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IRR Calculation Related Problems

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1. Consider the following cash flow profile and assume MARR is 10 % per year.;EOY 0 1 2 3 4 5 6;NCF -$100.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00;a. What does Descartes' rule of signs tells us about the IRR(s) of this project?;b. What does Norstrom's criterion tell us about the IRR(s) of this project?;c. Determine the IRR(s) for this project?;d. Is this project economically attractive?;2. What do you know about the mathematical value of a project's Internal Rate of Return under each of the following conditions?;a. The Present Worth of a project is greater than 0?;b. The PW of a project is equal to 0?;c. The PW of a project is less than 0?;d. The Future Worth of project is greater than 0?;e. The FW of a project is equal to 0?;f. The FW of a project is less than 0?;g. The Annual Worth of a project is greater than 0?;h. The AW of a project is equal to 0?;i. The AQ of a project is less than 0?;3. A specialty concerete mixer used in construction is purchased for $300,000 seven (7) years ago.Its annual O&M costs are $105,000. At the end of 8 year planning horizon, the mixer has a salvage value fo $5,000. If the mixer is replaced the new mixer will require initial investment of $375,000.At the end of 8 year planning horizon, it will have a salvage value of $45,000. Its annual O&M costs will be only $40,000 due to newer technology.;Analayze using EUAC measure and MARR of 15% to see if the mixer should be replaced if the older mixer is sold for market value of $65,000.;a. Use cash flow approach (insider's viewpoint approach);4. Logan Public Library is planning a renovation. Cost including cabling will be $33,000, new equipment will cost $21,000 and e-volume access initiation will be $17,500. Maintenance is expected to run another $3,500 per year plus $4,000 for renewed e-volume access. The interest rate is 8%, planning horizon is 10 years;and renovation is expected to have a salvage value of 30% with no salvage value for equipment or e-access.;It's estimates that visits will increase by 2,500 in the first year and 500 per year thereafter.;If it's estimated that the average benefits due to new facilities and equipment, access will be $2.00 per person per visit.;a. Should the city approve the plans? Use PW and calculate B-C.;b. What is the smallest benefit per person that will make this project desirable?

 

Paper#35148 | Written in 18-Jul-2015

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