Reference no: EM133130752

1) A new power plant will cost Newburg $2.1M to build and $230K per year to operate for its 25-year life, when its salvage value is zero. The higher efficiency of the new plant will lower utility bills by $21 per year for each of the 20,000 residents of Newburg. The plant's air pollution will cost residents $3 each per year. If i = 5%, should the new power plant be built?

2) A new milling machine with an 8-year life will cost Brake-O-Matic $48,000. Net revenues for the 8 years are $12K, $14K, $15K, $16K, $10K, $8K, $8K, and $6K. The machine has an expected salvage value of $7500. Brake-O-Matic uses a present worth index that divides the PW of all future net revenues by the initial cost. If money costs Brake-O-Matic 12%, what is the present worth index?

3) You inherit $10K when you are 20. What is this worth when you are ready to retire at 65? Assume that the money can be invested at 7%, which is your interest rate for the time value of money. Compare this with an insurance policy that could be purchased with a lump-sum payment of $10K. That policy would pay you $100K at age 65 and your survivors $100K if you die sooner. How much value per year must you put on protecting your survivors for these to be equivalent?

4) Flincham Fine Paints can buy new painting equip[1]ment for $10,000. Its useful life is 5 years, after which it can be sold for $2000. Estimated annual costs are $1000, and it should save Flincham $3000 per year. If Flincham's MARR is 6%, should the equipment be purchased? Use PW analysis.