MGT 5064 Week 1 Assignment 6 | Florida Institute Of Technology | Assignment Help
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- 06 May 2021
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MGT 5064 Week 1 Assignment 6 | Florida Institute Of Technology | Assignment Help
MGT 5064 Cost and
Economic Analysis – HOMEWORK 6 (35 points)SPRING 2021 - Online1Reading and
Homework Assignment
PM Eastern Time Chapter
6 Discounting Benefits and Costs in Future Time Periods Refer to the posted
notes on CANVAS under “Files’, view the class lecture on Chapter 6, and view
the “Solutions to Chapter 6 Assignment (Discounting).mp4” solutions video, then
answer the following questions completely. Show your work/ calculations.1. A highway
department is considering building a temporary bridge to cut travel time during
the three years it will take to build a permanent bridge. The temporary bridge
can be put up in a few weeks at a cost
of $740,000. At the end of three years, it would be removed and the steel would
be sold for scrap. The real net cost of this removal would be $81,000. Based on
estimated time savings and wage rates, fuel savings, and reductions in risks of
accidents, department analysts predict that the benefits in real dollars would
be $275,000 during the first year, $295,000 during the second year, and
$315,000 during the third year. Departmental regulations require use of a real
discount rate of 4 percent.
a. (5 points) Calculate
the present value of net benefits assuming that the benefits are realized at
the end of each of the three years.
b. (5 points) Calculate
the present value of net benefits assuming that the benefits are realized at
the beginning of each of the three years.
c. (5 points) Calculate
the present value of net benefits assuming that the benefits are realized in
the middle of each of the three years.
d. (5 points) Calculate
the present value of net benefits assuming that half of each year’s benefits
are realized at the beginning of the year and the other half at the end of the
year
.e. (2 points) Does the
temporary bridge pass the net benefits test?
2. (7 points) A town’s
recreation department is trying to decide how to use a piece of land. One
option is to put up basketball courts with an expected life of eight years.
Another is to install a swimming pool with an expected life of 24 years. The
basketball courts would cost $180,000 to construct and yield net benefits of
$40,000 at the end of each of the eight years. The swimming pool would cost
$2.25 million to construct and yield net benefits of $170,000 at the end of
each of the 24 years. Each project is assumed to have zero salvage value at the
end of its life. Using a real discount rate of 5 percent, which project offers
larger net benefits?
USA 
India