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Problem Set

1. NPC plans to build a hydroelectric plant costing P850M to supply electricity to Northern Mindoro for 40 years. Annual operating costs will be P50M and revenues will be P150M. Calculate the benefit-cost ratio at 8% interest. 2. A city is considering 3 energy sources: a P250M nuclear plant with P3M annual costs for 20 years; a P200M coal plant with P10M annual costs for 20 years; a P100M natural gas plant with P18M annual costs for 20 years. Use ROR to select the best option with a 9% MARR. 3. A contractor bought a crane for P11,000 with P

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103 views

Problem Set

1. NPC plans to build a hydroelectric plant costing P850M to supply electricity to Northern Mindoro for 40 years. Annual operating costs will be P50M and revenues will be P150M. Calculate the benefit-cost ratio at 8% interest. 2. A city is considering 3 energy sources: a P250M nuclear plant with P3M annual costs for 20 years; a P200M coal plant with P10M annual costs for 20 years; a P100M natural gas plant with P18M annual costs for 20 years. Use ROR to select the best option with a 9% MARR. 3. A contractor bought a crane for P11,000 with P

Uploaded by

Joy Dimaano
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problem Set:

1. National Power Corporation (NPC) intends to build a hydroelectric plant in Puerto Galera to
supply electricity to the northern part of Oriental Mindoro. The estimated cost is P850, 000, 000.
If the annual cost of power transmission, maintenance and operations are estimated to be P50,
000, 000 and the expected annual revenues will be P150, 000, 000 for the period of 40 years.
Find he B/C f he project if the money worth 8% per annum.
2. A city government feels that energy production capacity must be expanded to meet
anticipated demands for energy. Three alternatives sources are being considered.
a. A nuclear facility with an investment of P250 million, operating costs of P3 million per
year and life of 20 years.
b. A coal plant with an investment of P200 million, operating costs f P10 million per year
and a life of 20 years.
c. A natural gas plant with a cost of P100 million, operating costs of P18 million per year
and a life of 20 years.
Use the ROR method to select the best alternative. The cost of capital (MARR) for the city is 9%.
3. A contractor purchased a crane for P11, 000. His operating cost will be P2, 700 per year and
he expects to sell it for P5, 000 five years from now. What is the equivalent annual worth of the
crane at an interest rate of 10%?
4. Assume the company number 3 is planning to exit the tomato canning business in 4 years. At
that time, the company expects to sell machine A for P12, 000 or machine B f P15, 000. All other
costs are expected to remain the same. Which machine should the company purchased under
these conditions?
5. An initial capital of P10, 000 was put up for a new business that will produce an annual income
of P6, 000 for 5 years and will have a salvage value of P2, 000 at that time. Annual expenses for
its operation (salaries wages, insurance and taxes) and maintenance amounts to P3, 000. If
money is worth 10% compounded annually, is this investment profitable or not, if so, what is the
difference in the present worth of the net income to his initial capital?
6. The data below are estimated for the project study of a certain business investment. If money
is worth 10% which of the project is more desirable, using PW Method and, determine the
difference in profit from each project study.
For A, the initial investment is P3, 500, with annual revenue of P1, 900. Annual
disbursement amounts of P645 with no salvage value at the end of its life which is 4 years.
For B, the initial investment is P5, 000 with annual revenue of P2, 500. Annual
disbursement is P1, 383 with no salvage value at the end of its life which is 8 years.
7. Given the two machines A and B having initial costs of P55, 000 and P75, 000 respectively.
The total annual cost of A is P16, 200 while that f B is P12, 450. If money is worth 10% annually,
at what service life do these two machines have the same equivalent uniform and annual cost?

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