BCN3753 Florida International XYZ Construction NPV Analysis

User Generated

Nfrrylnaxv

Business Finance

BCN3753

Florida International University

Description

Hello!
I need help in doing these problems for my Financial Management of Construction Organizations Hw, I'll provide lecture slides if need it!

Please find the assignment sheet on the attachment.

Unformatted Attachment Preview

Florida International University BCN3753- Financial Management of Construction Organization Assignment #3 Fall 2019 Assignment #3 Hand-Out Date: September 19, 2019 Due Date: Oct 1, 2019 (11:59 pm) Question 1 (5 points) XYZ Construction, Inc. has asked you to help them select a new backhoe. You have a choice between a Caterpillar one, which costs $55,000 and will save the company $6,000 annually, and a John Deere one, which costs $68,000 and will save the company $7,500 annually. Both machines can be sold at 30% of their original cost after 8-years of useful life. Given the interest rate is 3%, using the NPV analysis to determine which of the backhoe should be purchased? Assignment #3 Page 1 of 3 Florida International University BCN3753- Financial Management of Construction Organization Assignment #3 Fall 2019 Question 2 (5 points) ABC Real Estate Inc. is considering the following three different locations to build a retail store: Land cost Construction cost Annual rental revenue Location A $2,800,000 $3,000,000 $550,000 Location B $4,100,000 $3,900,000 $750,000 Location C $3,600,000 $3,500,000 $650,000 If the company’s minimum attractive rate of return (MARR) is 6%, which location should be selected using the rate-of-return analysis over a 20-year analysis period? Assignment #3 Page 2 of 3 Florida International University BCN3753- Financial Management of Construction Organization Assignment #3 Fall 2019 Questions 3 (5 points) An investor is considering buying some land for $500,000 and constructing an office building on it. Three different buildings are being analyzed. Construction cost Resale value after 20 years Annual net rental income Building Height 2 Stories 5 Stories 10 Stories $700,000 $1,500,000 $3,000,000 $1,500,000 $2,400,000 $4,500,000 75,000 120,000 200,000 Using benefit-cost ratio analysis and an 6% MARR, determine which alternative, if any, should be selected. Assignment #3 Page 3 of 3
Purchase answer to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Hi. here is your assignment :) Let me know if you need more help or if you have any questions so that I can explain to you okay :). I am willing to do further explanation if would ask ;)

Question 1:
Caterpillar

A

B

C

D

E

F

G

H

I

1

Year

0

1

2

3

4

5

6

7

8

2

Cost

55000
6000

6000

6000

6000

6000

6000

6000

3

Saving

4

Salvage Value
= 30%*55000

5

Free Cash flow

-55000

6

Interest rate

3%

6000

16500
6000

6000

6000

6000

6000

6000

6000

22500

- Using Excel
54969.50 =NPV(A6,B1:I1)+A5
NPV
Number of Year(n) = 8
NPV = PV of Savings + PV of Salvage Value - Initial Investment = 6000* (1-(1+r)-n/r +
21000/(1+r)n -55000 = 6000* (1 -(1+3%)-8/3% + 16500/(1+3%)8 -55000 = -54969.50
John Deerer

A

B

C

D

E

F

G

H

I

1

Year

0

1

2

3

4

5

6

7

8

2

Cos...

Similar Content

Related Tags