Project

1. KIEWIT CONSTRUCTION COMPANY IS PLANNING TO BUY A NEW 1200 INGERSOL RAND DRILL FOR THEIR ROCK EXCAVATION PROJECT AT EAST SIDE RESERVIOR DAM. THEY OBTAIN TWO BID PROPOSALS: ONE FROM CATERPILLER EQUIPMENT IN PEORIA AND ONE IMPERGILLO- GRAZA IN CHICAGO. THE FOLLOWING DATA ARE PROVIDED FROM THE RESPECTIVE COMPANIES. IT IS YOUR RESPONSIBILITY TO PERFORM AN ECONOMIC ANALYSIS ON YOUR ASSIGNED ALTERNATIVE. THE FOLLOWING COST SCHEDULE HAS BEEN DEVELOPED BY OUR ACCOUNTANT:

CATERPILLER IMPERGILLO INITIAL $800,000 $600,000 COST DELIVERY $40,000 $15,000 COST OPERATION/ $5000/YR $3000/YR MAINTANENCE UPGRADE/ $1500 EVERY 3RD $1000 EVERY 2TH PARTS YEAR YEAR INSURANCE $1000/YR $600/YR INCOME $170000/YR $120000/YR INCREASE 3%/YR $20,000/YR SALVAGE $140000 $120000 LIFE 6 YR 4 YR INTEREST COST 8% CP QUARTERLY 2%/QUARTER CP MONTHLY REVENUE 2%/YR 3%/YR

(10) 1. DETERMINE THE LEAST COMMON MULTIPLE:___________

2. WHAT IS THE PAYMENT PERIOD FOR

ALTERNATE A: ___________________

(10) ALTERNATE B:____________________

3. CALCULATE THE EFFECTIVE ANNUAL INTEREST RATE FOR COST CATERPILLER ALTERNATE:

(20)

IMPERGILLO ALTERNATE:

(20)

(80) 4. CONSTRUCT THE COMPLETE CASH FLOW DIAGRAM FOR YOUR ASSIGNED ALTERNATIVE