Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

A paper company with large land holdings asks your help in evaluating the cost of converting boiler furnaces to the use of peat as fuel. The plant currently consumes the following amount of fuel annually: oil: 2,000,000 barrels per year at $35 per barrel the first year. The conversion to burn peat will cost $40,000,000 and have a life of 20 years, and is estimated to save 50 percent of the cost of the oil now consumed. Salvage value of the conversion at EOY 20 equals $5,000,000. Oil costs are expected to rise at 9 percent per year compounded, and the annual savings will rise proportionally. Use i = 15 percent.

a) What is the amount of anticipated fuel-cost saving for the first year only? (Assume the expenditure for the conversion occurs right now, and the savings accrue during the year and are credited at the end of each year)

b) Find the future worth, F, of the savings in fuel costs over the full 20-year period.

c) Compare the net future worth at EOY 20 of the conversion cost (including salvage value) versus fuel savings and tell whether the fuel savings justify the cost of conversion.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M940592

Have any Question? 


Related Questions in Basic Finance

Evaluate studies for a report-imagine that youre the

Evaluate studies for a report:- Imagine that you're the corporate communications vice president for Harley-Davidson Motor Company. To promote motorcycle use in the United States, you're planning a communication campaign ...

Part a answer each of the following questions in a

Part A: Answer each of the following questions in a composition of one to two paragraphs, or perform calculations as requested. 1. Define liquidity risk, default risk and taxability risk, and explain how these risks rela ...

Read and study the following experimental research

Read and study the following experimental research designs. For each: a. Identify and provide a label for the independent and dependent variables. b. Indicate the number of levels in the independent variable, and provide ...

A news story reported that the former ceo of homebuilder kb

A news story reported that the former CEO of homebuilder KB Home was convicted "of four felony counts in a stock option backdating scam." The article goes on to note: A stock option allows an employee to purchase a compa ...

A recent survey at a major corporation found that employees

A recent survey at a major corporation found that employees who regularly participated in the company fitness program tended to have fewer sick days than employees who did not participate. However, because the study was ...

1 show that when you apply node splitting to a nonreducible

1. Show that when you apply node splitting to a nonreducible ow graph, and then perform T1-T2 reduction on the resulting split graph, you wind up with strictly fewer nodes than you started with. 2. What happens if you ap ...

1 provide an illustration that highlights the differences

1. Provide an illustration that highlights the differences between consumer and industrial packaging. 2. What is the primary purpose of bar coding in packaging? 1s the role of bar coding different in materials handling? ...

Choose an article that discusses the differences between

Choose an article that discusses the differences between book value, liquidation value, market value, and intrinsic value. Explain the three factors that determine the intrinsic, or economic, value of an asset. As an inv ...

1 why is the use of long-term debt financing referred to as

1. Why is the use of long-term debt financing referred to as using financial leverage? 2. What is the fundamental principle of financial leverage? 3. What is the basic conclusion of the original Modigliani and Miller Pro ...

If the calculated value of f is found to be significant for

If the calculated value of F is found to be significant for the main effect of an independent variable with more than two levels, what tests does the researcher then conduct? Why are such tests not necessary if the indep ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen