CIV 355 FALL 2023 EXAM #3 Name:_____________________

WEDNESDAY NOVEMBER 1st, 2023.

1. Boston Fish House restaurant is considering acquiring a meat processor. The required
initial investment of $76,000 and the projected cash benefits over the project’s four
year life are as follows:

Period (n) Net cash flow

0 -$76,000
1 $35,560
2 $37,360
3 $31,850
4 $34,400

De’Jayvion Brown’s Accounting Firm has been asked by the owner of the Fish House to evaluate
the present worth economic merit of the acquisition. The restaurant’s MARR is known to be
12%. Should the Fish House make this purchase (show all calculations)? (10pts).
2. Consider the investment alternative projects below, a) compute the net Future worth of
each project at 10% MARR, b) Plot the cash flow diagrams for each project, c) circle the
best alternative. (20pts)

N (YEARS) A B C D
0 -$3,500 -$6,500 -$2,800 -$4,300
1 0 $1,600 -$1,800 -$1,000
2 $4,200 $1,800 $2,500 $1,900
3 $1,500 $2,300
4 $2,200 $1,500
3. MDOT purchased Civil Tech for $100 million (at MARR = 15%) in hopes of selling it 7 years from
now. MDOT estimates a net cash flow decrease with an arithmetic gradient of 10 million per
year starting in year 5. There is expected to be a net loss of 7 million annually starting at the
end of year 1. What should be MDOT’s minimum selling price in 7 years? (10pts).

4. Ten years ago JSU offered to buy Millsap for $500 million. JSU offered $350 million down and
the remaining balance at the end of year 1. JSU’s salary payments to faculty would be $1.5
million annually starting year 1 and continue throughout the ownership. Today, JSU would only
be able to sell Millsaps for a profit of $100 million. Calculate JSU’s capital recovery and annual
worth if they had made the deal at a MARR of 12%. (10pts)
5. BONUS: JSU is advertising for maintenance companies to maintain the football field at Memorial
Stadium for the next 50 years. The best quote they got was from Trinity Hilliard’s Landscaping.
They predict the cost to be $1,000 every year and an additional $5,000 every four years for
resurfacing. What is the capitalized cost of the maintenance at an interest rate of 10% per year?
(10%)