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sergey [27]
3 years ago
6

One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associate

d with each alternative are available. Use B/C analysis at a discount rate of 8% per year over a 20-year study period to determine which alternative should be selected. For analysis purposes only, assume that the benefits of reduced flood damage are available in years 3, 9, and 18 of the study period.
Retention Pond Channel
Initial Cost, $880,000 1,500,000
Annual Maintenance, $/Year 92,000 30,000
Reduced Flood Damage, $ 200,000 625,000
Business
1 answer:
pochemuha3 years ago
8 0

Answer:

Since the incremental B/C of 58.21 is less greater 1, it implies that the alternative that should be selected is Channel.

Explanation:

The alternative that should be selected can be determined using the Benefit-Cost (B/C) analysis as follows:

Incremental B/C = [Incremental Flood damage savings * ((1 + r)^-3 + (1 + r)^-9 + ((1 + r)^-18)] / [Incremental initial cost + (Incremental Annual Maintenance cost * ((1 - (1 / (1 + r))^n) / r))] ............... (1)

Where:

Incremental initial cost = Channel initial cost - Retention pond initial cost = $1,500,000 - $880,000 = $620,000

Incremental Annual Maintenance cost = Channel Annual Maintenance - Retention pond Annual Maintenance = $30,000 - $92,000 = -$62,000

Incremental flood damage savings = Channel Incremental flood damage savings - Retention pond incremental flood damage savings = $625,000 - $200,000 = $425,000

r = Discount rate = 8%, or 0.08

n = number of years = 20

Substituting all the relevant values into equation (1), we have:

Incremental B/C = [425000 * ((1+0.08)^-3 + (1+0.08)^-9 + (1+0.08)^-18)] / [$620,000 - ($62,000 * ((1 - (1 / (1 + 0.08))^20) / 0.08))]

Incremental B/C = $656,340.35 / $11,274.86

Incremental B/C = 58.2127235166936

Rounding to 2 decimal places, we have:

Incremental B/C = 58.21

Since the incremental B/C of 58.21 is less greater 1, it implies that the alternative that should be selected is Channel.

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Answer:

The correct answer is $56,000.

Explanation:

According to the scenario, the given data are as follows:

Average checks per day = $14,000

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Interest rate = 0.018% per day

So, we can calculate the company's float by using following formula:

Company's Float = Average checks per day × Days in clearing

By putting the value in the formula, we get

Company's Float = $14,000 × 4

= $56,000

8 0
3 years ago
​(Cost of​ debt) Belton Distribution Company is issuing a ​$1 comma 000 par value bond that pays 8.9 percent annual interest and
ioda

Answer:

After tax cost of debt is 7.69%

Explanation:

The after tax cost of debt can be computed by first of all determining the pre-tax cost of debt .

The pre-tax of debt is the yield to maturity computed using the rate formula in excel as follows:

=rate(nper,pmt.-pv,fv)

nper is the number of times the bond would pay coupon interest over the entire bond life ,which is 15 years multiplied by 2=30

pmt is the semi-annual interest which is $1000*8.9%/2=$44.5

pv is the current price of the bond at $962

fv is the face value of the bond at $1000

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this is the semi-annul yield ,annual yield is 9.38%

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5 0
3 years ago
Given the following owner’s income and expense estimates for an apartment property, formulate a reconstructed operat-ing stateme
scoundrel [369]

Answer:

$363,000

Explanation:

Calculation for the property’s indicate market value.

First step

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PGI: $66,000

(10 units x $550 x 12 month )

Less: Vacancy Loss(3,300)

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EGI:62,700

Less: Operating Expenses

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Heat1,700

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Water3,700

Maintenance4,800

Management3,000

Reserve for CAPX2,800

Total Operating Expenses$22,800

Net Operating Income$39,900

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Second step is to find the property’s indicate market value.

Using this formula

Market Value=NOI/ Ro

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Market Value=$39,900/11.0%

Market Value=$363,000

Therefore the property’s indicate market value is

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6 0
3 years ago
Renue Spa had the following balances at December 31, Year 1: Cash of $15,000, Accounts Receivable of $61,000, Allowance for Doub
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Answer:

Explanation:

provision For Doubtfull Accounts Yr.3

Opening Bal.                                        =                         3,750

For the Year (215000*2%)                   =                          4300

Write-off                                                =                        -2100

Closing Balance (3750+4300-2100)  =                        5950

Account Recievable For Yr.3

Opening Bal.                                        =                         61000

Sales For the Year (215000*2%)         =                          215000

Provision For the Year                         =                        -4300

Cash Recived from Debtors                =                        218000

Closing Balance                                   =                        53700

Net Realizable Value of Recievables

Closing Debtors                                    =              53700  

Closing Provision                                  =              -5650

Net Realizable Value                             =             47750

C) Collectible Amount              

Provision For the Year                          =            4300

Previously writte of recoverred          =            -500

Total bad debts for the year                 =            3800    

5 0
3 years ago
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Liula [17]

Answer: reduce output.

Explanation:

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In a Competitive Market, Price is the same as Marginal revenue which means that Marginal revenue here is $25 and the Marginal Cost is $26. At this quantity of output, the Marginal Cost is larger than the Marginal revenue.

Company should therefore reduce output to a quantity where Marginal Cost will equal Marginal revenue.

6 0
2 years ago
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