answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
nata0808 [166]
2 years ago
3

You are thinking of making an investment in a new plant. The plant will generate revenues of $1 million per year for as long as

you maintain it. You expect that the maintenance cost will start at $50,000 per year and will increase 5% per year thereafter. Assume that all revenue and maintenance costs occur at the end of the year. You intend to run the plant as long as it continues to make a positive cash flow (as long as the cash generated by the plant exceeds the maintenance costs). The plant can be built and become operational immediately. If the plant costs $10 million to build, and the interest rate is 6% per year, should you invest in the plant?
Business
1 answer:
ICE Princess25 [194]2 years ago
3 0

Answer:

The project's NPV is $3,995,074 and the IRR is 9%, so you should invest in the plant.

Explanation:

total investment $10 million

interest rate 6%

yearly revenues $1 million

maintenance cost per year:

$50,000

then increase by 5% during the following years

I used an excel spreadsheet to help me find out how many years the plant would operate. The plant should continue to operate for 62 years. In the same excel spreadsheet I calculated the net cash flow per year and the NPV of the project using a 6% discount rate.

The project's NPV is $3,995,074 and the IRR is 9%, so you should invest in the plant.

Download pdf
You might be interested in
Assume millerville was producing 30 scooters and 10 helicopters before specialization. if millerville wanted to maintain product
lutik1710 [3]

As long as the production times and price points were simular then it would. However, with assuming it costs much more of a hellicoper then it does for a scooter to be produced they would definitly benefit from trading one schooter for one helicopter with Jamestown. They will benefit due to time and money that is being saved.

7 0
2 years ago
Nikita is the manager of a local small hotel. Just today Nikita received word that a major convention will be coming to town nex
Ne4ueva [31]

Answer:

Contingency viewpoint or approach of management

Explanation:

According to the contingency viewpoint, there is no particular standard of management. Rather, the type of management style adopted including decisions made depends on the type of situation that the organization is facing at the particular time. Nikita in this scenario is using the contingency approach since she is making decisions based on the upcoming convention.

3 0
2 years ago
Which method of analysis does not classify variables as dependent or independent?
Masja [62]

Answer:

C) cluster analysis

Explanation:

Regression analysis. The regression analysis determines the relationship between the two variables. Thus, one of these quantities (X) is given in advance(dependent) and is not random. The second value (U) is the independent and random number. The randomness of the second quantity can be explained for two reasons. First: Measuring the random number U, which depends on the number X, is associated with certain errors; second: The value of U may depend on other uncontrollable factors, in addition to being dependent on the value of the corresponding X value. In this case, we need to talk about the distribution of the random variable U against each value of the X variable.  The main purpose of the regression analysis is to build a mathematical model that takes into account the factors affecting the physical process using experimental data and evaluating its accuracy.  The least squares method is used for statistical estimation of the mathematical model's suitability to experimental data.

Discriminant analysis is a method used in statistics, pattern recognition, and machine learning to find a linear combination of attributes that define or distinguish two or more classes or events. The resulting combination can be used as a linear classifier or more often to reduce the size before classifying.  LDA is closely related to variance analysis (ANOVA) and regression analysis, which try to express a dependent variable as a linear combination of other properties or dimensions. However, while variance analysis uses qualitative independent variables and a continuous dependent variable, discriminant analysis has continuous independent variables and a qualitative dependent variable.

Cluster analysis or clustering is a problem of grouping a number of objects. In this problem, objects must be in some way more similar to those in other groups to accommodate the same clusters (clusters). One of the main problems with data transmission is a common technique used in statistical data analysis. It is also used in machine learning, pattern recognition, image analysis, data retrieval, bioinformatics, data compression and computer graphics.

One-way analysis of variance (ANOVA) is used to calculate the significance of the difference between three and more independent means in a normally distributed series. ANOVA compares the arithmetic means of three or more groups alone; ANOVA result is also significant when at least one of these comparisons is significant. To measure the significance it will have the relation to the regression analysis that's why there will be dependent and independent variables as well.

6 0
2 years ago
Read 2 more answers
Jannusch Corporation makes one product. Budgeted unit sales for July, August, September, and October are 10,000, 11,600, 13,300,
yarga [219]

Answer:

Option A is Correct one.

<u>The budgeted required production for August is 11,600 units.</u>

Explanation:

Beginning inventory=(20%*11600)=2320

Add:production(balance)(11600+2660-2320)=11940 units(B).

Less:ending inventory(20%*13300)=(2660)

Sales=11600 units

8 0
2 years ago
A company needs $8 million in new capital for expanded composites manufacturing. It is offering small-denomination corporate bon
Softa [21]

Answer:

nominal interest rate = 4% annual

effective interest rate =  5.56% annual

Explanation:

the bond's nominal rate is basically the coupon rate

to calculate the bond's effective interest rate we must calculate its yield to maturity:

YTM = [coupon + [(face value - present value) / n]} / [(face value + present value) / 2]

  • coupon = $1,000 x 4% x 1/2 = $20
  • FV = $1,000
  • PV = $800
  • n = 40

YTM = [20 + [(1,000 - 800) / 40]} / [(1,000 + 800) / 2]

YTM = 25 / 900 = 2.777 semiannual ⇒ 5.56% annual

6 0
2 years ago
Other questions:
  • Alex invested $10,500 in an account that pays 6 percent simple interest. how much money will he have at the end of four years?'
    8·1 answer
  • A more efficient means of processing algae to produce an anticancer drug is discovered. as a result, the supply curve for the dr
    9·1 answer
  • After hiring 151 units of the variable input, labor, a firm determines the MFC to be $.30 and the MRP to be $.33. The firm shoul
    15·1 answer
  • The terms of trade are acceptable if the price is ________ the seller’s opportunity cost and ______ the buyer’s opportunity cost
    15·1 answer
  • A rectangular field with one side along a river is to be fenced. Suppose that no fence is needed along the river, the fence on t
    10·1 answer
  • On December 15, Lisa, a landlord, entered into an oral agreement with Tom to lease apartment 5W to Tom for one year starting on
    6·1 answer
  • A buyer of a 2003 Protege S Hatchback has a choice of 0% financing for 60 months or a $3,600 rebate. He plans to make no down pa
    7·1 answer
  • Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service depar
    10·1 answer
  • All of these are pitfalls an organization should avoid in strategic planning except:_____________.1. using plans as a standard f
    7·1 answer
  • Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities wil
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!