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6.3: For the projects shown, what is the capital recovery cost? Project P Project Q Project...
| 6.3: For the projects shown, what is the capital recovery cost? | ||||||
| Project P | Project Q | Project R | Project S | Project T | Project U | |
| Initial Cost | ($120,000) | ($230,000) | ($350,000) | ($450,000) | ($530,000) | ($690,000) |
| Salvage value (% of IC) | 20% | 15% | -12% | 16% | -11% | 32% |
| Project life | 3 | 4 | 5 | 6 | 7 | 9 |
| Rate of interest (MARR) | 12% | 11% | 14% | 15% | 13% | 10% |
Solutions
Expert Solution
| Project P | Project Q | Project R | Project S | Project T | Project U | |
| Initial Cost (I) | 1,20,000 | 2,30,000 | 3,50,000 | 4,50,000 | 5,30,000 | 6,90,000 |
| Salvage value (% of IC) | 20% | 15% | -12% | 16% | -11% | 32% |
| Salvage value(S) | 24,000 | 34,500 | -42,000 | 72,000 | -58,300 | 2,20,800 |
| Project life | 3 | 4 | 5 | 6 | 7 | 9 |
| Rate of interest (MARR) | 12% | 11% | 14% | 15% | 13% | 10% |
| Capital recovery factor (CRF) | 0.4163 | 0.3223 | 0.2913 | 0.2642 | 0.2261 | 0.1736 |
| Sinking fund factor (SFF) | 0.2963 | 0.2123 | 0.1513 | 0.1142 | 0.0961 | 0.0736 |
| a = (I*CRF) | 49,961.88 | 74,135.06 | 1,01,949.24 | 1,18,906.61 | 1,19,838.73 | 1,19,811.97 |
| b = (S*SFF) | 7,112.38 | 7,325.26 | -6,353.91 | 8,225.06 | -5,603.26 | 16,259.83 |
| Capital recovery cost (a-b) | 42,849.50 | 66,809.80 | 1,08,303.15 | 1,10,681.55 | 1,25,441.99 | 1,03,552.14 |
jeff jeffy answered 1 year agoRelated Solutions
The cash flows for four projects are shown below, along with the cost of capital for...
The cash flows for four projects are shown below, along with the
cost of capital for these projects. If these projects are mutually
exclusive, which one should be taken?
A.
Year: 0 1 2 3 4 5
Cash
flow: -$12,000 $4000 $4000 $4000 $4000 $4000
Cost of Capital: 5.0%
B.
Year:
0
1
2
3
4
5
Cash
flow:
-$15,000 $4000
$4000 $4000
$4000
$4000
Cost of Capital: 7.0%
C.
Year:
0
1
2
3
4
5
Cash
flow:
-$20,000 $6000
$6000 $6000
$6000
$6000
Cost of Capital: 8.2%
D.
Year:
0 ...
) The cash flows for four projects are shown below, along with the cost of capital...
) The cash flows for four projects are shown below, along with
the cost of capital for these projects. If these projects are
mutually exclusive, which one should be taken? 28) A) Year: 0 1 2 3
4 5 Cash flow: -$20,000 $6000 $6000 $6000 $6000 $6000 Cost of
Capital: 8.2% B) Year: 0 1 2 3 4 5 Cash flow: -$15,000 $4000 $4000
$4000 $4000 $4000 Cost of Capital: 7.0% C) Year: 0 1 2 3 4 5 Cash...
Consider the following three projects; assume 14 percent cost of capital. Period Project A Project...
Consider the following three projects; assume 14 percent cost
of capital.
Period Project A Project
B Project
C
T=0 ($3,000) ($5,000) ($2,000)
T=1 $1,000 $1,500 $900
T=2 $1,200 $1,500 $900
T=3 $1,500 $2,500 $700
T=4 $1,500 $2,500 $700
When you have only $5,000 to support the above projects, which
project (or projects) should be chosen under the Profitability
Index?
What is the appropriate cost of capital for the project?
Empress Inc. has issued a bond with a face value of $1,000 and
an interest rate of 13% to fund a new project. The bond is secured
by the cash flows from the project, which will be $950 with a
probability of 60% and $1,200 otherwise. Assume risk
neutrality.What is the appropriate cost of capital for the project?
if the demand curve is Q(p)=p*, what is the elasticity of demand? if marginal cost is...
if the demand curve is Q(p)=p*, what is the elasticity of
demand? if marginal cost is 1$ and *= -2, what is the profit
maximizing price?
Data for two machines P and Q are as shown below. At what MARR will both...
Data for two machines P and Q are as shown below. At what MARR
will both machines be equally attractive for installation?
Machine P
Machine Q
Initial cost
$160,000
$315,000
Life in years
4
6
Inflation per year (for all costs)
3.00%
Benefit increase per year
6.00%
MARR per year compounded yearly
14.00%
Project life in years
12
First year estimated costs
$43,200
$72,450
First year estimated benefits
$83,200
$129,150
Salvage value of machine (% of initial cost)
13.50%
10.00%...
Using a cost of capital of 13%, calculate the net present value for the project shown...
Using a cost of capital of 13%, calculate the net present value
for the project shown in the following table and indicate whether
it is acceptable, LOADING.... The net present value (NPV) of the
project is $
Initial investment -1,151,000
Year Cash inflows
1 84,000
2 136,000
3 192,000
4 255,000
5 318,000
6 382,000
7 277,000
8 100,000
9 42,000
10 25,000
Using a cost of capital of 11%, calculate the net present value for the project shown...
Using a cost of capital of 11%, calculate the net present
value for the project shown in the following table and indicate
whether it is acceptable,
Initial investment
(CF 0CF0)
negative $−$1149
Year
(t)
Cash inflows
(CF Subscript tCFt)
in thousands
1
$8080
2
$130
3
$189
4
$256
5
$312
6
$376
7
$280
8
$102
9
$42
10
$20
The net present value (NPV) of the project is
$-75,817.60. (Round to the nearest cent.) Is the project
acceptable?
Using a cost of capital of 11%, calculate the net present value for the project shown...
Using a cost of capital of 11%, calculate the net present value
for the project shown in the following table and indicate whether
it is acceptable
Initial investment
(CF 0CF0)
-$1149
Year
(t)
Cash inflows
(CF Subscript tCFt)
in thousands
1
$80
2
$130
3
$189
4
$256
5
$312
6
$376
7
$280
8
$102
9
$42
10
$20
Using a cost of capital of 15%, calculate the net present value for the project shown...
Using a cost of capital of 15%, calculate the net present value
for the project shown in the following table and indicate whether
it is acceptable
Initial investment $-1,145
Year Cash inflows
1 $76
2 $132
3 $185
4 $256
5 $316
6 $383
7 $277
8 $98
9 $43
10 $25
The net present value (NPV) of the project is $_____
Please show all work and what inputs would be in a financial
calculator
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