Question 1

The cost of building the RAMA IX suspension bridge in Thailand is $8 million. The bridge will need to be repainted every 7 years and resurfaced every 9 years, each for an indefinite period of time. The cost of painting is expected to be $159,000 and the cost of resurfacing is estimated to be $417,000. Determine the capitalized worth of the bridge at an interest rate of 4% per year.

Accepted Answer

- $9,488,397.50

Question 2

Sun Devil Inc. is building two small additions onto its corporate headquarters in Tempe in order to maximize its operating efficiency. The additions, which total 27,000 square feet, will attach to the east and south sides of its existing 66,000- square- foot headquarters. The construction costs are estimated to be $40 per square feet. The company estimates $60,000 per year in fixed costs e.g., maintenance and insurance, etc.) and $3 per square foot in variable costs e.g., utilities, etc.) for the additional facility. The market value of the additions is expected to be 33% of the construction costs at the end of 20 years. Determine the capital recovery cost and the EUAC of the two additions if the minimum attractive rate of return is 4% per year.

Accepted Answer

CR = $67,512.96
EUAC = $208,512.96

Question 3

Aztec Corp., a clothing retailer, plans to open another 95 stores by the end of the year. Each new store will require an initial investment of $270,000 and an annual operating cost of $24,000. Each will have a $61,000 salvage value after 5 years. The company expects to garner revenue of $36,000 each year. What is the future worth of this investment if the company's minimum attractive rate of return is 13% per year, compounded semiannually?

Accepted Answer

FW for each store is - $367,349.00.

Question 4

BioPharm Inc. recently acquired Cow Biopharmaceuticals Inc., a producer of antibodies and Cow- HB to prevent Hepatitis B re- infection in liver transplant patients. The company plans to invest $3.5 million in new manufacturing equipment. The Cow Biologics division is expected to generate revenue of $300,000 and operating cost of $330,000 each month.
The new equipment is estimated to have a $700,000 salvage value after 7 years. What is the future worth of this investment if the company's minimum attractive rate of return is 18% per year, compounded monthly.

Accepted Answer

The answer of BioPharm Inc. recently acquired Cow Biopharmaceuticals Inc.,...

Question 5

Thai Savings Bank issues 100,000 bonds as a response to the Thai Central Bank's initiatives to increase domestic saving. The bonds have a face value of $40,000 each, a bond interest rate of 8% per year payable annually, and a maturity date of 14 years. What is the current price of a bond, if the market interest rate is 9% per year, compounded semiannually?

Accepted Answer

The answer of Thai Savings Bank issues 100,000 bonds as...

Question 6

Consider the following cash flow. Determine the annual worth if the minimum attractive rate of return is 9% per year.

Accepted Answer

The answer of Consider the following cash flow. Determine the...

Question 7

Orangemen Lofts plans to add 300 luxury apartments to its complex in Cohoes. The cost of the land now is $16 million including taxes and fees. The construction cost is expected to be $64 million including the cost of the central amenities. The annual maintenance and operating cost is expected to be $450,000. The company also estimates the market value of the property to be 72% of the construction price after 11 years. The average occupancy rate of 88% is expected each year. What is a minimum monthly rent required to make this investment economically acceptable if the company's minimum attractive rate of return is 6% per year, compounded monthly?

Accepted Answer

The answer of Orangemen Lofts plans to add 300 luxury...

Question 8

Boilermaker Brew Plc. and Hoosier Brewing Co. plan to combine their U.S. operations in an attempt to bolster their sagging sales in a tough domestic market. The two companies will form a new unit called HoosierMaker. The companies expect to invest $120 million upfront to set up the new unit. HoosierMaker expects to garner revenue of $9.5 million each year and spend $1.3 million a year in costs, over the next 7 years. What is the future worth of this investment if the companies' rate of return is 16% per year?

Accepted Answer

The answer of Boilermaker Brew Plc. and Hoosier Brewing Co....

Question 9

Determine the internal rate of return of the following cash flow.

Accepted Answer

The answer of Determine the internal rate of return of...

Question 10

As part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology, GoodDrugs Inc. plans to set up a new division dedicated to developing biotherapeutic drugs and research technologies. The company expects to pay $240 million for set up costs of its new division now and $12 million in operating costs each year for the next 13 years. The company estimates that the new division will be able to generate annual revenue of $84 million 8 years from now. What is the net present worth of this investment if the company's minimum attractive rate of return is 7% per year and the study period is 13 years? Assume there is no salvage value.

Accepted Answer

The answer of As part of a broad effort to...

Question 11

Husker Co., a major drug store chain, plans to spend $35 million in capital investments for its new inventory loss reduction initiative. By upgrading the current inventory tracking system using advanced RFID technology, the company estimates the annual maintenance cost of $210,000. The salvage value of the system at the end of year 13 is expected to be 0.4% of the original investment. What is the minimum annual inventory loss prevention required to make this investment economically acceptable if the company's minimum attractive rate of return is 8% per year.

