Digi 4G 2:52 PM Economic group Homework 2.pdf Homework 2(18 June 2018, Monday) A
ID: 1156247 • Letter: D
Question
Digi 4G 2:52 PM Economic group Homework 2.pdf Homework 2(18 June 2018, Monday) Aspecially buik computer system has just been purchased by Progress Greenhouse Products to monitor moisture level and to control drip irrigation in hydroponics beds that gw clu tradiro tomalocs. The system can be parchased for RM100,000 roquires a minor peeventive maintenance with cest RM3,000 per year. At the end of sisth year, a major system upgrading cest RMIS000 will be required. The profit will have resulted in RMI5,000 each year foe a period of 20 ycars and one-off saving in year eleveth for RM 7,000. This sysisem will have asalvage value of RMS,000 at the end of year 20 andthe MARR-7%. Amwer the flowing. Analyne this singe preject proposal using Benefit Cost Ration(AW (5 marks) (ii) Juntify the acopeahlity ofthis proposal 2 marks Date submission on 21h June 2018, Thursday "d "end questionExplanation / Answer
Purchase Cost = 100,000
Annual preventive maintenance cost = 3,000
Upgrading cost = 15,000 only 6th year
Annual Profit = 15,000
One off savings = 7,000 only on 11th year
Salvage Value = 35,000
Number of years = 20 years
MARR = 7%
a. Calculate Benefit cost ratio using annual worth method
Calculate Present Worth of all benefits
PW of Benefits = 15,000 (P/A, 7%, 20) + 7,000 (P/F, 7%, 11)
PW of Benefits = 15,000 (10.594) + 7,000 (.4751)
PW of Benefits = 162,236
Annual Worth = 162,236 (A/P, 7%, 20)
Annual Worth = 162,236 (.0944) = 15,315
Calculating Present Worth of all cost
PW of all cost = 100,000 + 3,000 (P/A, 7%, 20) + 15,000 (P/F, 7%, 6) – 35,000 (P/F, 7%, 20)
PW of all cost = 100,000 + 3,000 (10.594) + 15,000 (.6663) – 35,000 (.2584)
PW of all cost = 132,733
Annual Worth = 132,733 (A/P, 7%, 20)
Annual Worth = 132,733 (.0944) = 12,530
Benefit Cost Ratio = Annual Worth of Benefits ÷ Annual Worth of cost
Benefit Cost Ratio = 15,315÷ 12,530
Benefit cost ratio = 1.22
b. As the benefit cost ratio is greater than one, the project is acceptable. In this project the benefits are more than the cost and project is acceptable.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.