Given a Project with the following data: First (initial) cost = JD 7000; Annual Operating cost= JD 1200; Salvage Value = JD 1500, i-8% per year, and 12 years. To Calculate the Equivalent Single Value (Eq. X) at the end of year 5, we use:

Given a Project with the following data: First (initial) cost = JD 7000; Annual Operating cost= JD 1200; Salvage Value = JD 1500, i-8% per year, and 12 years. To Calculate the Equivalent Single Value (Eq. X) at the end of year 5, we use:

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

See similar textbooks

Related questions

Q: Determine the average rate of return for a project that is estimated to yield total income of…

A: 1. Formula for average rate of return is = Average annual income or profit/ Initial investment2. To…

Q: Estimates for one of two process upgrades are as follows: First Cost = Php 40,000 Annual Cost = Php…

A: Annual worth is the net revenue from the investment annually. It is calculated using the discounting…

Q: A project has an initial cost of $60,000, expected net cash inflows of $15,000 per year for 10…

Q: A project has an initial cost of $35,000, expected net cash inflows of $10,000 per year for 11…

A: The profitability index is a discounting technique of capital budgeting. It is a time-adjusted…

Q: The profitability index at 10% per year for a project that has an initial investment of $400,000, an…

A: Calculation of PI (Profitability index) is shown as follows: Hence, option (a) i.e. 0.95 is…

Q: Of the following mutually exclusive alternatives, select the best one by rate-of-return analysis…

A: For such a lengthy calculation, the use of excel can give fast and accurate results. With given MARR…

Q: A project has an initial cost of $60,000, expected net cash inflows of $10,000 per year for 10…

A: The project NPV is calculated as present value of cash inflows less initial cost

Q: Consider the retrofitted space-heating system with given the investment of $110,000 and market value…

A: The question is based on the calculation of economic worth of machine.

Q: Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5…

A: Benifits = present value of cash inflows Net annual cash inflows = 60000 - 22000 = 38000 PV of…

Q: Using the ERR method and a 17% MARR, determine the acceptability of a 10-year manufacturing project…

A: MARR = 17℅ REINVESTMENT RATE = 14℅ Year Time to Maturity Outflows Inflows 0 10 2,800,000 1…

Q: What is the interest earned on a project that requires an initial investment of $ 10,000 and…

A: Initial investment (PV) = $ 10,000 Future value (FV) = $ 20,114 Period (n) = 5 Years

Q: Some particulars for a project are as follows. Initial Capital Cost in year 0 ($Mn) Follow-up…

A: The overall cost of an asset across its life cycle, including original capital expenses, maintenance…

Q: A new project will cost $80,000 initially and will last for 7 years, at which time its salvage value…

A: The question is based on the concept of sensitivity analysis of capital budgeting. The analysis…

Q: Find the equivalent present worth of the following 6-year project using the following data; purchase…

A: Present Worth: It is the present value of cash flows including all costs and savings. The cash…

Q: You are given the following estimated information about a proposed project: Investment cost $ 66,000…

A: Economic life of the project means the duration for which the project will remain operational.…

Q: Patti's project has an IRR of 15 percent, first cost P, and annual savings A. She observed that the…

A: First cost = P Salvage value = Third of the first cost = P/3 Annual savings = A IRR = i = 15% Let…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years,…

A: The Internal rate of return is one of the capital budgeting method under which the projects are…

Q: Compare the following alternatives based on the rate of return analysis assuming that the MAAR is…

A: Initial costs A = 60 B = 90 Annual operation and reparation A = 15 + 5 = 20 B = 8 +2 = 10 This…

Q: A project with 10-year life requires an initial investment of $30000. The annual cost of the project…

A: Initial investment (I) = $30000 CF1 to CF4 = $17500 - $6300 = $11200 CF5 = $17500 - $6300 - $8000 =…

Q: You are given the following forecasted data about a project: Project life = 3 years Required…

A: NPV means PV of net benefit which will arises from the project in the coming years. It is equal to…

Q: Consider a palletizer at a bottling plant that has a first cost of $150,000, has operating and…

A: The future value equivalent cost is the future value of the costs associated with the investment at…

Q: An investment project requires an initial expenditure of $160 000.00 with a salvage value of $30…

A: Calculate NPV of the project to determine whether project should be undertaken or not.

Q: A project requires you to invest $10,000 now, will generate annual revenues of $1500 for 10 years…

A: Present worth (PW) is a capital budgeting approach that helps in evaluating and comparing the…

Q: A fırm is considering the following alternatives, each with a five year life. What is the IRR of the…

A: The Internal rate of return is a capital budgeting metric which is used to measure the return on…

Q: A project has an initial cost of $50,000, expected net cash inflows of $9,000 per year for 10 years,…

A: given, initial investment = $50,000 annual cashflow (A) = $9000 n = 10 years r = 10%

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000per year for 7 years,…

A: NPV abbreviated as Net Present Value is the difference between the present value of cash inflows and…

Q: What is the equivalent annual cost for a project that requires a $50,000 investment at time-period…

A: Given, Initial Investment = $50,000 Annual Expense = $10,000 Opportunity cost = 10%

Q: You are considering an investment in a project that has an initial cost of $150,000; annual , cost…

A: Minimum need annual revenue will be calculated using excel goal seek function

Q: Using the table in Exercise 10, calculate the net present value for each project shown below at the…

A: NPV means the net present value of a project. It is used to assess the cash flows associated with an…

Q: You are faced with a decision on an investment proposal. Specifically, the estimated additional…

A: MARR: It is the minimum expected rate of return and evaluated by comparing it with IRR (Internal…

Q: Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5…

A: B/C ratio known as the benefit-cost ratio is computed by calculating the present value of benefits…

Q: A project with a life of 8 has an initial fixed asset investment of $9,660, an initial NWC…

A: Equivalent annual cost: Equivalent annual cost is the ratio of net present value of the project and…

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Net cost is nothing but the opposite of NPV where cost of an investment exceeds the present value of…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years,…

A: Solution:- We know, Net Present value (NPV) means the net present value of cash inflows after…

Q: Determine the average rate of return for a project that is estimated to yield total income of…

A: 1. Compute the estimated average annual income: Estimated average annual income=$484,4404…

Q: You are considering a project with the following financial data: Required initial investment at n =…

A: The capital budgeting is a technique that helps to analyze the profitability of the project.

