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Tutorial 4 Solution

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19 views

Tutorial 4 Solution

Uploaded by

sissy.he.7
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ECE 192, Spring 2023

Tutorial 4 Solution

Problem-1 Solution:

a) Using Straight-line depreciation, the depreciation charge for each year is:
𝑃−𝑆
𝐷𝑠𝑙𝑛 =
𝑁
$12,000 − $600
𝐷𝑠𝑙4 = = $2,850
4
The book Value of the asset, for every year will be:

𝐵𝑉𝑠𝑙𝑛 = 𝑃 − 𝑛 × 𝐷𝑠𝑙𝑛

𝐵𝑉𝑠𝑙1 = 𝑃 − 𝐷𝑠𝑙4 = $12,000 − $2,850 = $9,150

𝐵𝑉𝑠𝑙2 = 𝑃 − 2 × 𝐷𝑠𝑙4 = $12,000 − 2 × $2,850 = $6,300

𝐵𝑉𝑠𝑙3 = 𝑃 − 3 × 𝐷𝑠𝑙4 = $12,000 − 3 × $2,850 = $3,450

𝐵𝑉𝑠𝑙4 = 𝑃 − 4 × 𝐷𝑠𝑙4 = $12,000 − 4 × $2,850 = $600

b) Using Declining balance method, the depreciation charge is:


𝐷𝐷𝐵𝑛 = 𝑑 × 𝑃 × (1 − 𝑑)𝑛−1
𝐷𝐷𝐵1 = 0.2 × $12,000 × (1 − 0.2)0 = $2,400
𝐷𝐷𝐵2 = 0.2 × $12,000 × (1 − 0.2)1 = $1,920
𝐷𝐷𝐵3 = 0.2 × $12,000 × (1 − 0.2)2 = $1,536
𝐷𝐷𝐵4 = 0.2 × $12,000 × (1 − 0.2)3 = $1,228.80

The book Value of the asset, for every year will be:

𝐵𝑉𝐷𝑉1 = $9,600
𝐵𝑉𝐷𝑉2 = $7,680
𝐵𝑉𝐷𝑉3 = $6,144
𝐵𝑉𝐷𝑉4 = $4,915.2

1
ECE 192, Spring 2023

Problem 2 Solution
Since both alternatives have the same life, the analysis period is 20 years.
NPW (Machine X) = 9,000 (P/A, 8%, 20) +11,000 (P/A, 8%, 10) +40,000 (P/F, 8%, 20) − 120,000
= 9,000 (9.818) +11,000 (6.710) +40,000 (0.2145) − 120,000
= $50,752
NPW (Machine Y) = 12,000 (P/A, 8%, 20) +20,000 (P/F, 8%, 20) − 96,000
= 12,000 (9.818) +20,000 (0.2145) − 96,000
= $26,106
Based on the above results, Machine X is selected.

Problem-3 Solution

a) Service life is not equal and should be extended to perform the analysis. The least common multiple
in this case is 12 for both options. Then the PW for each alternative is:

𝑃𝑊𝐶𝑅100 = −680[1 + (𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 4) + (𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 8)]


+ (245 − 35)(𝑃⁄𝐴 , 𝑖 = 10%, 𝑁 = 12)
+ 100[(𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 4) + (𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 8)
+ (𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 12)]

𝑃𝑊𝐶𝑅100 = −680[1 + 0.6830 + 0.4665] + 210(6.8137) + 100[0.6830 + 0.4665 + 0.3186]

𝑃𝑊𝐶𝑅100 = $1160.027

𝑃𝑊𝐶𝑅𝑋 = −1100[1 + (𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 6)] + (440 − 60)(𝑃⁄𝐴 , 𝑖 = 10%, 𝑁 = 12)


+250[(𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 6) + (𝑃⁄𝐹 , 𝑖 = 10%, 𝑁 = 12)]

𝑃𝑊𝐶𝑅𝑋 = −1100[1 + 0.5645] + 380(6.8137) + 250[0.5645 + 0.3186]

𝑃𝑊𝐶𝑅𝑋 = $1,089.03

They should choose the CRX model

b) 𝑅𝑒𝑝𝑙𝑎𝑐𝑒 𝑡ℎ𝑒 𝑠𝑐𝑟𝑎𝑝 𝑣𝑎𝑙𝑢𝑒 = 100 𝑤𝑖𝑡ℎ 𝑥 = 𝑠𝑐𝑟𝑎𝑝 𝑣𝑎𝑙𝑢𝑒 𝑓𝑜𝑟 𝐶𝑅1000 𝑜𝑝𝑡𝑖𝑜𝑛 (𝑙𝑒𝑠𝑠 𝑝𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑)

𝑃𝑊𝐶𝑅100 (𝑥) = 𝑃𝑊𝐶𝑅𝑋 = 1,089.03


−680[2.1495] + 210[6.8137] + 𝑥[1.4681] = 1,089.03
1089.03 + 30.783
𝑥= = $762.34
1.4689

2
ECE 192, Spring 2023

Problem-4 Solution

Alternative 2X 2Y XY
Initial Costs 160,000 (2x80,000) 194,000 (97,000x2) 177,000 (80,000+97,000)
O&M 60,000 54,000 57,000
Salvage Values 80,000 100,000 90,000

𝐹𝑊2𝑋 = −160,000(𝐹 ⁄𝑃 , 𝑖 = 15%, 𝑁 = 3) − 60,000(𝐹 ⁄𝐴 , 𝑖 = 15%, 𝑁 = 3) + 80,000


𝐹𝑊2𝑋 = −160,000(1.5209) − 60,000(3.4725) + 80,000
𝐹𝑊2𝑋 = −$371,694

𝐹𝑊2𝑌 = −194,000(𝐹 ⁄𝑃 , 𝑖 = 15%, 𝑁 = 3) − 54,000(𝐹 ⁄𝐴 , 𝑖 = 15%, 𝑁 = 3) + 100,000


𝐹𝑊2𝑌 = −194,000(1.5209) − 54,000(3.4725) + 100,000
𝐹𝑊2𝑌 = −$382,569.6

𝐹𝑊𝑋𝑌 = −177,000(𝐹 ⁄𝑃 , 𝑖 = 15%, 𝑁 = 3) − 54,000(𝐹 ⁄𝐴 , 𝑖 = 15%, 𝑁 = 3) + 90,000


𝐹𝑊𝑋𝑌 = −177,000(1.5209) − 54,000(3.4725) + 90,000
𝐹𝑊𝑋𝑌 = −$377,131.8

The preferred alternative will be to buy two robots X, since is the one with the less negative Future Worth.

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