Quiz7_Spring09 - [email protected]?J.'1,ZQuiz # 7 (Closed...

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Unformatted text preview: [email protected]?J.'1,ZQuiz # 7 (Closed book) Tuesday March 10,2009 L/' (J) ' A preliminary design study for a new project has just been completed. The estimated economic parameters for this project are as follows: Production at 100% of capacity = 2 million kg/yet>.."'Total capital investment = $ 35 million Fixed capital = $ 30 million Variable costs at full capacity = $ 5 million/year Fixed costs (excluding depreciation) = $ 1 million/year Depreciation is carried out using a 3-year MACRS method. The depreciation rates are 0.3333, 0.445, 0.1481, and 0.0741 for years 1 to 4, respectively. Neglect working capital and salvage value recovery. Effective tax rate is 35% The plant will operate at 50% capacity the first year, 90% capacity the second year, and 100% capacity each year thereafter. Using a 6-year evaluation period: l/ -'f"?A 1. Develop an expression for the price per kg that would yield a DCFRR of 40%. Calculate this price. 2. At the price you have just calculated, if you were to neglect the time value of money, develop expressions for and calculate the ROI and the PBP. 17 1"-- 01 ..y ::: .• 71 <:.. rBV~ SVt ~OMM 9 Q.!\1 \~, ~ S y,L() LO, G:,!o 5 I. 0 ?- L_L 0 '0 II :: p & C -v C-I))( I&\'- H-.) erAi +3) ...
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This note was uploaded on 04/13/2011 for the course CHEE 5369 taught by Professor Alim during the Spring '11 term at University of Houston.

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