Q: A project has an initial cost of $50,000, expected net cash inflows of $15,000 per year for 7 years,…

A: Initial cost = $ 50,000 Annual cash inflow (P) = $ 15000 Period (t) = 7 Years Cost of capital (r) =…

Q: You are required to investigate the following project: The initial Investment at n=0 is $100,000.…

A: Project life= 10 years Minimum return on investment=14% Initial costs= $100,000 Annual operating…

Q: A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC…

A: Equivalent Annual Cost(EAC) is the composition of annual cash outlay and annuity for initial cash…

Q: Alternative X has a first cost of 36000 an annual operating cost of 6900 , and a salvage value of…

A: A method of capital budgeting that helps to evaluate the present worth of cash flow and a series of…

Q: A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost =…

A: Given, First cost=-20M Annual cost=-4M Annual Revenue=8M Net Annual Revenue=8M+(-4M)=4M MARR=10%…

Q: Alternative R has a first cost of $94,000, annual M&O costs of $66,000, and a $20,000 salvage value…

A: Introduction:- An alternative cost is a probable benefit that could have been acquired but wasn’t…

Q: A five-year project has an initial fixed asset investment of $300,000, an initial NWC investment of…

A: Equivalent annual cost (EAC) is the annual cost of owning and maintaining an asset determined by…

Q: You are given the following forecasted data about a project • Project life = 3 years Required…

A: Forecasted data : Project life = 3 years Required investment = $1200000 Salvage value = $200000…

Q: Determine the B/C ratio for the following project. First Cost = P100, 000 Project life, years = 5…

A: B/C ratio means present value of benefits divided by the Present value of costs. B/C ratio = Present…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Given a Project with the following data: First
(initial) cost = JD 7000; Annual Operating
cost= JD 1200; Salvage Value = JD 1500, i-8%
per year, and 12 years. To Calculate the
Equivalent Single Value (Eq. X) at the end of
year 5, we use:

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Determine the B/C ratio for the following project.First Cost = P100, 000Project life, years = 5Salvage value = P10, 000Annual benefits = P60, 000Annual O and M = P22, 000Interest rate= 15%
A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC investment of $2,440, and an annual OCF of −$39,040. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is the project's equivalent annual cost, or EAC? Show equations using excel.
Alternative X has a first cost of 36000 an annual operating cost of 6900, and a salvage value of 11025 after 13 year. Alternative Y has a first cost of 37000 an annual operating cost of 7000, and a salvage value of 16280 after 13 year. If MARR of 13% per year, approximately what is the PW of each alternative? Select one: O a. PW of X= -77518 and PW of Y= -78067 O b. PW of X= -75990 and PW of Y= -76529 O c. PW of X= -76750 and PW of Y= -77294 O d. PW of X= -78293 and PW of Y= -78848
Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5 Salvage value P10, 000 Annual benefits Р60, 000 Annual O and M Р22, 000 Interest rate, % 15
You are required to investigate the following project: The initial Investment at n=0 is $100,000. The project life is 10 years. Estimated annual operating cost : 34,000. The required minimum return on the investment :14%. The salvage value 8,000. What is the minimum annual revenues that should be generated to make the project worthwhile? 97842 52758 81921 45716 O O O O
Project A requires an original investment of $50,900. The project will yield cash flows of $14,800 per year for 4 years. Project B has a computed net present value of $2,910 over a 4-year life. Project A could be sold at the end of 4 years for a price of $14,500. Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 0.943 0.909 0.893 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 0.943 0.909 0.893 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Use the tables above. 2. 2.
(c) Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.) Annual rate of return Project Bono % Project Edge % Project Clayton %
A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the annual worth of the project equals:
Determine the Rate of Return (ROR) for the following project. Initial Capital Investment (P) = $2,942,825 Project Life (n) = 10 years Salvage Value at the end of year 10 $50,000 Equal Annual Revenues = $1,100,000 Equal Annual Operations and Maintenance Costs (AOC) = $400,000 Minimum Acceptable Rate of Return (MARR) = 22% ycy %3D %3D %3D That is the ROR of the project (to the nearest 1%)?
Alternative X has a first cost of 22000 an annual operating cost of 4100 , and a salvage value of 6825 after 27 year. Alternative Y has a first cost of 23000 an annual operating cost of 4200 , and a salvage value of 16560 after 27 year. If MARR of 27% per year, approximately what is the PW of each alternative?
From the given values below, which machine should be selected using (a) Present worth Method and (b) Future worth Method if interest rate is 10% per year? Machine A B Initial Cost (Php) Annual Operating Cost 146,000 15,000 80,000 10,000 3 220,000 10,000 75,000 25,000 Annual Revenue Salvage Value Useful Life (years) 6
1.A project has a first cost of $16,999with a life of 10 years and a salvage value of $2,500. If the MARR is12% and provides benefits of about$2,750 annually, what is the PW other project