Question
In: Finance
The city of Toronto is considering two types of green water filtration subsystems. Design A requires...
The city of Toronto is considering two types of green water filtration subsystems. Design A requires an initial investment of $500,000, with annual operating and maintenance costs of 10% of the investment for the next 15 years. Design B needs an investment of $250,000, with annual operating and maintenance costs of $75,000 per year for the next 15 years. Tax collections from Torontonians would be $85,000 per year. The interest rate is 6%, and no salvage value is associated with either system.
- Using Present Worth Analysis, which system should be selected and why?
- If a new design (design C), which requires an initial outlay of $350,000 and annual operating and maintenance costs of $65,000, is proposed, would your answer to (A) change?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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Maize Water is considering introducing a water filtration device for its 20-ounce water bottles
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Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board...
Aerotron Electronics is considering the purchase of a water
filtration system to assist in circuit board manufacturing. The
system costs $80,000. It has an expected life of 7 years at which
time its salvage value will be $7,500. Operating and maintenance
expenses are estimated to be $2,000 per year. If the filtration
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A. Caspian Sea Drinks is considering the purchase of a new water filtration system produced by...
A. Caspian Sea Drinks is considering the purchase of a new water
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equipment, the RGM-7000, will allow Caspian Sea Drinks to expand
production. It will cost $15.00 million fully installed and will be
fully depreciated over a 15 year life, then removed for no cost.
The RGM-7000 will result in additional revenues of $3.08 million
per year and increased operating costs of $789,667.00 per year.
Caspian Sea Drinks' marginal tax rate...
A. Caspian Sea Drinks is considering the purchase of a new water filtration system produced by...
A. Caspian Sea Drinks is considering the purchase of a new water
filtration system produced by Rube Goldberg Machines. This new
equipment, the RGM-7000, will allow Caspian Sea Drinks to expand
production. It will cost $12.00 million fully installed and will be
fully depreciated over a 20 year life, then removed for no cost.
The RGM-7000 will result in additional revenues of $2.72 million
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Caspian Sea Drinks' marginal tax rate...
Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board...
Aerotron Electronics is considering the purchase of a water
filtration system to assist in circuit board manufacturing. The
system costs $60,000. It has an expected life of 7 years at which
time its salvage value will be $7,500. Operating and maintenance
expenses are estimated to be $2,000 per year. If the filtration
system is not purchased, Aerotron Electronics will have to pay Bay
City $12,000 per year for water purification. If the system is
purchased, no water purification from Bay...
The government of a particular city is considering two mutually exclusive water purification systems for implementation....
The government of a particular city is considering two mutually
exclusive water purification systems for implementation. Doing
nothing is not an option. Refer to the data below to determine
which system should be selected, when MARR = 12% per year, and
Use the AW method
Use the PW method
Use rate of return method
Alternative
System 1
System 2
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$100,000
$150,000
Annual revenues
$50,000
$70,000
Annual expenses
$22,000
$40,000
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$20,000
$12,000...
The government of a particular city is considering two mutually exclusive water purification systems for implementation....
The government of a particular city is considering two mutually
exclusive water purification systems for implementation. Doing
nothing is not an option. Refer to the data below to determine
which system should be selected, when MARR = 9% per year, and
Use the AW method
Use rate of return method
Please Solve number b only !! Use rate of return method
Alternative
System 1
System 2
Capital Investment
$100,000
$150,000
Annual revenues
$50,000
$70,000
Annual expenses
$22,000
$40,000
Market value...
The City of Bourbonnais plans to construct a water purificationfacility that requires $1,000,000 investment in...
The City of Bourbonnais plans to construct a water purification
facility that requires $1,000,000 investment in the beginning and
$20,000 O&M costs per year. The city will expect additional
revenue of $70,000 per year from residents.Assuming the city’s MARR is 10% compounded yearly and the
facility is handed over after 20 years to a utility company that
would pay $120,000 for the facility, compute the net present worth
of the project and determine if the project is economically worthy?
....
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