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Oregon Department of Transportation (ODOT), a public-sector entity, is evaluating two alternate routes to I-5 in the Portland area. Route 105 will cost ODOT $500,000 in initial investment and will cost $10,000 per year to maintain the route. This route will benefit the public and local businesses at $100,000 per year. However, due to the length of the route and other considerations, there will be a toll charged to the users. The toll is estimated to cost the public a total of $2,000 annually. The other route in consideration is Route 305 that will cost ODOT $100,000 more than Route 105. The annual O&M is $5,000 less than Route 105. The public benefit is $15,000 more per year than Route 105. With Route 305 there is no issue of toll to the users. Both options do not have a salvage value. ODOT uses a 5-year planning horizon and 10% MARR to evaluate their projects. Based on the information provided, which alternative should ODOT invest in?
Miller Mfg. is analyzing a proposed project. The company expects to sell 11,000 units, give or take 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered a..
Investor A makes a cash purchase of 100 shares of AB&C common stock for $55 a share. Investor B also buys 100 shares of AB&C but uses margin. Each holds the stock for one year, during which dividends of $5 a share are distributed. If the margin requi..
IBM sells a Treasury bond futures agreement for $94,000. On the delivery date, the spot price is $95,000.- IBM sold the futures agreement to speculate. Does IBM win or lose? Explain.
ASD Corp. will pay a dividend of $1.15 on each of its common shares next year. The company has stated that it will maintain a constant growth rate of 4.2% per year forever. If you require 8.5% return to invest in ASD stock (and assuming you agree wit..
A project has an initial outlay of $1,160. It has a single payoff at the end of year 6 of $9,960. What is the profitability index (PI) of the project, if the company’s cost of capital is 11.37 percent?
Gold Rush Mining is evaluating when to open a gold mine. The mine has 48,800 ounces of gold left that can be mined, and mining operations will produce 6,100 ounces per year. The required return on the gold mine is 11 percent, and it will cost $34.1 m..
You are contemplating the purchase of a new $1,840,000 computer-based dairy cow feeding system. The system will be depreciated straight line over its ten year life and have no value at the end of its life. You will earn $530,000 per year from additio..
assumptions about growth during the high-growth period do not affect value as much as assumptions about the terminal value.
The Granite Group purchased a piece of equipment for $1.2 million. They paid a down payment of 20% in cash and financed the balance. The loan terms require monthly payments for 15 years at an annual percentage rate of 7.75% compounded monthly. What i..
portfolio of the stock and the risk-free asset.
Money Market funds generally have check writing privelages.
You are preparing to make monthly payments of $75, beginning at the end of this month, into an account that pays 6 percent interest compounded monthly. How many payments will you have made when your account balance reaches $10,000?
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