Question

Perform a financial analysis for a project where you will show costs, discount factor for cost, and discounted costs as well as benefit, discount factor for benefit and discounted benefit for each year starting from year 0. Assume the projected cost and benefits for this project are spread over four years as follows: Estimated costs are $145,000 in year 0 and $45,000 each year in years 1, 2, and 3, and estimated benefits are $0 in year 0 and $210,000 each year in years 1, 2, and 3. Use a discount rate of 6.5% (six and half percent) and round the discount factors to two places after decimal. Calculate the NPV and the ROI. Show all computed and given values in tabular form. Which year does the payback occur? How did you arrive at that conclusion? List all necessary assumptions.

Answer #1

Perform a financial analysis for a project using the format
provided in Figure 4-5. Assume that the projected costs and
benefits for this project are spread over four years as follows:
Estimated costs are $200,000 in Year 1 and $30,000 each year in
Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $100,000
each year in Years 2, 3, and 4. Use a 10 percent discount rate, and
round the discount factors to two decimal places....

Net Present Value Problem
Discount rate
12%
Project 1
Year 1
Year 2
Year 3
Year 4
Year 5
TOTAL
Costs
220,000
35,000
35,000
25,000
20,000
?
Discount factor
?
?
?
?
?
Discounted costs
?
?
?
?
?
?
Benefits
0
80,000
80,000
65,000
60,000
?
Discount factor
?
?
?
?
?
?
Discount benefits
?
?
?
?
?
?
Discounted benefits – Discounted costs (NPV)
?
?
?
?
?
?
ROI =
???...

A project has the following cash flow.
Year
Costs
Benefits
0
$10,000
0
1
$1,000
$5,000
2
$1,000
$5,000
3
$2,000
$6,000
4
$2,0000
$3,000
Assuming a discount rate of 10%, estimate the following:
a)Net Present Value (NPV)
b)Discounted Benefit-Cost Ratio
c)Net discounted Benefit-Cost Ratio
d)Is the project feasible? Explain your answer

Complete the CBA in the table below.
Wetland Restoration Project: (Discount Factor = 5%)
Year = . 0 . 1 . 2 . 3 . 4 . 5
Benefits . 0 . 0 . 0 . $10000 . $12500 . $12500
Disc Factor
PV Benefits
Cost . $25,000 7500 . 500 . 500 . 500 . 500
PV Cost
a. Should the investment be made?

Sun King Computers is considering the following project. The
projected net cash flows are:
Initial Cost is $3.5 million; annual net cash flows are $815,000
per year for 7 years.
What is the Discounted Payback Period if the appropriate discount
rate is 7.5%?

Preform a benefit/cost analysis on the following
project:
Expected costs: $5,000 today, $5,000 a year from today,
and $5,000 two years from today
Expected revenue: $6,000 five years from today, $7,000
seven years from today, and $8,000 ten years from
today.
Assume a 6% discount rate
The Net Present Value (NPV) of the project
The benefit/cost ratio
Is the project worth undertaking?

A proposed project has the following costs and benefits:
Year
Costs
Benefits
0
2,000
1
1,000
2
1,000
3
1,000
4
2,000
5
2,000
Assuming an interest rate of 10%, the project's simple payback
period is most nearly _________.
A.
2 years
B.
4 years
C.
6 years
D.
5 years
E.
7 years
Using the information in Problem #3 and linear interpolation,
the project's discounted payback period is most nearly
___________.
A.
3.62 years
B.
2.33 years
C.
2.05...

You are considering building waste treatment plan. The project
lasts 40 years and occurs construction costs of $100 (all numbers
are in millions of $). Annual operation cost is $8, and annual
operation benefit is $15. Assume constant interest rest of 4.5%
a) Using annuity formula compute annuity factor, PV of benefits,
PV of costs, NPV of the project.
b) (Sensitivity analysis) What is the minimum annual benefit
needed to keep the project desirable? (NPV>0)

A public project with social discount rate of 6% has determined
that its initial costs will be spread out over the first 2 years of
construction. They will be $10,000,000 in year 0, $15,000,000 in
year 1, and $5,000,000 in year 2. Beginning in year 3 and
continuing until year 22, the project will have an annual operating
expense of $1,000,000. In addition, the city government sponsoring
the project will receive $100,000 per year in revenue because of
the project....

You are in charge of an EHR implementation project at your
clinic. Before the project can proceed, your upper management has
asked you to put together an ROI analysis on the costs and benefits
of the EHR implementation project. Your management is requiring
that you include cost benefit analysis for the next five years. EHR
implementation takes place in 2015 and benefits from the
implementation are assumed to begin right away in 2015. The ROI
analysis should include years 2015...

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