1. XYZ Construction Company is investigating the purchase of a new dump truck. Interest is 9%. The cash flows for two likely models are as follows: (20 pts) Annual Annual Salvage Model First Cost Operating Life Income Value Cost A $50,000 $2,000 $9.000 $10,000 10 yr B $80,000 $1.000 $12,000 $30,000 10 yr a) Using PW analysis, decide which truck the firm should buy, and explain why. b) Before the construction company can close the deal, the dealer sells out of Model B and can not get any more. What should the firm do now, and why? 2. North City must choose between two new snow-removal machines. The SuperBlower has a $70,000 first cost, a 20-year life, and an $8,000 salvage value. At the end of nine years, it needs a major overhaul costing $19,000. Annual maintenance and operating costs are $9,000. The Sno-Mover will cost $50,000, has an expected life of 10 years, and has no salvage value. The annual maintenance and operating costs are expected to be $12,000. Using a 12% interest rate, which machine should be chosen based on PW analysis? (15 pts) 3. A 30-unit apartment building should last 35 years, when it will need either to be replaced or to undergo major renovation. Assume the value of the building at 35 years will be 10% of its construction cost. Assume it will be sold and the cost of the land will be recovered in full. (20 pts) Land Building $3.2M $4.8M Annual Operating and Maintenance $850,000 Annual Property Taxes and Insurance (% of initial investment) Vacancy Rate 12% 12% a) If the owner wants a 15% rate of return, what does the monthly rent for each unit have to be (assume monthly compounding)? ENGG 820, February, 2024 b) If turning two units into an exercise facility would decrease the vacancy rate by five percentage points