# CE 3361 ANNUALWORTH ECONOMIC ANALYSIS ON THE IMPREGILLO OPTION

CE 3361                                                                      NAME:____________________

PROJECT III                                                              DATE:_____________________

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DUE: 19 APRIL 2016

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

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

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CE 3361                                                                   NAME:____________________

PROJECT III                                                           DATE:_____________________

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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

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CE 3361                                                                      NAME:____________________

PROJECT III                                                              DATE:_____________________

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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:_________________

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CE 3361                                                                      NAME:____________________

PROJECT III                                                              DATE:_____________________

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1. 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

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CE 3361                                                                      NAME:____________________

PROJECT III                                                              DATE:_____________________

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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:_________________

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CE 3361                                                                      NAME:____________________

PROJECT III                                                              DATE:_____________________

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1. 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

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CE 3361                                                                      NAME:____________________

PROJECT III

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PAYBACK PERIOD CALCULATION: nP

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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                                                      NO

ONLY AFTER                                     NOT IMPORTANT

SALVAGE

NAME _____________________________________

SIGNATURE:_______________________________