## Quiz 5 : Present-Worth Analysis  Looking for Economics Homework Help? # Quiz 5 : Present-Worth Analysis

Given information: • Price of equipment is \$1,500,000. • Revenue is \$650,000 per year. • Manufacturing cost is \$220,000 per year. • Fixed cost is \$80,000. • Maintenance cost is \$45,000 per year. • Tax payment is \$58,000. • Salvage value is \$1,000,000. • Time period 10 years. Net cash flow: Net cash flow can be calculated as follows: Net cash flow is . Net cash flow: Net cash flow can be calculated as follows: …… (1)Cash flow in year 1: Substitute the respective values in equation (1) to calculate cash flow in year 1. First year cash flow is . Cash flow table: Table -1 shows the cash flow for 10 years that obtained by using equation (1). In the tenth year salvage value has to add with the cash flow. Table-1 Given information: • Cost of an investment project is \$90,000. • Revenue per year is \$30,000. • Time period is five years. Payback period: Payback period can be calculated by using the cumulative cash flow: …… (1)Substitute the respective values in Equation (1) to calculate the first year cumulative cash flow value. Hence, first year cumulative cash flow is . Cash flow and cumulative cash flow: Hence, similar calculation is followed in Table-1 by using the Equation (1) to obtain the cumulative cash flow for each year. Table-1 Table -1 show that the total investment is fully paid at the third year. Hence, option b is correct.

Given information: • Price of the product is \$65,000. • Production per year is 30,000 kilo gram. • Price increases by \$2 per kilo gram; hence increased revenue is . • Production increases by 4,000 kilo gram; hence, total production is . • Operating hour is 3,500. • Saving is \$25 per hour. • Time period is 8 years. a.Cash inflow: Total cash inflow can be calculated as follows: Total cash inflow is . Cash outflow Total cash outflow can be calculated as follows: Total cash outflow is . Net cash flow: Net cash flow can be calculated as follows: Net cash flow is .

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