Homework SourseHi This question was already asked and is linked below can y
Hi This question was already asked, and is linked below, can you please varify the method and show parts C & D clearly
Please answer the following by hand showing all arithmetic and original formulas, please do not use a graphic calculator.
https://www.chegg.com/homework-help/questions-and-answers/please-answer-following-hand-showing-arithmatic-original-formulas-please-use-graphic-calcu-q29460084
Q2
The province of Ontario is planning to construct a new hydropower plant to help make energy prices more affordable, as well as to support improved public health and environmental quality. The construction of the hydropower plant will start by the beginning of 2023 and will take 3 years at a cost of $200 million per year. The cost of maintenance and repairs, which is to start after project completion, is expected to be $5 million for the first 6 years, and to increase by $50,000 per year thereafter. The scrap value of the hydropower plant is estimated to be $25 million at the end of its service life. The project is expected to save the province $55 million per year in energy savings. Assume the present to be the end of 2017/beginning of 2018, the life of the project is till the end of year 2060, and the interest rate to be 5%.
A Draw a cash flow diagram for this project (from present till 2060).
B What is the Present Worth of the project?
C What is the Future Worth of the project?
D Is it a good investment for the province to make?
| A Draw a cash flow diagram for this project (from present till 2060). B What is the Present Worth of the project? C What is the Future Worth of the project? D Is it a good investment for the province to make? |
Solution
ANSWER: i am first solving in excel and then going to solve part c and d as for part c we need the present worth , which is calculated in excel.
C)
The above calculations are done in excel, and now i am going to solve as per the formulas.
we know from part b the present worth will be $94,171,721.35
now for part c that is future worth, it will be equal to = pv(f/p,i,n)
i = 5% and n = 43 years
fv = 94,171,721.35(f/p,5%,43) = 94,171,721.35 * 8.1496 = $767,468,163.46
D) since the present worth of the investment was positive that is greater then zero, therefore it will be a good investment for the province to make as when npv > 0 , then the project should be undertaken.
| year | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | 2036 | 2037 | 2038 | 2039 | 2040 | 2041 | 2042 | 2043 | 2044 | 2045 | 2046 | 2047 | 2048 | 2049 | 2050 | 2051 | 2052 | 2053 | 2054 | 2055 | 2056 | 2057 | 2058 | 2059 | 2060 |
| initial cost | -200,000,000 | -200,000,000 | -200,000,000 | |||||||||||||||||||||||||||||||||||||||||
| maintenance and repair cost | -5,000,000 | -5,000,000 | -5,000,000 | -5,000,000 | -5,000,000 | -5,000,000 | -5,500,000 | -6,000,000 | -6,500,000 | -7,000,000 | -7,500,000 | -8,000,000 | -8,500,000 | -9,000,000 | -9,500,000 | -10,000,000 | -10,500,000 | -11,000,000 | -11,500,000 | -12,000,000 | -12,500,000 | -13,000,000 | -13,500,000 | -14,000,000 | -14,500,000 | -15,000,000 | -15,500,000 | -16,000,000 | -16,500,000 | -17,000,000 | -17,500,000 | -18,000,000 | -18,500,000 | -19,000,000 | -19,500,000 | -20,000,000 | ||||||||
| savings | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | 55,000,000 | ||||||||
| scrap value | 25,000,000 | |||||||||||||||||||||||||||||||||||||||||||
| cash flows | 0 | 0 | 0 | 0 | 0 | -200,000,000 | -200,000,000 | -200,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 49,500,000 | 49,000,000 | 48,500,000 | 48,000,000 | 47,500,000 | 47,000,000 | 46,500,000 | 46,000,000 | 45,500,000 | 45,000,000 | 44,500,000 | 44,000,000 | 43,500,000 | 43,000,000 | 42,500,000 | 42,000,000 | 41,500,000 | 41,000,000 | 40,500,000 | 40,000,000 | 39,500,000 | 39,000,000 | 38,500,000 | 38,000,000 | 37,500,000 | 37,000,000 | 36,500,000 | 36,000,000 | 35,500,000 | 60,000,000 |
| npv | $94,171,721.35 | |||||||||||||||||||||||||||||||||||||||||||
| fv | $767,468,163.46 |
