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Could you make it quick please 1) A payment of $30000 (actual dollars) is to be received 10 years hence, followed by a $40,000 (actual
Could you make it quick please
1) A payment of $30000 (actual dollars) is to be received 10 years hence, followed by a $40,000 (actual dollars) payment 17 years from the present. If over this time span the annual inflation rate is 9% (please see the table for your value) while the expected annual market interest rate (combined rate of interest) is 9%, calculate the present equivalent of these two payments using a) Actual-dollar analysis (using the combined interest factor). b) Constant-dollar analysis (converting to constant dollars first and then using inflationfree interest rate). Hint: Use inflation free rate given below in your calculations. 2) A central air conditioning unit was purchased in 1978 for $500.000 (please see the table for your value) and had an expected life of 10 years. The salvage value for the unit at that time was expected to be $250.000 (please see the table for your value). What will be the book value at the end of 7 years for: a) Straight-line depreciation? b) Double-declining-balance depreciation? 3) In 1979, a company purchased a $120,000 asset with an estimated life of 10 years and expected salvage value of $15.000 (please see the table for your value). What will be the depreciation amount in 5th year and book value at the end of 5 years for: a) The straight-line method b) The double-declining-balance method 4) The federal government is planning a hydroelectric project for a river basin. In addition to the production of electric power, this project will provide flood control, irrigation, and recreation benefits. The estimated benefits and costs that are expected to be derived from the three alternatives under consideration are listed below Alternatives Initial cost S 29.500.000 $30.500.000 $50.700.000 Power sales $ 1.000.000 $ 1.200.000 $ 1.800.000 Flood control savings $ 250.000 $ 350.000 $ 500.000 Irrigation benefits $ 350.000 $ 450.000 $ 600.000 Recreation benefits $ 100.000 $ 200.000 $ 350 000 Operating and $ 200.000 maintenance costs $ 250.000 $ 350.000 The interest rate is 5% and the life of each project is estimated at 50 years. a) Using incremental benefit-cost analysis, determine which project should be selected b) Calculate the benefit-cost ratio for each alternative. Is the best alternative selected if the alternative with the maximum benefit-cost ratio is chosen? c) If the interest rate is 8%, what alternative will be chosen? 5) A municipal government is considering the construction of a new county stadium in its city, and three alternatives have been selected for comparison: B1: Consists of the construction of a football stadium and the use of the existing stadium for baseball games. B2. Consider the construction of a multi-purpose stadium for both football and baseball games B3: Requires the construction of a stadium for football and a stadium for baseball The total construction costs are $16 million, 523 milion, and $14 million, respectively. for alternatives B1, B2, and B3. The relevant costs and benefits of these alternatives are shown below Revenue to the city from licket sales outside the city Image and other intangible benefits Maintenance costs Increase in hotel revenues from fans living outside the city Loss in property values due to increased traffic ALTERNATIVES B2 83 $900,000 $1,000,000 $600,000 $300,000 $500 000 $300,000 $300 000 $350 000 $400,000 $380,000 $850,000 $340,000 $90,000 $270,000 $410,000 Expected life for Alternative B1 is 30 years, for Alternative B2 is 35 years, for Alternative B3 is 30 years a 10 % interest rate is used and using benefitcost analysis from the city's point of view, which of the three proposed alternatives should be selected Step by Step Solution
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