Kindly answer all the questions with detailed calculations. Thanks.
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) Anneal Annual Salvage Model First Cost | Operating g Life Cost Income Value A $50,000 $2,000 $9,000 $10,000 | B | $80,000 $1,000 $12,000 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 8$3.2M Building $4.8M Annual Operating and Maintenance $850,000 Annual Property Taxes and Insurance (% of initial investment) 12% Vacancy Rate 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) Ifturning two units into an exercise facility would decrease the vacancy rate by five percentage points 4. Some equipment will be installed in a warehouse that a firm has leased for seven years. There are two alternatives: Cost $1,000 $1,500 Uniform Annual Benefit $550 $610 Useful life, years 3 4 At anytime after the equipment is installed, it has no salvage value. Assume that Alternatives A and B will be replaced at the end of their useful lives by identical equipment with the same costs and benefits. For a seven-year analysis period a 10% interest rate, use an annual cash flow analysis to determine which alternative should be selected? (20 pts) 5. Peter Minuit bought an island from the Manhattoes Indian in 1626 for $24 worth of glass beads and trinkets. The 1991 estimate of the value of the land on this island was $12 billion. What rate of return would the Manhattoes have received if they had retained the title to the island rather than selling it for $24? (10 pts) 6. Is economic feasibility a relevant factor when options for the control and disposal of hazardous wastes are being considered? How heavily should economic feasibility be weighted, and against which other factors (e.g., engineering and geotechnical feasibility, length of time until probable failure, maintenance requirements, human and eco-system health risks,...)? (15 pts)