Accepted Answer

The answer of Husker Co., a major drug store chain,...

Question 12

The cost of building the gondola lift system that transports visitors from the tops of the mountain peaks to the valley at the Zhangjiajie National Forest Park in China is $10.5 million. The lift system will need an annual maintenance cost of $164,000, and the elevators will need to be replaced every 5 years with the estimated cost of $603,000, for an indefinite period of time. What is the capitalized worth of the lift system at an interest rate of 16% per year?

Accepted Answer

The answer of The cost of building the gondola lift...

Question 13

Kenny Pipe & Supply Inc., a wholesale distributor of plumbing supplies, pipe, valves, and fittings, plans to remodel its existing facility in the Birmingham, Alabama, location. The facility will require an initial remodeling cost of $370,000 and a monthly operating and maintenance cost of $30,000. It will have a $66,500 salvage value after 7 years. What is the net present worth of this investment if the company's minimum attractive rate of return is 6% per year, compounded monthly?

Accepted Answer

The answer of Kenny Pipe & Supply Inc., a wholesale...

Question 14

Miner's Mexican Grill Inc. plans to open its 100th restaurant by the end of next year. The new restaurant will require an initial investment of $300,000 and an annual operating cost of $31,000. It will have a $62,000 salvage value after 6 years. The company also estimates that the new restaurant will bring in revenue of $43,400 each year. Determine the acceptability of the investment if the company's minimum attractive rate of return is 13% per year using annual worth analysis.

Accepted Answer

The answer of Miner's Mexican Grill Inc. plans to open...

Question 15

The Bank of Tokyo- Mitsubishi issues 100,000 bonds as part of its liquidity and interest risk management instrument. The bonds have a face value of $36,000 each, a bond interest rate of 12% per year payable semiannually, and a maturity date of 16 years. The current price of the bond is $69,662. Write the correct equation to determine if this bond should be purchased using the IRR method, assuming an investor has a MARR of 4% per year, compounded quarterly.

Accepted Answer

The answer of The Bank of Tokyo- Mitsubishi issues 100,000...

Question 16

GoBulls Media is considering opening a new manufacturing facility to process and mail coupons to 660,000 households in the Tampa Bay area. The new facility will require an initial investment of $240,000 and an annual operating cost of $22,000. It will have a
$86,500 salvage value after 5 years. Calculate the net present worth of this investment if the company's minimum attractive rate of return is 5% per year, compounded monthly.

Accepted Answer

The answer of GoBulls Media is considering opening a new...

Question 17

A new water treatment operation is being considered for the new automated water treatment plant in South Africa. The system can be purchased and installed for $44.5 million and requires additional annual operating and maintenance expenses of $2.7 million over a 22- year period. However, it will save an estimated $5.7 million each year from the reduced operational, environmental, and security risks. The company uses a MARR of 12 percent per year in its economic evaluations of the new system. The market value of the system will be $4.45 million at the end of 22 years. Write the correct equation to determine if this system should be installed using the IRR method.

Accepted Answer

The answer of A new water treatment operation is being...

Question 18

Lane College in Jackson, Tennessee, is considering the conversion of an abandoned church pew manufacturing plant adjacent to the school's campus into a 34,000- square- foot building to house the campus bookstore, a conference center, a small business incubator, and a community computer lab. The project requires $30 million for renovation costs, additional annual fixed operating and maintenance expenses of $100,000, and variable expenses of 190 per square- foot over a 10- year period. The college expects to generate an annual revenue of $7,810,000 over a 10- year period. The college uses a MARR of 7 percent per year in its economic evaluations of the new project. The market value of the building will be $2 million at the end of 10 years. Write the correct equation to determine if this building should be renovated using the IRR method.

Accepted Answer

The answer of Lane College in Jackson, Tennessee, is considering...

Question 19

Sony Corporation has invested $5.6 million in developing super- thin TVs based on new, organic light- emitting diode technology. The company plans to market the OLED TVs in an 11- inch size and produce 24,000 units for the first five years. The annual production and operating cost is estimated at $350 per unit and will be sold at $400 per unit. Determine the internal rate of return for this investment if the study period is five years.

Accepted Answer

The answer of Sony Corporation has invested $5.6 million in...

Question 20

A textile manufacturer plans to improve revenue from its heating blankets, sold primarily in the northern areas of the United States by increasing its marketing activities. A total of
$170,000 spent now in marketing is expected to generate new revenue of $400,000 per year. The MARR is 6% per year and the evaluation period is 9 years. Use simple payback analysis to determine the acceptability of the marketing investment.

Accepted Answer

The answer of A textile manufacturer plans to improve revenue...

Quiz 5: Evaluating a Single Project

Consider the following cash flow. Determine the annual worth if the minimum attractive rate of return is 9% per year.

Determine the internal rate of return of the following cash flow.