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Use the net present value methodology when creating a cost-benefit analysis to evaluate the following project:

The State of Massachusetts would like to replace a National Guard armory rapidly reaching the end of its service life. The Department of Military Affairs has been told that continued special maintenance would be $275,000 annually. Rehabilitation of facility would cost $4,000,000, and would extend the armory's service life by 15 years.

find out the discount factor for each year (use 4% discount rate @ 15 years)

find out the annual present value cost of maintenance (15 years)

find out the discounted benefit of rehabilitating the armory

Given the discounted cost of rehabilitation, what is the cost- benefit ratio for the proposal?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M940702

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