PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 22, Problem 11PS
Summary Introduction
To discuss: The ways to undertake a more complete analysis.
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You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure
hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the
basis of a present worth comparison at an interest rate of 10% per year? Why is yours the correct choice?
Alternative
First Cost
Maintenance cost, per
Year
Salvage Value
Life
X
$-25,000
$-8000
$1,000
5 years
Y
$-55,000
$-2000
$2,000
5 years
and that of alternative Y is $1
The present worth of alternative X is $.
Alternativ (Click to select) is selected by the company.
You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic
hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present
worth comparison at an interest rate of 13% per year? Why is yours the correct choice?
Alternative
First Cost
X
$-45,000
Maintenance cost, per
$-9000
Year
Salvage Value
$1,000
Life
5 years
Y
$-55,000
$-4000
$6,500
5 years
The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4
Alternative X
is selected by the company.
Consider palletizer at a bottling plant that has a first cost of $134,338, has operating and maintenance costs of $17.980 per year, and an estimated net salvage value of $37,509 at the end of 30 years. Assume an interest rate of 8%. What is the future worth of this project?
Enter your answer as follow: 123456.78
Chapter 22 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 22 - Real options Respond to the following comments. a....Ch. 22 - Prob. 2PSCh. 22 - Real options True or false? a. Real-options...Ch. 22 - Prob. 4PSCh. 22 - Real options Describe each of the following...Ch. 22 - Expansion options Look again at the valuation in...Ch. 22 - Expansion options Look again at Table 22.2. How...Ch. 22 - Prob. 8PSCh. 22 - Timing options Look back at the Malted Herring...Ch. 22 - Prob. 10PS
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