economics

03 Aug economics

1. SHOW ALL WORK: YOU MUST USE THE PROJECT IIIA SHEETS TO SUMBIT

YOUR WORK

2. USE THE ANNUAL WORTH KEY FOR THE FIRST LIFE CYCLE OF COST AND

REVENUE PROVIDED ON PAGE 5

3. IF YOU SEND PROJECT IIIA- BY E-MAIL MAKE SURE

– I CAN OPEN THE DOCUMENT

– THE DOCUMENT IS READABLE

4. PAGE 3 MUST BE SIGNED AND SUBMITTED

1. CALCULATE THE CONVENTIONAL B/C RATIO FOR ALTERNATES A AND B.

ARE ALTERNATES A AND B ECONOMICALLY JUSTIFIED?

B/C CONV = EQUATION

ALTERNATE A ALTERNATE B

B/C CONV = B/C CONV =

B/C CONV = B/C CONV =

B/C CONV = B/C CONV =

ECONOMICALLY JUSTIFIED?

YES NO YES NO

2. CALCULATE THE MODIFIED B/C RATIO FOR ALTERNATES A AND B.

ARE ALTERNATES A AND B ECONOMICALLY JUSTIFIED?

B/C MOD = EQUATION

ALTERNATE A ALTERNATE B

B/C MOD = B/C MOD =

B/C MOD = B/C MOD =

B/C MOD = B/C MOD =

ECONOMICALLY JUSTIFIED?

YES NO YES NO

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CE 3361 NAME:_______________

PROJECT IIIA – SPRING 2017 DATE:________________

DUE 24 APRIL 2017 AT 2:30 PM

3. PERFORM A LIFE CYCLE COST ANALYSIS FOR ALTERNATES A AND B.

ALTERNATE A ALTERNATE B

ELEMENT AW LCC AW LCC

INITIAL COST

LCCA LCCB

4. USING THE ANNUAL WORTH VALUES ON PAGE 5, PERFORM A BREAK-EVEN

QUANTITY ANALYSIS TO CALCULATE THE NUMBER OF PROJECTS THAT

MUST BE UNDERTAKEN EACH YEAR TO JUSTIFY THE DIFFERENCE IN

ALTERNATIVES A AND B. THE LABOR COST/HR FOR ALTERNATE A IS $14.00

WHEREAS THE LABOR COST/HR FOR ALTERNATE B IS $28.00. ALTERNATE A

CAN PRODUCE 1 PROJECT/10 HR AT A RATE OF $1500/PROJECT AND

ALTERNATE B CAN PRODUCE 1 PROJECT/7.5 HR AT A RATE OF $1100/PROJECT.

ALTERNATE A VARIABLE ALTERNATE B VARIABLE

UNIT COST UNIT COST

νA = νB =

νA = νB =

ALTERNATE A UNIT ALTERNATE B UNIT

REVENUE REVENUE

rA = rB =

FIXED COSTS FIXED COSTS

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CE 3361 NAME:_______________

PROJECT IIIA – SPRING 2017 DATE:________________

DUE 24 APRIL 2017 AT 2:30 PM

4. BREAKEVEN QUANTITY

RA + rA QBE – FCA – νA QBE = RB + rB QBE – FCB – νA QBE

BE

BE

BE

BE

5. USING THE MARCS FORMULA, DETERMINE THE DEPRECIATION SCHEDULE

FOR ALTERNATE C OR ALTERNATE D.

PROPOSAL INITIAL COST USEFUL LIFE

ALTERNATE C $50,000 5 YEARS

ALTERNATE D $80,000 7 YEARS

DEPRECIATION SCHEDULE

YEAR ALTERNATE C ALTERNATE D

1

2

3

4

5

6

7

8

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CE3361 NAME:_______________

PROJECT IIIA – SPRING 2017 DATE:________________

DUE 24 APRIL 2017 AT 2:30 PM

6A. J.A. JONES WANTS TO RAISE $10,000,000 BY SELLING 1000 DEBENTURE BONDS.

THE BOND COUPON RATE IS 8%. INTEREST PAID IS PAID ANNUALLY AND

THE BONDS HAVE A MATURITY DATE 15 YEARS FROM NOW. DETERMINE:

FACE VALUE OF THE BONDS:__________________

TOTAL INTEREST TO ALL BOND HOLDERS PAID EACH YEAR:

I =

I =

AMOUNT PAID TO EACH INVESTOR AT THE END OF 15 YEARS:___________

6B. HOW MUCH WOULD YOU BE WILLING TO PAY TO BUY A J.A. JONES BOND

TO REALIZE A RATE OF RETURN OT 7%?

GENERAL

BV = EQUATION

V =

I =

I =

I =

BV = TABLE________

BV =

BV =

BV = _________________

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CE3361 NAME:_______________

PROJECT IIIA – SPRING 2017 DATE:________________

DUE 24 APRIL 2017 AT 2:30 PM

ALTERNATE A ALTERNATE B

AW INITIAL -$14.1K -$14.3K

COST

AW OPERATION/ -$1.2K -$0.9K

MAINTANENCE

AW UPDATES -$1.22K -$0.54K

AW INSURANCE -$1.0 K -$1.0 K

LABOR RATE -$14.0/HR -$28.0/HR

PRODUCTION 10 HR/PROJECT 7.5 HR/PROJECT

AW REVENUE +$16.1K +$19.0K

AW SALVAGE +$1.2K +$1.3K

UNIT REVENUE + $1500/PROJECT +$1100/PROJECT

LIFE 5 YEARS 7 YEARS

INTEREST ON 5.063% 2.015%

COST

INTEREST ON +1.5% +1.5%

REVENUE

BY SIGNING THIS PAGE, I STIPULATE THAT I HAVE NOT GIVEN NOR RECEIVED ANY HELP IN COMPLETING THIS PROJECT______________________________

PRINT NAME:__________________________________

PROJECT IIIA: DUE 24 APRIL 2017 AT 2:30 PM NO EXCEPTIONS

FC =

FC =