Question 17 15. maintenance at a cost of $50.000 per year during its 20 year lif

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Question 17

15. maintenance at a cost of $50.000 per year during its 20 year life. If benefits of $3 The initial cost of a federal highway project is $4 million. The road will require 00,000 per year have been identified, the Benefit to Cost Ratio (BCR) value at an interest rate of 6%, per year is closest to: (5 Pts) a. 0.72 B.C = Benefits / total cost 0.75 c. 0.88 d. 1.0 e. 1.36 A machine costs $100,000 when new has a 15 year lifetime and a salvage value equal to 20% of its original value. The capital recovery costs. interest rate of 8% 16. based on an per year, compounded annually is closest to: (4 Pts) a. $12,518 b. $12,833 c. $13,777 d. $10,946 e. $21,111 MMS Corp. borrows $2,350,000 today for a new building. The loan is an equal principal payment loan with an APR of 7.12% compounded monthly. Payments are due monthly and the term of the loan is 8 years. The current portion of debt in month 13 is closest to: (5 Pts) 17. a. $302,650 b. $293,750 c. $288,560 d. $275,660 e. $261,111

Explanation / Answer

15 ) a) 0.72

Benefit cost ratio = Present Value of Net Cash Flow / Present Value of Investment

= $250,000 * (PVAF,6%,20) / $4,000,000

($250,000 * 11.4699 )/ $4,000,000

= 0.72

16) d) $10,946

We must find the capital recovery costs. The data are

I = $100,000            S = $20,000

MARR = 8%        Useful life N = 15

CR = I(A/P, MARR, N) – S(A/F, MARR, N)

= $100,000(A/P,8%,15) – $1000(A/F, 8%,15)

= $100,000*(0.1168) – $20,000*(0.0368)

= $11,680 - $734

= $10,946

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