Question

In: Finance

Some particulars for a project are as follows: Capital Cost ($ Mn) 1000 Annual Operating cost...

Some particulars for a project are as follows:

Capital Cost ($ Mn)

1000

Annual Operating cost ($ Mn/yr)

10% of Capital Cost

Annual Benefits ($Mn/yr)

400

Useful Life (years)

20

Interest/Discount rate (percent)

10

a) What is the Life Cycle Cost (LCCs) of the project – expressed in present value and future value terms?

b) What is the Life Cycle Cost (LCCs) of the project – with year 10 as the base year? c) What is the NPV of the project with year 15 as the base year?
d) What is the Pay-back (PB) period for this project?
e) What is Equivalent Annual Cost (EAC) for this project?

f) At what discount rate will this project become unviable?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The annual overhead costs relating to these activities are as follows: ????????Particulars Deliveries to retailers Amount...
The annual overhead costs relating to these activities are as follows: ????????Particulars Deliveries to retailers Amount ($) ????????2,400,000 ????????Set-up costs 6,000,000 ????????Purchase orders 3,600,000 ????? All direct labour is paid at $20 per hour. The company holds no stocks. At a board meeting there was some concern over the introduction of activity-based costing. The finance director argued: “I very much doubt whether selling the Unwind model is viable but I am not convinced that activity-based costing would tell us any...
Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh)...
Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh) 300 000 27 200 25 40 000 400 1.1 Using the table above, calculate the lifecycle cost of the technology over an assessment period of 25 years at a real discount rate of 5% 1.2 Calculate the average unit cost of the power in present value terms (in cents/kWh) supplied by the technology over its lifetime at this real discount rate. 1.3 What is...
Project A is as follows: $100,000 upfront cost and annual cash flows of $25,000 a year...
Project A is as follows: $100,000 upfront cost and annual cash flows of $25,000 a year for seven years. Project B is as follows: $100,000 upfront cost and cash flow of $20,000 per year for 8 years. what are the payback periods for projects A and B?
Project A is as follows: $100,000 upfront cost and annual cash flows of $25,000 a year...
Project A is as follows: $100,000 upfront cost and annual cash flows of $25,000 a year for seven years. Project B is as follows: $100,000 upfront cost and cash flow of $20,000 per year for 8 years. Project A Payback Period is 4 years and Project B is 5 years. using that data calculate NPV for projects A and B using a 10% discount rate. which project do you pick if they are mutually exclusive? Which do you pick if...
A seven-year project has an initial investment of $550,000 and an annual operating cost of $32,000...
A seven-year project has an initial investment of $550,000 and an annual operating cost of $32,000 in the first year. The operating costs are expected to increase at the rate of inflation, which is projected at 2% for the life of the project. The investment is in Class 7 for CCA purposes, and will therefore be depreciated at 15% annually. The salvage value at the end of the project will be $98,000. The firm’s discount rate is 11%, and the...
1          A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating cost...
1          A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh) 380 000 29 500 25 42 000 380 If the owner can sell the electricity at 30 c/kWh, calculate the lifecycle cost of the technology over an assessment period of 25 years at a real discount rate of 5%                                 Calculate the average unit cost of the power in present value terms (in cents/kWh) supplied...
2. Project A will cost $100,000 and requires working capital of $20,000. Annual revenue of $21,000...
2. Project A will cost $100,000 and requires working capital of $20,000. Annual revenue of $21,000 and expenses of $5,000 for five years. In the fifth year there will be salvage value of $8,000. Should the project be accepted with a discounted rate of 14%. Annuity rate 2.91371; Single factor rate .51937.
2. Project A will cost $100,000 and requires working capital of $20,000. Annual revenue of $21,000...
2. Project A will cost $100,000 and requires working capital of $20,000. Annual revenue of $21,000 and expenses of $5,000 for five years. In the fifth year, there will be a salvage value of $8,000. Should the project be accepted with a discounted rate of 14%? Annuity rate 2.91371; Single-factor rate .51937.
1          A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating...
1          A renewable energy electricity supply technology has the following characteristics: Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh) 300 000 27 200 25 40 000 400 If the owner can sell the electricity at 25 c/kWh, what is the simple payback period for the technology? Would the owner invest in this technology if (s)he set a strict maximum four-year payback period? What would the selling price for the electricity have to...
Q3: Capital budgeting and cost of capital Reno Co is considering a project that will cost...
Q3: Capital budgeting and cost of capital Reno Co is considering a project that will cost $ 26,000 and result in the following cash flows: Years 1 2 3 4 Project Cash flow 10,000 11,500 12,600 14,800 The views of the directors of Reno Co are that all investment projects must be evaluated over four years of operations using net present value. You have given the information below to assist you to calculate the appropriate discount rate: Reno Co has...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT