please show your work on the math problems to get full credit.
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| Sami Almalki | |||||
| TECH-ineering 452 Economics Eng | |||||
| Vov 26, 2012 | |||||
| Problem 8.5 | |||||
| Two different routes are under consideration for a new interstate highway: | |||||
| Length of | Annual | ||||
| Highway | First Cost | Upkeep Cost | |||
| The " Long" route | 22 miles | $21 million | $140,000 | ||
| Transmountain shortcut | 10 miles | $45 million | $165,000 | ||
| For either route, the volume of traffic will be 400,000 cars per year. These cars | |||||
| are assumed to operate at $0.25 per mile. Assuming a 40-year life for each road | |||||
| and an interest rate of 10%, determine which route should be selected. | |||||
| User's annual cost= 22miles*$0,25 per mile*400,000 cars=$2,200,000 | |||||
| Sponsor's annual cost=$21,000,000(A/P,10%,40)+$140,000=$2,277,488 | |||||
| Short cut: | |||||
| User's annual cost= 10miles*$0,25*400,000 cars= $1,000,000 | |||||
| Sponsor's annual cost=$45,000,000(A/P,10%,40)+$165,000=$4,766,674 | |||||
| Problem 9.1 | |||||
| Identify which of the following expenditures is considered as a capital expenditure that | |||||
| must be capitalized (depreciated): | |||||
| (a) Purchase land to build a warehouse at $300,000. | |||||
| (b)Purchased a copy machine at $15,000. | |||||
| ( c) Installed a conveyor syatem at a cost of $55,000 to automate some part of production processes. | |||||
| (d)Painted the office building, both interior and exerior, at a cost of $22,000. | |||||
| (e)Repaved the parking lot at a cost of $25,000. | |||||
| (f) Installed a purified water fountain in the employee lounge at a cost of $3,000. | |||||
| (g) Purchased a spare part for a stamping machine at a cost of $3,800. | |||||
| (h) Paid $12,000 to lease a dump truck for six months. | |||||
| (i) Purchased a patent on an energy-saving device over five years at a cost of $30,000. | |||||
| a,b,e,f, and h (amortization,rather than depreciation) | |||||
| Problem 9.9 | |||||
| Consider the following data on an asset: | |||||
| Cost of the asset, I | $130,000 | ||||
| Useful life, N | 5 years | ||||
| Salvage value, S | $20,000 | ||||
| Compute the depreciation allowance and the resulting book values using the following method: | |||||
| Dn=Book value at beginning of year n - Salvage value,over, Remaining useful life at beginning of year n | |||||
| SL | DDB | ||||
| n | Dn | Bn | Dn | Bn | |
| 0 | $130,000 | $130,000 | |||
| 1 | $22,000 | $108,000 | $52,000 | $78,000 | |
| 2 | $22,000 | $86,000 | $31,200 | $46,800 | |
| 3 | $22,000 | $64,000 | $18,720 | $28,080 | |
| 4 | $22,000 | $42,000 | $693 | $20,000 | |
| 5 | $22,000 | $20,000 | $0 | $20,000 | |
| (a) Depreciation rate=1/5 for SL | |||||
| (b) Deprciation rate= 2/5 for DDB |
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