a 20-year study 7.24 You work for the New Mexico Department of Transportation (NMDOT). Two proposals to im- prove street safety and lighting in a colonia in south central New Mexico have been proposed. (a) Use a B/C analysis and a discount rate of 8% per year to evaluate the proposals. (b) (Here is a thought ques- tion.) If you reevaluate proposal 1 benefits and find them to be understated by $100,000 per year, ben- efits will increase from $530,000 to $630,000 per year. Now, the evaluation (1 vs. DN) will have a B/C = 1.30. There are three questions: (1) What will be the time basis of the incremental evalua- tion? (2) Using the comparison terminology "larger initial cost" vs. "smaller initial cost," what will be the order of incremental comparison between the two proposals: (1 vs. 2) or (2 vs. 1)? (3) Which proposal will be selected now? Why?
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- Select the better of two proposals to improve street safety and lighting in a colonia in south central New Mexico. Use a B/C analysis and an interest rate of 8% per year.Dark Skies Observatory is considering several options to purchase a new deep space telescope. Revenue would be generated from the telescope by selling “time and use” slots to various researchers around the world. Four possible telescopes have been identified in addition to the possibility of not buying a telescope if none are financially attractive. The table below details the characteristics of each telescope. A present worth ranking analysis is to be performed. Solve, a. Determine the preferred telescope if MARR is 25%/year. b. Determine the preferred telescope if MARR is 42%/year.Russell Trent was recently tasked with evaluating projects for Stan's No Touch Car Wash. The company recently decided to use NPV as its primary criterion for approving projects. To be selected, a project must have a positive NPV. Russell is currently evaluating a project with the following estimated investment requirements ($ millions) by year (starting in year 0): \ Investment Year Investment 0 16 1 10.1 2 12.5 The estimated revenues ($ millions) from the project, expected to begin at time 2, are given in the table below: Investment Year Investment 0 11.1 1 11.3 2 8.2 3 14.3 4 11.9 To account for the different risk characteristics throughout the project's life, Russell has determined that a hurdle rate of 23% should be used beginning at time 0, while 37% should be used beginning in period 4. Determine the NPV for the project. NPV=
- Please answer below homework question in short and easy steps : Let say if a businessmen consulting with a Medical Center analyzing a possible improvement upgrade to their operating rooms chilled water air conditioning system. The improvement is expected to last for 5 years, and each year they expect to save $87,000 per year due to less water usage and to save $58,000 per year due to using less. To pay for this improvement, this Medical Center will withdraw money from an invesment paying 2.5 % interest compunded annually. Please suggest what will be the maximum amount that you would recommend this Medical Center should pay for this upgrade ?Zandri Industries is evaluating whether to invest in solar panels to provide some of the electrical needs of its main office building in Buffalo, New York. The solar panel project would cost $475,000 and would provide cost savings in its utility bills of $45,000 per year. It is anticipated that the solar panels would have a life of 15 years and would have no residual value. (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.). (Click the icon to view the future value factor table.) (Click the icon to view the future value annuity factor Read the requirements. table.) Requirement 1. Calculate the payback period in years of the solar panel project. Determine the formula, then calcuste the payback period. (Round your answer to two decimal places.) Initial investment Expected annual net cash inflow Payback period %3D %24 475,000 $4 45,000 10.56 years Requirement 2. If the company uses a discount rate of 10%, what is the…You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($44,000 Investment) Year Cash Flow $ 22,000 1 2 3 4 20,000 21,000 20,600 Profitability index Project Y (Slow-Motion Replays of Commercials) ($64,000 Investment) Cash Flow Year 1 2 O Project X O Project Y 3 4 a. Calculate the profitability Index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.) Profitability index 32,000 25,000 26,000 28,000 b. Calculate the profitability Index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.) c. Which project would you select based on the profitability Index?
- The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway. Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city's discount rate is 10% per year, and the planning horizon is 10 years. Use the Incremental benefit cost (B/C) analysis to determine the best option. Note: Use the same excel sheet that you downloaded in the previous question to solve this question. Solve it in a new sheet in the same document. Annual benefits, Annual disbenefits, Plan Initial cost, $ Annual cost, $/year $/year $/year 50,000 3,000 20,000 500 90,000 4,000 30,000 2,000 C 200,000 6,000 61,000 2,100The city of Oak Ridge is evaluating three mutually exclusive landscaping plans for refurbishing a public greenway. Benefits to the community have been estimated by a landscaping committee, and the costs of planting trees and shrubbery, as well as maintaining the greenway, are summarized below. The city’s discount rate is 8% per year, and the planning horizon is 10 years. Solve, a. Use the B–C ratio method to recommend the best plan when annual maintenance expenses offset annual benefits in the numerator. b. Repeat Part (a) when annual maintenance expenses add to total costs in the denominator. Which plan is best? c. Should the recommendations in Part (a) and (b) be the same? Why or why not?Struggling to find the payback period and NPV. I believed pay period to be annual net income+depreciation, then divide that number into initial investment. Please if you can, show me what the right equation is? Thank you for the help in advance. Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Future Value of $1, Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons). Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. $ 536,000 Answer is not complete. 1. Accounting rate of return 2. Payback period…
- You are a policymaker and want to calculate the present value of the net benefit of the following project proposal. Proposal: An HIV treatment campaign that will cost the city $15 million in year 1, but will save 10 lives each year for years 1, 2, and 3. Suppose each life is valued at $3 million and the discount rate is 5%. What is the present value of the stream of net benefits over the following 3 years? (Tip: discount the benefits and costs starting with year 1.)CBA analysis for these two options Option A requires the purchase of a garbage collection vehicle that needs a two-person crew. The vehicle will cost $60,000 and each worker will be paid $20,000 a year. The city would pick up 400 tons of garbage annually, and for each ton of garbage collected, it would charge a $400 fee. The city would have annual revenue of $160,000 (400 × $400) from this operation. Option B requires a vehicle for a three-person crew. The vehicle will cost $80,000 and each worker will be paid $15,000 annually. With this option, the city’s garbage collection capacity would be 300 tons annually, so the annual revenue would be $120,000 (300 × $400). Using a three-year period and a discount rate of 5 percent, which option should be recommended in the budget request?You are asked to evaluate the following two projects for the Norton Corporation. Using the net present value method combined with the profitability index approach described in footnote 2 of this chapter, which project would you select? Use a discount rate of 14 percent. Project X (videotapes of the weather report) ($20,000 investment) Year Cash Flow 1. $10,000 2 8,000 3 9.000 4 8.600 Project X (videotapes of the weather report) ($40,000 investment) Year Cash Flow $20,000 2 13,000 3 14.000 4 16.800