Question
Your friend wants to have his own rye whiskey distillery. Here are the options to do so. Since you are a good friend, he asks
Your friend wants to have his own rye whiskey distillery. Here are the options to do so. Since you are a good friend, he asks you to decide for him which is best? (You value money at a rate of 4.5% per quarter year.)
Options: | A | B | Units |
Installed cost: | $10.K | $15.K | USD |
Uniform annual benefit: | $1.600 | $1.5K | USD |
Useful life: | 10 | 20 | Years |
The salvage value at the end of the useful life of each alternative is zero. Evaluate at 2.44% semiannually, compounded weekly.
Costs for Rebuilding Cold Mountain
The folks at the Community Town Association asked me to repair and infill tunnels in Cold Mountain. Above are estimated costs [$M]. What is the equivalent annual for costs at my standard rate of 10%? In case you cant tell, the costs increase by 10% per year after year 2. They will pay me $1630M in year 8, calculate the ROR in the old method ((Revenue-Costs)/Cost) and by the correct (according to my finance guys) method of ROR analysis (IRR).
Community Town Association of the Lower Belt of San Angelica de Sebastian
These people need an aqueduct for water supply. Which option is best if evaluated at 5%?
- McDuck Mountain Tunnel: Construction cost: $5.5M. Annual maintenance: $10K. Lifetime: should last forever.
- Scrooge Mountain Pipeline: Construction cost: $4.5M. Annual maintenance: $15K. Lifetime: 30 years.
1.) 2.44% per semiannual period, compounded weekly when converted to effective yearly is ______%
2.) The AW for costs to refill Cold Mountain is _____________________.
3.) What is the difference between the ROR calculated by (Made-Cost)/Cost and the ROR done from analysis of a cash flow (IRR)? A.) IRR is the amount of return or rate of return per year. ROR is just a flat amount of made vs. spent. B.) ROR is amount per year and IRR is the rate of return for how much it cost to start the project. C.) IRR is decided by the central bank and the loan amount but ROR does not account for debt rate.
4.) Therefore, the best Rye Whiskey distillery option is __________. A.) OPTION A B.) OPTION B C.) OPTION C D.) OPTION B & A Are equivalent. E.) Option C & A are equivalent.
Costs for Rebuilding Cold Mountain 200 180 160 140 120 100 80 60 40 20 0 0 1 2 3 4 5 6 7 8 Costs for Rebuilding Cold Mountain 200 180 160 140 120 100 80 60 40 20 0 0 1 2 3 4 5 6 7 8Step by Step Solution
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