plz , solve like this method or do not solve it

PAYBACK PERIOD ANALYSIS Payback analysis (also called payout analysis) is a form of analysis that uses a PW equivalence relation. Payback can take two forms: one for i = 0% (also called discounted payback) and another for i > 0% (also called no- return payback). The payback period np is the time, usually in years, it will take for estimated revenues and other economic benefits to recover the initial investment P and a specific rate of return i %. The np value is generally not an integer. The payback period should be calculated using a required refun that is greater than 0%. In practice, however, the payback period is often determined with a no- return requirement (1 = 0%) to initially screen a project and determine whether it warrants further consideration. 00:4117/06/2012 To find the discounted payback period at a stated rate i > 0%. calculate the years that make the following expression correct. 0 = -P+ SNCF/P/F1,1) 18.4) NCF is the estimated net cash flow for each year. where NCF - receipts - disbursements. If the NCF values are equal each year, the P/A factor may be used to find lip 0 = -P + NCF(P/Al) [8.51 After years, the cash flows will recover the investment and a return of t%. If. in reality, the asset or alternative is used for more than my years, a larger retum may result, but if the useful life is less than Wp years, there is not enough time to recover the initial investment and the return. It is very important to realize that in payback analysis all ner cash flows occurring after ny vears are neglected. This is significantly different from the approach of all other evaluation methods (PW. AW, ROR. B/C) where all cash flows for the entire useful life are included. As a result, payback analysis can unfairly bias alternative selection. Therefore, the pay- back period should not be used as the primary measure of worth to select an alternative. It provides initial screening or supplemental information in conjunc- tion with an analysis performed using the PW or AW method. 09:45 17/06/2012 22 No-retur payback analysis determines ne at i = 0%. This n value serves merely as an initial indicator that a proposal is viable and worthy of a full eco- nomic evaluation. To determine the payback period, substitute i = 0% in Equation [8.4) and find my 0 = -P+NCE, 18.61 For a uniform net cash flow series, Equation [86] is solved for 1, directly NCF 18.71 0941 17/06/2012 EXAMPLE This year the owner founder of J&J Health allocated a total of 18 million to develop new treatment techniques for sickle cell anemia, a blood disorder that primarily affects people of African ancestry and other ethnic groups, including people who are of Mediterranean and Middle Eastern descent. The results are estimated to positively impact net cash flow starting 6 years from now and for the foreseeable future at an average level of 56 million per year. a. As an initial screening for economic viability, determine both the no-retum and / - 10% payback periods b. Assume that any patents on the process will be awarded during the sixth year of the project. Determine the project ROR if the 56 million net cash flow were to contime for a total of 17 years through year 22), when the patents legally expire. Solution A. The NCF for years tough 5 is so and 56 million thereafter. Let unter of years beyond 5 when NCFO For no-rerum payback apply Equation [86]. And for- 10 apply Equation [84] In million mit 090-18 + $(0)*(6) *3-3-3-8 years TO 6--18 + 5(0) + 6(P/1.1046.-) (P/F.10%.5) (P/.4.10.) 48317 6(0.6209) - 5+-5+7 - 12 years (rounded up) b. The PW relation to determiner over the 22 years is satis ed al 15.02. In 5 million units. PW is PW = -18 + 6(P/4.196.17) (P/F/5) The conclusions are a 10% retum requirement increases payback from 3 to 12 years, and when cash flows expected to occur after the payback period are considered. project retum increases to 15 per year 09:41 17/06/2012 A waste water tanks situated near the main plant receives sludge daily. When the tanks is full, it is necessary to remove the sludge to a site located 8.2 kilometers from the main plant Currently, when the tanks are full, the sludge is removed by pump into a truck and hauled away. This process requires the use of a portable pump that initially costs $800 and has an 8-year life. The company pays a contract individual to operate the pump and oversee environmental and safety factors at a rate of $100 per day, plus the truck and driver must be rented for $200 per day. The company has the option to install a pump and pipeline to the remote site. The pump would have an initial cost of $1600 and a life of 10 years and will cost $3 per day to operate. The company's MARR is 10% per year. (a) If the pipeline will cost $12 per meter to construct and will have a 10-year life, how many days per year must the tanks require pumping to justify construction of the pipeline? (b) If the company expects to pump the tanks once per week every week of the year, how much money can it afford to spend now on the 10-year life pipeline to just break