What is equivalent annual cost of buying and maintaining

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Reference no: EM131984315

1. A proposed nuclear power plant will cost $1.5 billion to build and then will produce cash flows of $230 million a year for 15 years. After that period (in year 15), it must be decommissioned at a cost of $830 million. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in billions rounded to 3 decimal places.)

a. What is project NPV if the discount rate is 3%?

b. What if the discount rate is 18%?

2. A firm can lease a truck for 4 years at a cost of $46,000 annually. It can instead buy a truck at a cost of $96,000, with annual maintenance expenses of $26,000. The truck will be sold at the end of 4 years for $36,000.

a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Which is the better option?

Lease

Buy

Reference no: EM131984315

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