Problem Exelon is contemplating spending $500000 to upgrade their nuclear reacto

Question

Problem Exelon is contemplating spending $500000 to upgrade their nuclear reactor four years from now. After which they will be spending $15000 yearly on routine maintenance for the next 5 years. If the company wants to know the equivalent value now of the planned expenditure assuming Exelon MARR is 8%; a) Determine the engineering economy symbols and their value for each option. b) Construct the cash flow diagram c) Calculate the equivalent value now Problem 2 a) Maintenance costs for the fermentation units in a Kalona biofuel production plant are expected to be $80,000 three years from now and another $95,000 six years from now. If Kalona biofuel product plant wants to set aside enough money now to cover these costs, how much must be invested at an interest rate of 8% per year compounded semi- annually? b) An interest rate of 12% per year compounded quarterly is equivalent to what effective interest rate per year? Problem 3 Agro Allied incorporation plans to finance a site reclamation project that will require a 4-year cleanup period. If the company borrows $4.5 million now and wants to earn 16% per year compounded semiannually on its investment, how much will the company have to receive in a lump sum payment when the project is over? Formulas needed: 1. i per period - (1 + /m)-1

Explanation / Answer

1. Cash flow digram

B0 calculate the N.P.V

NPV of cash out-flow =Upgredetion cash out-flow $414,003.

NPV of cash out-flow =Maintinance cash out-flow $44,016

Problem 2.

Ans. A - Calculation of amount of investment @8%.

Amount need to invest now = $86,385

B. Ans

if annual interest rate is 12% and compound quarterly than effective rate of return =

Formula = Quarterly rate = (1 + annual rate )(1/4) – 1

    So, effective rate = 2.87%

Problem 3.

Principal = $45,00,000

Rate of interest = 16%

Time                 = 4year

Compaund        = sewmiannualy

Formula    = Amount = p [(1+r/2)/100]^2n

Amount = $8,329,186

year Upgredetion cash out-flow Maintinance cash out-flow 1 $1,25,000 2 $1,25,000 3 $1,25,000 4 $1,25,000 5 $15,000 6 $15,000 7 $15,000 8 $15,000 9 $15,000 Total $5,00,000 $75,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.