L Two methods are under consideration for producing the case for a portable hazardous material photoionization monitor. A plastic case will require an initial investment of $?' 5,000 and will have an annual operating cost of $2?,000 with no salvage after 2 years. An aluminum case will require an investment of $125,000 and will have annual costs of $1 2.0 00. Some of the equipment can he sold for $30,000 after its 3year life. At an interest rate of 10% per year, which case should be used on the basis of a gresent worth unolgsis? You should consider Least ommon Multiple of l 2 and 3} which is E: gears in y_our analis instead of 2 or 3 years! Question 2 (20 points) Two methods are under consideration for producing the case for a portable hazardous material photoionization monitor. A plastic case will require an initial investment of $75,000 and will have an annual operating cost of $27,000 with no salvage after 2 years. An aluminum case will require an investment of $125,000 and will have annual costs of $12,000. Some of the equipment can be sold for $30,000 after its 3-year life. At an interest rate of 10% per year, which case should be used on the basis of a present worth arlalysis? Use plastic case Use both cases Use aluminum case Use neither caseCompare the alternatives C and D on the basis of a present worth analysis using an interest rate of 11% per year and a study period of 10 years. Alternative First Cost OC, per Year Annual Increase in Operating Cost. per Year Salvage Value Life. Years $300 The present worth of alternative C is $ |:[ and that of alternative D is $ |:|. offers the lower present worth. Economic Evaluation and Investment Decision Methods second year, and increasing $500 each year thereafter. Using a minimum ROR of 10%, compare the present worth costs of 10-year service from Machines "A" and "B."3-3 Machine "A" has an initial cost of $50,000, an estimated service period of 10 years, and an estimated salvage value of $10,000 at the end of the 10 years. Estimated end-of-year annual disbursements for operation and maintenance are $5,000. A major overhaul costing $10,000 will be required at the end of 5 years. An alternate Machine "B" has an initial cost of $40,000 and an estimated zero salvage value at the end of the 10-year service period with estimated end-of-year disbursements for operation and maintenance of $8,000 for the first year, $8,500 for theOutline the main points you would make in a discussion of the statement: The efficient markets hypothesis states that the market price is always correct and therefore it is not possible for investors to make money from investing in shares. [10] An asset is worth 100 at the start of the year and is funded by a senior loan and a junior loan of 50 each. The loans are due to be repaid at the end of the year; the senior one with interest at 6% p.a. and the junior one with interest of at 8% p.a. Interest is paid on the loans only if the asset sustains no losses Any losses of up to 50 sustained by the asset reduce the amount returned to the investor in the junior loan by the amount of the loss. Any losses of more than 50 mean that the investor in the junior loan gets ( and the amount returned to the investor in the senior loan is reduced by the excess of the loss over 50. The probability that the asset sustains a loss is 0.25. The size of a loss, L, if there is one, follows a uniform distribution between 0 and 100. (i) Calculate the variances of return for the investors in the junior and senior loans. 81 (ii) Calculate the shortfall probabilities for the investors in the junior and senior loans, using the full return of the amounts of the loans as the respective henchmarks. [2] [Total 10]Outline the main points you would make in a discussion of the statement: The efficient markets hypothesis states that the market price is always correct and therefore it is not possible for investors to make money from investing in shares. [10] An asset is worth 100 at the start of the year and is funded by a senior loan and a junior loan of 50 each. The loans are due to be repaid at the end of the year; the senior one with interest at 6% p.a. and the junior one with interest of at 8% p.a. Interest is paid on the loans only if the asset sustains no losses Any losses of up to 50 sustained by the asset reduce the amount returned to the investor in the junior loan by the amount of the loss. Any losses of more than 50 mean that the investor in the junior loan gets ( and the amount returned to the investor in the senior loan is reduced by the excess of the loss over 50. The probability that the asset sustains a loss is 0.25. The size of a loss, L, if there is one, follows a uniform distribution between 0 and 100. (i) Calculate the variances of return for the investors in the junior and senior loans. 81 (ii) Calculate the shortfall probabilities for the investors in the junior and senior loans, using the full return of the amounts of the loans as the respective henchmarks. [2] [Total 10]