. The HBNA plant may generate a revenue base of $50 million per year. 3. The pre
ID: 1152391 • Letter: #
Question
. The HBNA plant may generate a revenue base of $50 million per year. 3. The president of the Italian parent company Baleez may have reason to be quite pleased with this projection for the simple reason that over the 5-year planning horizon, the expected revenue would total $250 million, which is $50 million more than the initial investment. With money worth 10% per year, calculate and determine will the initial investment be recovered over the 5-year horizon with the time value of money considered? 4. HBNA steel plant states that a large investment is planned for 2020. Most large investment commitments are actually spread out over several years as the plant is constructed and production is initiated. Further investigation may determine, for example, that the $200 M is a present worth in the year 2020 of anticipated investments during the next 4 years (2021 through 2024). Assume the amount planned by HBNA steel plant for 2021 is $100 M with constant decreases of $25 M each year thereafter from 2021 through 2024. As before, assume the time value of money for investment capital is 10% per year to determine the equivalent (a) present worth, and (b) annual series amounts, if public (c) Draw cash flow diagram.Explanation / Answer
Ans for 3
Initial investment=$200M
Present worth for revenue=50/(1.1)+50/(1.1)^2+50/(1.1)^3+50/(1.1)^4+50/(1.1)^5=$189.54M
Hence Time value of revenue=$189.5M<Initial investment=$200M
Initial investment will not be recovered in 5 years
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.