Equipment needed at Valero Corporation refinery for the conversion of corn stock to ethanol, a cleaner burning gasoline additive, will cost $175,000 and have net cash flows of $35,000 the first year, increasing by $10,000 per year over the life of 5 years. Develop a spreadsheet chart that plots AW vs interest rate to show where (what interest rate) the project switches from financially justified to unjustified. Use AW as the vertical axis of the chart, and interest (i) as the horizontal axis of the chart. Use a range of interest rates spanning from 10% to 20%, and use increments of 1%. Label both axes and use a title for the chart.
Equipment needed at Valero Corporation refinery for the conversion of corn stock to ethanol, a cleaner burning gasoline additive, will cost $175,000 and have net cash flows of $35,000 the first year, increasing by $10,000 per year over the life of 5 years. Develop a spreadsheet chart that plots AW vs interest rate to show where (what interest rate) the project switches from financially justified to unjustified. Use AW as the vertical axis of the chart, and interest (i) as the horizontal axis of the chart. Use a range of interest rates spanning from 10% to 20%, and use increments of 1%. Label both axes and use a title for the chart.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Equipment needed at Valero Corporation refinery for the conversion of corn stock to
ethanol, a cleaner burning gasoline additive, will cost $175,000 and have net cash
flows of $35,000 the first year, increasing by $10,000 per year over the life of 5 years.
Develop a spreadsheet chart that plots AW vs interest rate to show where (what interest
rate) the project switches from financially justified to unjustified. Use AW as the vertical
axis of the chart, and interest (i) as the horizontal axis of the chart. Use a range of
interest rates spanning from 10% to 20%, and use increments of 1%. Label both axes
and use a title for the chart.
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