The University of Alaska Fairbanks, UAF is considering the conversion of an abandoned manufacturing plant adjacent to the school's campus into a 35,000-square-foot building to house the campus bookstore, a conference center, and a community computer lab. The project requires $30 million for renovation costs, additional annual fixed operating and maintenance expenses of $100,000, and variable expenses of $103 per square-foot over a 10-year period. The college expects to generate annual revenues of $7,810,000 over a 10-year period. The college uses a MARR of 7 percent per year in its economic evaluations of the new project. The market value of the building will be $2 million at the end of 10 years.. For part a, please calculate your answer to 4 decimal places. Leave in decimal form. Format: 0.0000 a. What is the internal rate of return, IRR, for this project? b. Is this project economically justified? 4 OA. No, the present worth is likely less than 0 OB. Yes, the future worth is greater than 0 OC. No, IRR is greater than 0 OD. Yes, the present worth is greater than 0

The University of Alaska Fairbanks, UAF is considering the conversion of an abandoned manufacturing plant adjacent to the school's campus into a 35,000-square-foot building to house the campus bookstore, a conference center, and a community computer lab. The project requires $30 million for renovation costs, additional annual fixed operating and maintenance expenses of $100,000, and variable expenses of $103 per square-foot over a 10-year period. The college expects to generate annual revenues of $7,810,000 over a 10-year period. The college uses a MARR of 7 percent per year in its economic evaluations of the new project. The market value of the building will be $2 million at the end of 10 years.. For part a, please calculate your answer to 4 decimal places. Leave in decimal form. Format: 0.0000 a. What is the internal rate of return, IRR, for this project? b. Is this project economically justified? 4 OA. No, the present worth is likely less than 0 OB. Yes, the future worth is greater than 0 OC. No, IRR is greater than 0 OD. Yes, the present worth is greater than 0

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $4 million to set up and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $8 million during this year and depreciation expense will be another $2 million. THSI will require no working capital for this investment. THSI's tax-rate is 20% Assume that THSI's cost of capital for this project is 15%. The net present value (NPV) of this temporary housing project is closest to:
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