even? 21/10/2021 08:14 PAYBACK PERIOD ANALYSIS Payback analysis (also called payout analysis) is a form of analysis that uses a PW equivalence relation. Payback can take two forms: one for i = 0% (also called discounted payback) and another for i > 0% (also called no- return payback). The payback period np is the time, usually in years, it will take for estimated revenues and other economic benefits to recover the initial investment P and a specific rate of return i %. The np value is generally not an integer. The payback period should be calculated using a required refun that is greater than 0%. In practice, however, the payback period is often determined with a no- return requirement (1 = 0%) to initially screen a project and determine whether it warrants further consideration. 00:4117/06/2012 To find the discounted payback period at a stated rate i > 0%. calculate the years that make the following expression correct. 0 = -P+ SNCF/P/F1,1) 18.4) NCF is the estimated net cash flow for each year. where NCF - receipts - disbursements. If the NCF values are equal each year, the P/A factor may be used to find lip 0 = -P + NCF(P/Al) [8.51 After years, the cash flows will recover the investment and a return of t%. If. in reality, the asset or alternative is used for more than my years, a larger retum may result, but if the useful life is less than Wp years, there is not enough time to recover the initial investment and the return. It is very important to realize that in payback analysis all ner cash flows occurring after ny vears are neglected. This is significantly different from the approach of all other evaluation methods (PW. AW, ROR. B/C) where all cash flows for the entire useful life are included. As a result, payback analysis can unfairly bias alternative selection. Therefore, the pay- back period should not be used as the primary measure of worth to select an alternative. It provides initial screening or supplemental information in conjunc- tion with an analysis performed using the PW or AW method. 09:45 17/06/2012 22 No-retur payback analysis determines ne at i = 0%. This n value serves merely as an initial indicator that a proposal is viable and worthy of a full eco- nomic evaluation. To determine the payback period, substitute i = 0% in Equation [8.4) and find my 0 = -P+NCE, 18.61 For a uniform net cash flow series, Equation [86] is solved for 1, directly NCF 18.71 0941 17/06/2012 EXAMPLE This year the owner founder of J&J Health allocated a total of 18 million to develop new treatment techniques for sickle cell anemia, a blood disorder that primarily affects people of African ancestry and other ethnic groups, including people who are of Mediterranean and Middle Eastern descent. The results are estimated to positively impact net cash flow starting 6 years from now and for the foreseeable future at an average level of 56 million per year. a. As an initial screening for economic viability, determine both the no-retum and / - 10% payback periods b. Assume that any patents on the process will be awarded during the sixth year of the project. Determine the project ROR if the 56 million net cash flow were to contime for a total of 17 years through year 22), when the patents legally expire. Solution A. The NCF for years tough 5 is so and 56 million thereafter. Let unter of years beyond 5 when NCFO For no-rerum payback apply Equation [86]. And for- 10 apply Equation [84] In million mit 090-18 + $(0)*(6) *3-3-3-8 years TO 6--18 + 5(0) + 6(P/1.1046.-) (P/F.10%.5) (P/.4.10.) 48317 6(0.6209) - 5+-5+7 - 12 years (rounded up) b. The PW relation to determiner over the 22 years is satis ed al 15.02. In 5 million units. PW is PW = -18 + 6(P/4.196.17) (P/F/5) The conclusions are a 10% retum requirement increases payback from 3 to 12 years, and when cash flows expected to occur after the payback period are considered. project retum increases to 15 per year 09:41 17/06/2012 A waste water tanks situated near the main plant receives sludge daily. When the tanks is full, it is necessary to remove the sludge to a site located 8.2 kilometers from the main plant Currently, when the tanks are full, the sludge is removed by pump into a truck and hauled away. This process requires the use of a portable pump that initially costs $800 and has an 8-year life. The company pays a contract individual to operate the pump and oversee environmental and safety factors at a rate of $100 per day, plus the truck and driver must be rented for $200 per day. The company has the option to install a pump and pipeline to the remote site. The pump would have an initial cost of $1600 and a life of 10 years and will cost $3 per day to operate. The company's MARR is 10% per year. (a) If the pipeline will cost $12 per meter to construct and will have a 10-year life, how many days per year must the tanks require pumping to justify construction of the pipeline? (b) If the company expects to pump the tanks once per week every week of the year, how much money can it afford to spend now on the 10-year life pipeline to just break even? 21/10/2021 08:14