An agribusiness has the opportunity to invest in new energy saving equipment tha

Question

An agribusiness has the opportunity to invest in new energy saving equipment that will generate annual savings of $150,000 per year for the next 28 years. The equipment costs $535,185. The firm normally earns 12 percent on its capital investments.

determine the benefit-cost ratio for this project.

determine the equivalent annual cost (EAC)for this project.

I already have other parts done below please do the 2 questions above.

0 ($535,185) 1 ($535,185) 1-28 years $150,000 7.9844 $1,197,660 NPV=1197660-535185 $662,475 years Cash inflow/(cash outflow) 28% 0 ($535,185) 1 ($535,185) 1-28 years $150,000 3.5678 $535,170 NPV=(15) IRR= lower rate + lower rate NPV/lower rate NPV +higher rate NPV * difference in rates 27.99% Payback period 1 $150,000          15,000.00 2 $150,000        165,000.00 3 $150,000        315,000.00 4 $150,000        465,000.00 4+70185/150000 5 $150,000        615,000.00 4.4679 pay back period

Explanation / Answer

Benefit Cost ratio = Benefits / Cost = 150000 x 28 / 535185 = 7.85

EAC = Asset price x discount rate / 1 - ( 1 + Discount rate) ^ - number of years = (535185 x 0.12) / ( 1 - ((1.12) ^ -28)) = $67028.64

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