Purchase Solution

Net Present Value ,perpetual savings

Not what you're looking for?

Ask Custom Question

Category: Economics
Subject: Net Present Value
Details: It costs $2600 to insulate a factory. Nest year, the fuel savings will be $220. EAch year after this, the cost of fuel is expected to rise by the rate g. If the discount rate is 12%, what rate of growth in fuel costs justifies going ahead with the insulation plan? (Hint: careul. Make sure that the rate of growth and the discount rate are aligned in terms of periodss.)

Purchase this Solution
Solution Summary

This solution helps student in calculating rate of growth in fuel costs that justifies going ahead with the insulation plan.

Solution Preview

This is case of perpetual savings from insulation of the factory. ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • ACH Disbursing and NPV

    shows step-by-step calculations to determine the Net Present Value (NPV) and also the minimum number of payments per month to break even with the cost to convert to ACH disbursing.

  • Suppose you are offered a savings account with an annual percentage rate of 4%

    If this 5% decline continues in perpetuity, what is the present value of the perpetual cash flow stream at a discount rate of 5% ?

  • Bond refunding

    NPV = Benefits (savings in interest) - Cost (refunding costs and call premium) For Bond 1, the savings in interest is 1% or 750,000 per year. The present value is 750,000/7%=10,714,285 (since it is a perpetual bond, the PV is amount/rate).

  • Present Value of infinite CCA tax savings

    Apply the formula for the Present Value of infinite CCA tax savings = [(purchase cost)(cca rate)(tax rate)/(rate of return + tax rate)][1+ (0.5 *rate of return)/1+rate of return] = [(75,000)(0.2)(0.4)/(0.1+.2)][(1.05/1.1) = 19,091 Present Value

  • Discussing Bond Refunding

    NPV = Benefits (savings in interest) - Cost (refunding costs and call premium) For Bond 1, the savings in interest is 1% or 750,000 per year. The present value is 750,000/7%=10,714,285 (since it is a perpetual bond, the PV is amount/rate).

  • Multiple Choice

    Include savings accounts. B. Include checking accounts. C. Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes. D. Include time deposits. E.

  • This company pays a perpetual annual dividend of 2.5% of its

    What is the net present value of this project?

  • Multiple choice

    Find the present value of an investment in equipment if it is expected to provide annual savings of $10,000 for 10 years and to have a resale value of $25,000 at the end of that period.

  • Need to solve the following problem

    Hence, the present value of the future cash flows will be as follows: PV of perpetual future cash flows = 5.60/(r) Given that r = 8%. PV of future cash flows = 5.60/(0.08) or $70.00.

View More Related Solutions