please do 8.19 only
CHAP 8] NPV, ROR, PBP, BCR 75 Supplementary Problems 813 A new plant to produce tractor gears requires an initial investment of $10 million. It is expected that supplemental investment of S4 million will be needed every 3 years to update the plant. The plant is expected to start producing gears 2 years after the initial investment is made at the start of the third year). Revenues of million per year are expected to begin to flow at the start of the fourth year. Annual operating and maintenance costs are expected to be 2 million per year. The plant has a 15-year life. Lis the annual cash flows Ant. CF.--510.000.000, CF - CF, -, CF, - -6000000, CF.-CF-CF-CF-CF-CF- CF - CF-5300000, CF - CF - CF - CF --$1000000 8.14 What is the NPV of the plant in Problem 8.13 7 the interest rate is 10% per yem, compounded annually? Ans. -5533661533 &15 Is the plant described in Problems 8.13 und 8.14 an economically acceptable investment? Ans. Na, because the NPV is negative 8.16 A different plant from the one described in Problem 8.13 can be built for an initial investment of 513 million and so supplemental investments. All other data are the same as in Problems 8 13 and 814. (a) Compute the net present value. (b) Is this plant an economically acceptable investment? Ans.(a) +5R38 206.47. (b) yes &17 Is the investment described is problem 8.16 stall eccecmically acceptable # the interest rate is 15% per year, compounded annually? Use the nat present value method Ans. Nec NPV --$3634288 520 8.18 Compute the NPV of an investment with CF-350000 and CF, 512000 - ...) the annual interest rate compounded annually, is (a) 8%. (b) 10%. (c) 12%. (d) 15%. (c) Interpret the results Ans.(a) 55473.37. (b) $226253; (c)-5663.98 (d) -54586.74. (e) The investment is not economically acceptable when the interest rate is 12% or greater in which case the present worth of the cash flowsts less than the present worth the investment 819 Is the conclusion Problem is changed the interest rate is 3% per year, compounded an ally! Ans. Ne NPV-51928 60702 8.20 What is the NPV the investment described in Problem 8.13 the interest rate is % per year. compounded annually? Ans. SA845.06 8.21 What can be said about the ROR the plant of Problem 8.13. in view of the results of Problems 8.19 and 8.2017 Ans. There is at least one value of /* between 3 and 5%. 122 Approximate the ROR for Problem 8.18 by interpolation between the results of Problem 8.1866) and (c) Ans. 10.454% 8.23 Compute the payback period for the investment (a) Problem 8.3. (b) Problem 8.16, (c) Problem *18 Ans.(a) PBP = 11 years; (b) PBP = 8 years (e) PBP = 4.17 years 8.24 What is the NPV or the plant described Problem 8.16, if the interest rate : 12% per you compounded annually? Ans. -S1 195 881.54 What is the ROR the plant described in Problem 8.167 Solve by interpolation, using the NPV data from Problems 8.16 and 8:24 Ans. 10834% What can be sand about the ROR for a set of positive cash flows!! Ans. Since the NPV is positive for every positive, no ROR exists 125 8.25
