08 ModelHW8 - 17.5) The U.S. government is considering...

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17.5) The U.S. government is considering building apartments for government employees working in a foreign country and living in locally owned housing. A comparison of two possible buildings indicated the following: Building X Building Y $8,000,000 $12,000,000 $240,000 $180,000 $1,960,000 $1,320,000 Assume the salvage value or sale value of the apartments to be 60% of the first investment. Use 10% and a 20-year study period to compute the B/C ratio on incremental investment and make a recommendation. (Assume no do-nothing alternative.) 0 1 2 3 4 5 X-Out $8,000,000 $240,000 $240,000 $240,000 $240,000 $240,000 X-In $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 X(B) $1,781,818 $1,619,835 $1,472,577 $1,338,706 $1,217,006 X(cost) $8,000,000 $218,182 $198,347 $180,316 $163,923 $149,021 X(I) $8,000,000 C' $2,043,255 X-BC(10%) 1.73 Y-Out $12,000,000 $180,000 $180,000 $180,000 $180,000 $180,000 Y-In $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 Y(B) $1,200,000 $1,090,909 $991,736 $901,578 $819,616 Y(cost) $12,000,000 $163,636 $148,760 $135,237 $122,942 $111,766 Y(I) $12,000,000 C' $1,532,441 Y-BC(10%) 0.91 BC(10%)X-Y (1.46) Since Building Y has a negative BC value, it must be discarded as an option and Building X must be se Original Investment by government agencies Estimated annual maintenance costs Savings in annual rent now being paid to house employees
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6 7 8 9 10 11 12 $240,000 $240,000 $240,000 $240,000 $240,000 $240,000 $240,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,106,369 $1,005,790 $914,354 $831,231 $755,665 $686,968 $624,516 $135,474 $123,158 $111,962 $101,783 $92,530 $84,119 $76,471 $180,000 $180,000 $180,000 $180,000 $180,000 $180,000 $180,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $745,106 $677,369 $615,790 $559,809 $508,917 $462,652 $420,593 $101,605 $92,368 $83,971 $76,338 $69,398 $63,089 $57,354 elected.
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13 14 15 16 17 18 19 $240,000 $240,000 $240,000 $240,000 $240,000 $240,000 $240,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $1,960,000 $567,742 $516,129 $469,208 $426,553 $387,776 $352,523 $320,476 $69,519 $63,200 $57,454 $52,231 $47,483 $43,166 $39,242 $180,000 $180,000 $180,000 $180,000 $180,000 $180,000 $180,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $1,320,000 $382,357 $347,597 $315,998 $287,270 $261,155 $237,414 $215,831 $52,140 $47,400 $43,091 $39,173 $35,612 $32,375 $29,431
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20 $240,000 $6,760,000 $1,004,831 $17,400,074 $35,674 $10,043,255 $180,000 $8,520,000 $1,266,444 $12,308,138 $26,756 $13,532,441
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17.8) The federal government is planning a hydroelectric project for a river basin.
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This note was uploaded on 05/12/2010 for the course BUSINESS BS515 taught by Professor Johnson during the Fall '09 term at Drexel.

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08 ModelHW8 - 17.5) The U.S. government is considering...

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