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PLEASE TYPE THE ANSWER 3. A project has an investment outlay of $7...

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Finance

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3. A project has an investment outlay of $7 million in year zero and $3 million in year 1. Operating cost is $3 million per annum and sales revenue of $6 million per annum commencing year 1. In year three there will be the need for an additional capital investment of $4 million. Appraisal life is 5 years. Assuming a discount rate of 8% per annum, compute the B/C ratio.

4. A project has capital cost of $10,000 in year 0 and $5000 in year 1. There is also the need for capital replacement at year 3 of $4000. Working capital is estimated at $5000 and is needed in year 1. Operating cost from years 2-5 is estimated at $5000 per annum. Revenue is projected to be $8000 per annum between years 2 - 5. Salvage value from sale of fixed assets will be $2000 in year 3 and $4000 in year 5. The working capital is recoverable at the end of year 5. Compute the B/C Ratio assuming the opportunity cost of capital is 25% per annum.

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