Calculate the total equivalent investment cost

Reference no: EM132162954

Question: A large project requires an investment of $200 million. The construction will take 3 years: $30 million will be spent during the first year, $100 million during the second year, and $70 million during the third year of construction. Two project operation periods are being considered: 10 years with the expected net profit of $40 million per year and 20 years with the expected net profit of $32.5 million per year. For simplicity of calculations it is assumed that all cash flows occur at end of year. The company minimum required return on investment is 10%. Calculate for each alternative:

(a) The payback period

(b) The total equivalent investment cost at the end of the construction period

(c) The equivalent uniform annual worth of the project (use the operation period of each alternative) Which operation period should be chosen?

Reference no: EM132162954

Questions Cloud

Introduce and define hofstedes cultural dimensions : Compare Singapore and Australia in terms of Hofstede's cultural dimensions,then discuss how national culture influences French & Raven's ‘Five Bases of Power'.

Find payback period if solar water heater system installed : Tom Sewel has gathered data on the relative costs of a solar water heater system and a conventional electric water heater. The data are based on statistics.

Write a professional statement of your ethics in workplace : Frame your statement for the work context. Who are you as an employee? If an employer were to hire you, what would he or she get as a professional person?

Involving off-budget taxation and spending : Explain why a military draft can be thought of as involving off-budget taxation and spending?

Calculate the total equivalent investment cost : A large project requires an investment of $200 million. The construction will take 3 years: $30 million will be spent during the first year.

How to minimize the sum of penalty and shipping costs : In the United Copiers service center model, we assumed that the potential locations of service centers are the same as existing customer locations.

Should Congress legislate in response to Citizens United : Read the First Ammendment and study the Citizens United vs Federal Election Commission case - Should Congress legislate in response to Citizens United

What is the payback period : A car dealer leases a small computer with software for $5000 per year. As an alternative he could buy the computer for $7000 and lease the software for $3500.

Compare and contrast the three models of culture : Compare and contrast the three (3) models of culture. Next, select one (1) of the researched international competitors.

User Account

All Pages