Suppose you are building a refrigerated extension to a storage facility. The cost of labor and...

Suppose you are building a refrigerated extension to a storage facility. The cost of labor and materials to build it are 58,000 and 160,000, respectively. The pre-tax discount rate is 12%, the tax rate is 20%, and the extension would add $220,000 to the value of the facility if sold in 10 years. Calculate the present value of the initial cost.

Expert Solution

Cost of labour = 58,000

Cost of material = 160,000

Discount rate = 12%

Salvage Value = 220,000

Tax rate = 20%

After tax Salvage value = 220000*(1-0.2) = 176,000

PV of After tax Salvage value = 176,000/(1.12^10) = 56,667.29

PV of Initial cost = 58000+160000-56667.29 = 161332.71

jeff jeffy answered 2 years ago

A project is being considered for upgrading inventory storage facility where the cost of the project...

A project is being considered for upgrading inventory storage facility where the cost of the project would be $120,000.00. This four-year long project is expected to generate future cash flow of $45,000.00 in each year. Considering the risk associated with the project, the required rate of return should be 12%. Find Net Present Value = Internal Rate of Return = Present Value Index = Payback Period = Discounted Payback Period =

Decompose the Income Statement into labor and facility sustaining cost pools. Divide the cost pools into...

Decompose the Income Statement into labor and facility sustaining cost pools. Divide the cost pools into activity centers at the ratio of 40% for the BOH and 60% for the FOH. Display in the table. Revenue $111,122.85 F&B cost $46,940.33 Salaries $6,000.00 Employer Taxes $779.63 Employee Meals $200.30 Telephone $14.18 Equipment Leases $46.38 Travel & Entertainment $17.88 Utilities $700.00 Activity Centers Labor Facility Sustaining FOH BOH Total 4. Based on the calculation from #3, calculate cost pool rates Total hours...

Your boss asks you to review an option to lease an equipment storage facility that the...

Your boss asks you to review an option to lease an equipment storage facility that the firm needs. You are to compare it with the purchase of the facility. The following information are pertinent to your decision: a) The facility will be needed for nine years b) If the facility is leased, the lessor will conduct all maintenance; if purchased, your firm must conduct maintenance c) Facility maintenance is expected to cost $66000 per year d) The cost to lease...

Due to growing membership, a food hub in Western Georgia isconsidering building a refrigerated warehouse...

Due to growing membership, a food hub in Western Georgia is considering building a refrigerated warehouse for produce. The new facility would increase annual operating expense by $21,200 due to utilities, maintenance, and additional labor. The increased capacity and improved produce shelf life from the facility will help the food hub increase operating receipts by $64,500 per year. The refrigerated warehouse would be 4000 square feet and it would cost $130 per square foot to build. Suppose that the food...

Suppose that the spot price of gold is $600. The total cost of insurance and storage...

Suppose that the spot price of gold is $600. The total cost of insurance and storage for gold is $30 per year, payable in advance. The rate of interest for borrowing or lending is 20%. If the forward price is $700, and you are interested in arbitrage, you would: (Hint: Check answer with an arbitrage table) Sell the spot commodity, lend money, and buy a forward contract Borrow money, buy the spot commodity, and buy a forward contract Borrow money,...

Suppose that the spot price of gold is $500. The total cost of insurance and storage for...

Suppose that the spot price of gold is $500. The total cost of insurance and storage for gold is $30 per year, payable in advance. The rate of interest for borrowing or lending is 20%. If the forward price is $650, how much money could you make from arbitrage at expiration of the forward? Hint: Use an arbitrage table after you figure out the appropriate arbitrage portfolio. 12 14 16 18 20

Suppose the spot price of a bushel of wheat is $2.00, the annual storage cost is...

Suppose the spot price of a bushel of wheat is $2.00, the annual storage cost is $0.30 per/bushel, the risk‐free rate is 8%, and the costs of transporting wheat from the destination point specified on the futures contract to a local grain elevator, or vice versa, is $0.01/bu. a. Use the cost‐of‐carry model to determine the equilibrium price of a September wheat futures contract (expiration of T = 0.25). b. Explain the arbitrage strategy an arbitrageur would pursue if the...

The construction estimator told the storage unit owner that building another section of storage units will...

The construction estimator told the storage unit owner that building another section of storage units will likely add 100 more storage space renters to the bottom line. The rational storage business owner considered the rental prices of an additional 100 units, but he would decide to add more units if and only if

A storage facility can be purchased for $120,000. The maintenance and taxes are estimated to be...

A storage facility can be purchased for $120,000. The maintenance and taxes are estimated to be $8,000 per year. Alternatively, you can rent the facility for $11,000 per year. Assume that in ten years, the facility can be sold for $100,000. Determine the IRR or cost of renting the facility, by interpolating the compound interest factors.

This is an extension of the Birthday Problem. Suppose you have 500 Facebook friends. Make the...

This is an extension of the Birthday Problem. Suppose you have 500 Facebook friends. Make the same assumptions here as in the Birthday Problem. a) Write a program in R to estimate the probability that, on at least 1 day during the year, Facebooks tells you three (or more) of your friends shat that birthday. Based on your answer, should you be surprised by this occurrence? b) Write a program in R to estimate the probability that, on at least...

Question