A public-private in itiative in Texas will signifi cantly expand the wind-genera
ID: 2453640 • Letter: A
Question
A public-private initiative in Texas will significantly expand the wind-generated energy through- out the state. The cash flow for one phase of the project involving Central Point Energy, a trans-mission utility company, is shown. Given reinvestment rate of 14% per year for excess funds and 10 % per year for borrowing rate for extra funds, determine: given MARR = 12%
Year
Net cash flow
0
-50000
1
+22000
2
+38000
3
-2000
4
-1000
5
+5000
Year
Net cash flow
0
-50000
1
+22000
2
+38000
3
-2000
4
-1000
5
+5000
Explanation / Answer
Answer a:
There are 5 ROR values are expected.By taking-
1. Reinvestment rate
2. Borrowing rate
3. MARR
4. Internal rate of return
5. External rate of return
Answer b:
Answer c:
Preject is not economic viable as MAAR(12%) is higher than ERR(11%).
Description Year 1 Year 2 Year 3 Year 4 Year 5 Initial Outlay Cash Inflows 22,000.00 38,000.00 (2,000.00) (1,000.00) 5,000.00 Future value factor @ 10% 1.46 1.33 1.21 1.10 1.00 Future value in $ @ 10%(Cash flows * factor) 32,210.20 50,578.00 (2,420.00) (1,100.00) 5,000.00 Total Future Values 84,268.20Related Questions
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