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    Yosof Khaled
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    1) A company is considering purchasing equipment for $6,000 that would increase annual cash inflows by $2,200 over its 6 year useful life. With a required 20% return, the NPV is positive so the equipment should be purchased. 2) A project requires $225,000 initial investment and is expected to generate cash inflows of $95,000, $80,000, $60,000, and $55,000 over 4 years. With a minimum 12% discount rate, the NPV and IRR should be calculated to see if it meets requirements. 3) Of the 3 proposals listed, proposal X has the highest positive NPV and should be chosen as the most

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    1) A company is considering purchasing equipment for $6,000 that would increase annual cash inflows by $2,200 over its 6 year useful life. With a required 20% return, the NPV is positive so the equipment should be purchased. 2) A project requires $225,000 initial investment and is expected to generate cash inflows of $95,000, $80,000, $60,000, and $55,000 over 4 years. With a minimum 12% discount rate, the NPV and IRR should be calculated to see if it meets requirements. 3) Of the 3 proposals listed, proposal X has the highest positive NPV and should be chosen as the most

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    6 views1 page

    Tut 3

    Uploaded by

    Yosof Khaled
    1) A company is considering purchasing equipment for $6,000 that would increase annual cash inflows by $2,200 over its 6 year useful life. With a required 20% return, the NPV is positive so the equipment should be purchased. 2) A project requires $225,000 initial investment and is expected to generate cash inflows of $95,000, $80,000, $60,000, and $55,000 over 4 years. With a minimum 12% discount rate, the NPV and IRR should be calculated to see if it meets requirements. 3) Of the 3 proposals listed, proposal X has the highest positive NPV and should be chosen as the most

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    of 1

    5th year Chemical Engineering

    Plant Design
    Tut. (3)
    1) A company is considering to purchase an equipment to be attached with the main
    manufacturing machine. The equipment will cost $6,000 and will increase the annual cash
    inflow by $2,200. The useful life of the equipment is 6 years. After 6 years it will have no
    salvage value. The management wants a 20% return on all investments. What is the NPV
    of this investment? Should the equipment be purchased according to NPV analysis?
    2) A project requires an initial investment of $225,000 and is expected to generate the
    following net cash inflow
    Year 1 2 3 4
    Cash inflow $95,000 $80,000 $60,000 $55,000
    Calculate the net present value of the project and the discounted cash flow rate of return if
    the minimum desired rate of return is 12%?
    3) From the following alternatives, choose the most desirable investment using NPV
    measure.
    Proposal X Proposal Y Proposal Z
    Present value of cash inflow $212,000 $171,800 $185,200
    Capital investment $200,000 $160,000 $180,000

    4- The purchased-equipment cost for a plant which produces pentaerythritol (solid fuel-
    processing plant) is $300,000. The plant is to be an addition to an existing formaldehyde
    plant. The major part of the building cost will be for indoor construction, and the
    contractor's fee will be 7 % of the direct plant cost.
    All other costs are close to the average values found for typical chemical plants.
    On the basis of this information, estimate the following:
    a. The total direct plant cost.
    b. The fixed-capital investment.
    c. The total capital investment.
    5- The total capital investment for a chemical plant is S1 million, and the working capital
    is $100,000. If the plant can produce an average of 8000 kg of final product per day during
    a 365-day year, what selling price in dollars per kilogram of product would be necessary
    to give a turnover ratio of 1?

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