CALCULATE THE ALTERNATE B CONVENTIONAL BENEFT/COST (B/C) RATIO:
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CE 3361
PROJECT II B
SHOW ALL WORK AND CALCULATIONS
- GIVEN THE FOLLOWING CASH TRANSACTIONS AND CORRESPONDING
ANNUAL WORTH VALUES FOR ALTERNATE B ECONOMIC ANALYSES:
ALTERNATE B
CASH TRANSACTION>ANNUAL WORTH
INITIAL550,000 - $ 62,057
INVESTMENT
OPERATIONS AND-; 2,500
MAINTENANCE
UPGRADES 128 YEAR 5
EVERY 5 YEARS 100 YEAR 10
INSURANCE 850
REVENUE +$ 30,000
INCREASE $ 10,000/YR
SALVAGE 180,000 13,803
USEFUL LIFE 12 YEARS
INTEREST ON COST 5%/YR
INTEREST ON REVENUE 1.5%/YR
ANSWER THE FOLLOWING QUESTIONS:
CE 3361
PROJECT II B
SHOW ALL WORK AND CALCULATIONS
2. CALCULATE THE ALTERNATE B CONVENTIONAL BENEFT/COST (B/C) RATIO:
(25)
EQUATION:=
ALTERNATE B: B/C =
ALTERNATE B: B/C =
JUSTIFIED
ALTERNATE B: B/C = ___________________ YES NO
3. CALCULATE THE ALTERNATE B LIFE CYCLE COST
(20)
EQUATION: LCCB =
COST
- $ 2500
+ $
TOTAL
ALTERNATE B: LCCB = ____________________________
-3-
CE 3361 NAME:________________________
PROJECT II B
SHOW ALL WORK AND CALCULATIONS
4. GIVEN THE ANNUAL WORTH OF ALTERNATE A AND ALTERNATE B
(60)
ALTERNATE A ALTERNATE B
INTIAL -$ 36,987 -$ 62,057
INVESTIMENT
OPERATIONS AND -$ 1,500/YR -$ 2,500/YR
MAINTENANCE
LABOR COSTS 6 OPERATORS 10 OPERATORS
$10/HR $ 24/HR
PRODUCTION 30 POUNDS/HR 60 POUNDS/HR
REVENUE $2/POUND $6/POUND
SALVAGE $ 9,132 $ 13,803
USEFUL LIFE 10 YEARS 12 YEARS
INTEREST ON COST 4%/YR 5%/YR
INTEREST ON REVENUE 5%/YR 1.5%/YR
CALCULATE THE COMPOSITE BREAKEVEN QUANTITY FOR ALTERNATE A AND ALTERNATE B
ALTERNATE A ALTERNATE B
VARIABLE UNIT COST VARIABLE UNIT COSTS
ν = ν =
ν = ν =
UNIT REVENUE UNIT REVENUE
r = r =
-4-
CE 3361 NAME:________________________
PROJECT II A DATE:________________________
SHOW ALL WORK AND CALCULATIONS
BREAKEVEN QUANTITY
- FCA - ν · QBE + RA + r · QBE =
-FCB - ν · QBE + RB + r · QBE
QBE = ______________________
-5-
SHOW ALL WORK AND CALCULATIONS
5A. CALCULATE THE U.S. GOVERNMENT DEPRECIATION SCHEDULE ON THE
ALTERNATIVE B INITIAL INVESTIMENT: $550,000 DURING THE FIRST 7-YEAR
TIME PERIOD
YEAR DOUBLE DECLINING STRAIGHT LINE
BALANCE DEPRECIATION
1 DDB = SL =
DDB = SL =
2 DDB = SL =
DDB = SL =
3 DDB = SL =
DDB = SL =
4 DDB = SL =
DDB = SL =
5 DDB = SL =
DDB = SL =
6 DDB = SL =
DDB = SL =
7 DDB = SL =
DDB = SL =
-6-
SHOW ALL WORK AND CALCULATIONS
5B CALCULATE THE U.S. GOVERNMENT DEPRECIATION SCHEDULE ON THE
ALTERNATIVE B INITIAL INVESTIMENT: $550,000 DURING THE FIRST 7-YEAR
TIME PERIOD
DEPRECIATION SCHEDULE
YEAR DEPRECIATION REMAINING DEPRECIATION
1 $550,000
2 - $
3 $
4
5
6
7
6. GIVEN A $20,000 BOND. THE STATED INTEREST RATE ON THE BOND IS 4.5%
PAID YEARLY. THE MATURITY DATE IS 25 YEARS. JOHN EXPECTS A RATE
OF RETURN OF 5%.
6A. WHAT IS THE FACE VALUE OF THE BOND?_____________
6B. WHAT IS THE BOND COUPON RATE?_____________
6C. HOW OLD WILL JOHN BE WHEN THE BOND MATURES?_____________
6 D. HOW MUCH IS JOHN WILLING TO PAY FOR THE BOND 3 YEARS FROM
NOW?
I =
I =
BV =
BV =
BV = ________________________________________
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