A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2080. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take five years at a cost of $25 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2080. Click the icon to view the table of compound interest factors for discrete compounding periods when i =6%. The present worth of this project is $ million. (Round to two decimal places as needed.)

A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2080. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take five years at a cost of $25 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2080. Click the icon to view the table of compound interest factors for discrete compounding periods when i =6%. The present worth of this project is $ million. (Round to two decimal places as needed.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2080. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take five years at a cost of $30 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $3 million, increasing by 1 percent per year thereafter. At an interest rate of 9 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2080.
A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070.To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start at the beginning of 2030 and take fivefive years at a cost of $15 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1 percent per year thereafter. At an interest rate of 6 percent, what is the present worth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070. The present worth of this project is how many million. (2 decimal places)
A regional municipality is studying a water supply plan for its tri-city and surrounding area to the end of year 2070. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start in 2030and take five years at a cost of $25 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $3 million, increasing by 1 percent per year thereafter. At an interest rate of 8 percent, what is the presentworth of this project? Assume all cash flows take place at year-end. Consider the present to be the end of 2025/beginning of 2026. Assume there is no salvage value at the end of year 2070.Click the icon to view the table of compound interest factors for discrete compounding periods when i=8%. Worth of the project in milion ???
A city is planning a new pipeline to supply water from distant mountains. The planning horizon chosen is 50 years, and the city uses an interest rate of 7%. For $250 million, the city can build a pipeline now that would supply its needs for 50 years, or it could build the project in two stages: $150 million now and $200 million in Year 25. Annual operation and maintenance for the first stage of the two-stage project are $3.0 million through Year 25 followed by $6.0 million for the combined first and second stage project after Year 25 and through Year 50. a) Form the cash flow table for the two alternatives and the incremental investment, showing the correct signs for all entries. b) Using present worth analysis, determine the best project. c) Using annual cash flow analysis, determine the best project. d) Using the incremental rate of return analysis, determine the best project. Check at the MARR only; do not try to find the incremental ROR itself. e) Using…
An airport expansion that is expected to be used indefinitely is under way at Jackson Hole Metro Airport. Land acquisition and major earthworks that will last as long as the airport is used are expected to cost $600 million. Terminal construction that will last 20 years is budgeted at $200 million. (Assume that the terminal is to be identically replaced every 20 years.) Runway construction will cost $150 million. The runways will also be used indefinitely, with repaving required every 10 years at a cost of $10 million. The operating and maintenance costs are estimated to be $15 million per year. What is the annual cost of the project if i = 5% and the airport will be used indefinitely?
A city is analyzing two alternatives for generating electricity. The first is the construction of a hydroelectric dam with an investment of $200 million and an annual cost of $2 million for operation and maintenance. The life span of the dam is so great that it can be considered infinite. The second alternative consists of generating electricity from a gas plant, whose lifetime is 20 years. The initial investment required is $40 million and the annual cost of operation and maintenance is $6 million. The minimum attractive rate of real return is 5% per annum. Compare and calculate the Net Present Value of the resulting savings
Since the beginning of the fiscal year 2009, Texas Department of Transportation invest one million each year to build up the transportation management database system in one of the Southern Texas city regions. TxDot is planning to transfer this database system to the city authority by the end of the fiscal year 2020. If the rate of return is 12% per year during the investment period, what is the total value of this database system when transferring?
The initial investment in a government-funded city flood control system is $500,000. From the initial year to the endless future, materials, maintenance, electric power, and other running expenditures are estimated to reach $10,000 per year. Every five years, major repairs and rehabilitations will be carried out at a cost of $100,000. What is the project's equivalent capitalized cost if the interest rate is 10% per year?
A new bridge across the Allegheny River in Pittsburgh is expected to be permanent and will have an initial cost of $30 million. This bridge must be resurfaced every five years at a cost of $1 million. The annual inspection and operating costs are estimated to be $50,000. Determine its equivalent annual cost of this long-life construction at i = 10% per year.
A certain government funded city flood control system has an initial investment cost of $500,000. Cost of materials, maintenance, electric power and other operating costs are expected to total $10,000 per year beginning from the first year until the infinite future. Major repairs and rehabilitations will occur every 5 years at a cost of $100,000. If the interest rate is 10% per year, what is the equivalent capitalized cost of this project?
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $5 million to set up and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $12 million during this year and the capital cost allowance will be another $3 million. THSI will require no working capital for this investment. THSI's marginal tax rate is 35%. Assume that THSI's cost of capital for this project is 15%. The net present value (NPV) of this temporary housing project is closest to: $435,000 -$650,000 $1,960,000 -$435,000 $1,250,000
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $4.87 million to setup and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $12 million during this year and depreciation expense will be another $3 million. THSI will require no working capital for this investment. THSI's marginal tax rate is 35%. Assume that THSI's cost of capital is 14.6% p.a. Compute the NPV of the temporary housing facility to the nearest dollar

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