You want to buy a large scale 3D printer which costs 4.600 TL. The annual mainte

Question

You want to buy a large scale 3D printer which costs 4.600 TL. The annual maintenance cost including 10 new 3D drawings each year is reported to be 110 TL in the brand's website. The best price of a 1 kg white cartridge you could find from a wholesaler is 42 TL whereas the price of a 1 kg colored cartridge is 57 TL regardless of the color. You estimate that the design you will print each year will consume 10 kg material of which only 30% will be white. To keep up with the pace of the technology, you will change your printer at the end of the 2nd year when you will sell it for 3.400 TL. Your minimum attractive rate of return is 10% per year. a)Determine the capital recovery cost of printer. b)What is fixed cost per year? c)What is the variable cost per year? d) What is the EUAC of the printer?

Explanation / Answer

Answer A

Answer B

Fixed cost per year

Total fixed cost per year is 600+110=710. Cartridge is the variable cost as it depends on demand and if demand is also fixed then cartridge cost will also be fixed and then the fixed cost will be 600+110+525 {(7*57)+(3*42)}. Depriciation is calculated as (4600-3400)/2=600 per year.

Answer C

Variable cost is cartridge cost that is 525 TL but is depends on demand.

Answer A& D

EUAC is calculated by adding all the expenditures except the depriciation because depriciation is a non cash item and used in accounting not in cash flows or EUAC. We already have added 4600 when we invested and thats it.

Present value of the cash flows is the present value of cash flows that will be generated by the project of the 2 years.

This wuestion does not have the information of revenue for the efficeient calculation of capital recovery.

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