Evaluate the net present value

Reference no: EM13213165

A highway department is considering building a temporary bridge to cut travel time during the three years it will take to build a permanent bridge. The temporary bridge can be put up immediately at a cost of $740,000. At the end of three years, it would be removed and the steel would be sold for scrap. The real net costs of this would be $81,000. Based on estimated time savings and wage rates, fuel savings, and reductions in risks of accidents, department analysts predict that the benefits in real dollars would be $275,000 during the first year, $295,000 during the second year, and $315,000 during the third year. Departmental regulations require use of a real discount rate of 4 percent.

a) Calculate the net present value assuming that the benefits are realized at the end of each of the three years.

b) Calculate the net present value assuming that the benefits are realized at the beginning of each of the three years.

c) Calculate the net present value assuming that the benefits are realized in the middle of each of the three years.

d) Calculate the net present value assuming that half of each year's benefits are realized at the beginning of each of the three years and the other half at the end of the year.

Reference no: EM13213165

Questions Cloud

Explain how many joules of energy are absorbed by the water : How many joules of energy are absorbed by the silver? How many joules of energy are absorbed by the water?

Explain what is the minimum mass of lioh required : The CO2 output of an astronaut is about 1.3 kg/day. What is the minimum mass of LiOH required for a six-day space shuttle flight involving five astronauts?

What is relative internal weight on underprivileged group : What is the net present value (NPV) of the project? Does the project satisfy the Kaldor-Hicks criterion and what is the relative internal weight on the underprivileged group? Should the policy be enacted if the "true" social weight is greater or l..

State how many red blood cells are there in an average adult : The volume of blood in a typical adult is about 4.7 L. How many red blood cells are there in an average adult?

Evaluate the net present value : Calculate the net present value assuming that the benefits are realized at the end of each of the three years - Departmental regulations require use of a real discount rate of 4 percent.

By how much will aggregate demand at current prices shift : Suppose the consumption function is C = $400 billion + 0.8Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with ( a ) A $50 billion increase in gov..

Discuss how managers use the elasticities measurement : Discuss the meaning of the regression coefficient of the independent variable(s) and how it could be used to estimate the elasticities of each of these variables. Discuss how managers use the elasticities measurement to make managerial decisions.

Identify strategy for minimizing impact of potential problem : Provide an example when it could be appropriate to conduct a time-series or cross sectional data. Discuss the potential problem that may arise with your example and identify strategies for minimizing the impact of the potential problem.

Explain materials operations automation purchasing : 1) PowerSki uses to transmit design changes to suppliers of the 340 components that make up the Jetboard. association software collaboration software design software alliance software 2) Following basically the same process that you'd use to buy a ..

User Account

All Pages