A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $114,000, and it will save an estimated 340,000 kilowatt-hours (kWh) of electric power each year over afive-year period. A kilowatt-hour of electricity costs $0.08. The market value, additional annual operating and maintenance expenses are negligible. What is the benefit-cost ratio of the project if the general inflation rate is 3% per year? The market interest rate = (im) is 22% per year, and the annual savings are expressed in year- zero dollars. Use the benefit-cost method to make a recommendation. The benefit-cost ratio of the system with PW is____--_?

A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $114,000, and it will save an estimated 340,000 kilowatt-hours (kWh) of electric power each year over afive-year period. A kilowatt-hour of electricity costs $0.08. The market value, additional annual operating and maintenance expenses are negligible. What is the benefit-cost ratio of the project if the general inflation rate is 3% per year? The market interest rate = (im) is 22% per year, and the annual savings are expressed in year- zero dollars. Use the benefit-cost method to make a recommendation. The benefit-cost ratio of the system with PW is____--_?

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

See similar textbooks

Similar questions

An automobile manufacturer is considering the installation of a high-tech material handling system for $30,000,000. This system will save $7,500,000 per year in manual labor, and it will incur $2,750,000 in annual operating and maintenance expenditures. The salvage value at the end of the system's 10-year life is negligible. If the company's hurdle rate (MARR) is 10% per year, what is the IRR (internal rate of return) of this project? (A) 8.33% B 12.18% 10.53% D) 9.37%
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $120,000, and it will save an estimated 300,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.10, and the company uses a MARR of 15% per year in its economic evaluations of refurbished systems. The market value of the system will be $8,000 at the end of six years, and additional annual operating and maintenance expenses are negligible. Use the benefit–cost method to make a recommendation.
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $120,000, and it will save an estimated 300,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.10, and the company uses a MARR of 15% per year in its economic evaluations of refurbished systems. The market value of the system will be $8,000 at the end of six years, and additional annual operating and maintenance expenses are negligible. what is the benefit–cost ratio of the project if the general inflation rate is 4% per year and the market value is negligible? The market interest rate (im) is 18% per year, and the annual savings are expressed in year-zero dollars.
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $142,000, and it will save an estimated 240,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.14, and the company uses a MARR of 12% per year in its economic evaluations of refurbished systems. The market value of the system will be $28,400 at the end of six years, and additional operating and maintenance expenses are $15,600 per year. Use the benefit-cost method to make a recommendation. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. The conventional B-C ratio of the system is 1.41. (Round to two decimal places.) This B-C ratio indicates that the project is not acceptable .
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $110,000, and it will save an estimated 300,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.10, and the company uses a MARR of 15% per year in its economic evaluations of refurbished systems. The market value of the system will be $8,000 at the end of six years, and additional annual operating and maintenance expenses are negligible. Use the PW method to determine whether this system should be installed.
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $115,000, and it will save an estimated 240,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.12, and the company uses a MARR of 12% per year in its economic evaluations of refurbished systems. The market value of the system will be $23,000 at the end of six years, and additional operating and maintenance expenses are $12,700 per year. Use the benefit-cost method to make a recommendation. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. The conventional B-C ratio of the system is places.) This B-C ratio indicates that the project is (Round to two decimal
The expenses included in the fabrication of a wind turbine for a planned Wind Farm is $73,000 annually. A wise Electrical Engineer developed an alternative that by spending $16,000 now to modify the rotor blades and adjust the gear box, the yearly cost will decrease to $58,000 next year and $52,000 at the end of year 2 until 5. If the interest rate is 10% per year, what is the present worth of the cost savings because of the modification and adjustment?
The estimated cost of a completely installed andready-to-operate 40-kilowatt generator is $32,000. Itsannual maintenance costs are estimated at $800. Theenergy that can be generated annually at full load isestimated to be 100,000 kilowatt-hours. If the valueof the energy generated is $0.09 per kilowatt-hour,how long will it take before this machine becomesprofitable? Take the MARR to be 10% and the salvage value of the machine to be $2,000 at the end ofits estimated life of 15 years.
A homeowner is considering an upgrade of a fuel-oil-based furnace to a natural gas unit. The investment in the fixed equipment, such as a new boiler, will be $2500 installed. The cost of the natural gas will average $60 per month over the year, instead of the $145 per month that the fuel oil costs. If funds cost 9% per year and cost inflation in fossil fuels will be 3% per year, how long will it take to recover the initial investment? Solve on a monthly basis.
A large automobile manufacturer is considering the installation of a high-tech material handling system for $30,000,000. This system will save $7,500,000 per year in manual labor, and it will incur $2,750,000 in annual operating and maintenance expenditures. The salvage value at the end of the system's 10-year life is negligible. If the company's hurdle rate (MARR) is 10% per year, should the system be recommended for implementation? The breakeven interest rate is %. (Round to two decimal places.) Should the system be recommended for implementation? Choose the correct answer below. A. No, this material handling system should not be recommended. B. Yes, this material handling system should be recommended.
A new heating system is to be purchased and installed for $110,000. This system will save approximately 300,000 kWh of electric power each year for a 6-year period with no additional 0&M costs. Assume the cost of electricity is $0.10 per kWh, and company's MARR is 15% per year, and the market value of the system will be $8,000 at EOY 6. Using the PW method, is this a good idea?
A temporary warehouse can be built for $10 million and its salvage value when decommissioned is zero. The annual revenue from the sale of storage space minus maintenance and operating costs is estimated at $3 million. If the TMAR is 13% per year and the warehouse is used for 8 years, does the investment matter? What is the minimum useful life for the construction to be interesting?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS