requires additional major maintenance costing $9 million every ten years?

You may assume major maintenance is needed after 10 years and 20 years but not after 30 years (at the end of the project). Assume a discount rate of 8% and that all costs are incurred at the end each year.

Enter your answer in the box below in units of million $.

Expert Solution

i = 8%

n = 30 years

PV of costs = P

P = (1.1/(1 + 8%) + 1.1/(1 + 8%)² + .... + 1.1/(1 + 8%)³⁰)

+ (9/(1 + 8%)¹⁰ + 9/(1 + 8%)²⁰ + 9/(1 + 8%)³⁰)

Using compound factor tables for i = 8% and n = 30

P = 11.258 x 1.1 + 6.994

P = $ 19.3778 mn

Rahul Sunny answered 2 years ago

1. a) What is the net present value of a project that has upfront costs of...

1. a) What is the net present value of a project that has upfront costs of $5 million and pays end of the year cash flows of $1 million in one year, $2 million in two years, and $3 million in three years if the annual discount rate for the project is 3 percent? Show how much money you would have at the end of three years if you bought the project and what you would have instead if you...

A machine has a 10-year life. It costs $5,000 to install today, and annual maintenance costs...

A machine has a 10-year life. It costs $5,000 to install today, and annual maintenance costs in years 1-10 are $500 per year. If the discount rate is 7%, what is the machine's equivalent annual annuity (EAA)? A project requires an initial investment of $20,000 today (i.e. year 0). Expected future cash flows in years 1-4 are $8000; $2000; $3000 and $6000 respectively. If the discount rate is 8%, what is the NPV? What is the IRR?

The present value of maintenance costs for E-government Basic and E-government Plus is

Using excel, determine: The present value of a five (5) year project, with expected annual cash...

Using excel, determine: The present value of a five (5) year project, with expected annual cash flows given below, assuming the cost of capital of 12.5% p.a. (1 Mark) Year Cash flow 1 75,600.00 2 58,800.00 3 50,400.00 4 42,000.00 5 36,500.00 ii. The future value of $ 12,200 received annually over a period of four (4) years, interest paid quarterly at the rate of 14% p.a.

What is the net present value of the stadium project, which is a 3-year project where...

What is the net present value of the stadium project, which is a 3-year project where Fairfax Pizza would sell pizza in the baseball stadium? The project would involve an initial investment in equipment of 160,000 dollars today. To finance the project, Fairfax Pizza would borrow 160,000 dollars. The firm would receive 160,000 dollars from the bank today and would pay the bank 206,400 dollars in 3 years (consisting of an interest payment of 46,400 dollars and a principal payment...

When a project entails significant social costs, the private net present value—the value of the project...

When a project entails significant social costs, the private net present value—the value of the project to its sponsor—exceeds the true (societal) net present value, namely the combined value to all the affected constituencies inclusive of the social costs. Should the externalities be taken into account when evaluating such a project? In your response, identify stakeholders’ roles, legalities, guidelines, policies or processes that might be considered/required to ensure a sponsor’s compliance or curb undesirable behavior? (See Finnerty Chapter 6) initial...

What is the present value of a $15 million pool of 30-year mortgages with an 10.5...

What is the present value of a $15 million pool of 30-year mortgages with an 10.5 percent per year monthly mortgage coupon if market rates are 7 percent? The GNMA guarantee fee is 7 basis points and the FI servicing fee is 43 basis points. a. Assume that the GNMA pass-through is fully amortized. b. Assume that the GNMA pass-through is only half amortized. Market rates are still 7 percent. If there is a lump sum payment at the maturity...

What is the present value of CD with 4% annual interest that matures in 1 year...

What is the present value of CD with 4% annual interest that matures in 1 year with the value of $3000? What is the future value? What factor would determine which value you chose to use?

Machine X costs $248,751 and has annual operating and maintenance costs of $9,980. Machine Y costs...

Machine X costs $248,751 and has annual operating and maintenance costs of $9,980. Machine Y costs $264,500 and has annual operating and maintenance cost of $5,120. Both machines are Class 39, which specifies a CCA rate of 25%. The company needs the machines for 11 years, and at the end of year 11 machine X can be sold for $12,257 and machine Y can be sold for 13,033. The Company's MARR is 10%, and its marginal tax rate is 35%....

What is the net present value of a project that has an initial cash outflow of...

What is the net present value of a project that has an initial cash outflow of $-13,000, at time 0, and the following cash flows for years 1-4? The required return is 10.0%. DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ENTER YOUR ANSWER TO THE NEAREST DOLLAR (e.g. 1250). Year Cash Flows 1 $3,950 2 $3,750 3 $5,900 4 $6,400

Question