Perform an annualworth economic analysis

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Reference no: EM131037394

GROUP B: IMPREGILLO COMPANY

In order to compare the bids by caterpiller and impregillo, kiewit has asked its staff to carryout an economic study based in present worth, annual worth and payback period analyses. It is your responsibility to perform the economic analysis only on your assigned alternative: in this case impregillo. Use the tables provided in this assignment. No other submissions will be accepted. The following cost/revenue schedule has been developed for the impregillo option by our accountant:

IMPERGILLO

INITIAL $600,000

COST

DELIVERY $15,000

COST

OPERATION/ $3000/YR

MAINTANENCE

UPGRADE/ $1000 EVERY 2^TH

PARTS YEAR

INSURANCE $600/YR

FIRST YEAR INCOME $120000/YR

INCOME INCREASE $20,000/YR

SALVAGE $120000

LIFE 4 YR

INTEREST

COST 2%/QUARTER CP MONTHLY

REVENUE 3%/YR

1. Perform a present worth economic analysis on impregillo option: fill in tables neatly

IMPREGILLO OPTION

PRESENT WORTH: PW i = 8.300%/YR

COST n = 0 TO 12 YEARS

ELEMENT	TIME	P/F	P/A	AMOUNT	SOURCE
-$600,000		1.0000		-$600.000	Eq.
-$ 15,000	0
-$600,000
-$ 15,000		0.72692		-$ 10,904	Eq.
-$600,000
-$ 15,000
-$ 1,000
-$ 1,000			-	-$ 727
-$ 1,000	6
-$ 1,000		0.52841
-$ 1,000
-$ 1,000			-
-$ 3,000		-
-$ 600	12	-
			TOTAL

TIME	(1 + i)ⁿ	1/(1 + i)ⁿ	(1 + i)ⁿ - 1	i · (1 + i)ⁿ	P/F	P/A
2
4
6
8
10
12

IMPREGILLO OPTION

PRESENT WORTH: PW i = 3%/YR

n = 4 TO 12 YEARS

REVENUE

ELEMENT	TIME	P/A	P/G	P/F	AMOUNT	SOURCE
$120,000	12		-		$1,194,480	TABLE 8
$ 20,000			51.2482
$120,000		-		0.8885
$120,000	8
$120,000
				TOTAL

DETERMINE NET PRESENT WORTH:

REVENUE:______________

COST: _______________

NET PW:_________________

2. Perform an annualworth economic analysis on the impregillo option: fill in tables neatly

IMPREGILLO OPTION

ANNUAL WORTH: AW i = 8.300%/YR

COST n = 12 YEARS

ELEMENT	N	PW	A/P	AMOUNT	SOURCE
-$600,000	12	-$600,000		-$80,854	Eq.
-$ 15,000
-$600,000			0.134764
-$ 15,000	12	-$ 10,904			Eq.
-$600,000
-$ 15,000
-$ 1,000
-$ 1,000				-$ 98
-$ 1,000			0.134764
-$ 1,000
-$ 1,000
-$ 1,000
-$ 3,000				-$ 3000
-$ 600	12
			TOTAL

TIME	(1 + i)ⁿ	(1 + i)ⁿ - 1	i · (1 + i)ⁿ	A/P
12

SHOW ALL WORK AND CALCULATIONS

IMPREGILLO OPTION

ANNUAL WORTH: AW i = 3%/YR

n = 12 YEARS

REVENUE

ELEMENT	n	PW	A/P	AMOUNT	SOURCE
$120,000	12			$120,000
$ 20,000					TABLE 8
$120,000			0.10046
$120,000	12
$120,000
			TOTAL

DETERMINE NET ANNUAL WORTH:

REVENUE:___________

COST:_______________

NET:_________________

Show all work and calculations

3. Given the following annual worth for one life cycle. Determine the payback period of the impregillo option for a 0% rate of return:

IMPREGILLO OPTION

ANNUAL WORTH: AW i = 8.300%/YR

COST n = 4 YEARS

ELEMENT	n	AMOUNT	SOURCE
-$600,000	4	-$182,364	Eq.
-$ 15,000	4	-$ 4,559	Eq.
-$ 1,000	4	-$ 259	Eq.
-$ 1,000	4	-$ 221	Eq.
-$ 3,000	4	-$ 3,000	Eq.
-$ 600	4	-$ 600	Eq.

REVENUE i = 3%/YR

n = 4 YEARS

ELEMENT	n	AMOUNT	SOURCE
$120,000	4	$120,000	TABLE 8
$ 20,000	4	$ 29,261	TABLE 8
$120,000	4	$ 28,684	TABLE 8

SHOW ALL WORK AND CALCULATIONS

PAYBACK PERIOD CALCULATION: nP

SHOW CALCULATIONS

COST REVENUE

AW NCF

AWREVENUE = ___________

AWCOST = ___________

AW NET CASH FLOW = ___________

nP = ________________

Does the impregillo option payback period exceed within the useful life of drill: choose all correct answers

YES

ONLY AFTER SALVAGE

NOT IMPORTANT

Reference no: EM131037394

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