CHAPTER 4 APPLICATIONS IN THE CONSTRUCTION INDUSTRY
|
|
- Juniper Wilkerson
- 7 years ago
- Views:
Transcription
1 CHAPTER 4 APPLICATIONS IN THE CONSTRUCTION INDUSTRY This chapter introduces some topics that are related to the economic evaluation of alternatives such as the depreciation, breakeven analysis and the sensitivity analysis. These topics are very important for the economic evaluation of projects. Also, the use of investment laws and economic evaluation are presented and applied for the construction projects such as: calculation of the renting cost of equipment, equipment replacement analysis and the evaluation of bids. 4.1 Depreciation The depreciation in defined as the decrease in market value of an asset over time through wear, deterioration or obsolescence. A machine may depreciate (decline in value) because it is wearing out and no longer performing its function as well as when it was new. Many kinds of machinery require increased maintenance as they age, reflecting a slow but continuing failure of individual parts. Also, the quality of outputs may decline due to wear in components. Another aspect of depreciation is that caused by obsolescence. Obsolescence occurs when the asset is no longer technologically superior to available alternatives. A machine is described as obsolete when the function it performs can be done in some better manner. A machine may be in excellent working condition, yet may still be obsolete. For example, electronic machines, computers, etc. As asset always has different values: initial value (P), book value (BV), salvage value (F) and market value (MV). The initial value represents the purchase price of an asset. Salvage value represents the expected price for selling the asset at the end of its useful life. The book value represents the current value in the accounting systems. The book value equals the initial value of the asset minus all the depreciation costs till given time. Engineering Economy 82 Dr. Emad Elbeltagi
2 The book value is always calculated at the end of each year. The market value, on the other hand, represents the value of the asset if it is sold in the free market. It is not necessary that the book value equals the market value. Depreciation is an accounting charge that allows for the recuperation of capital that was used to procure equipment or other physical assets. There are three common methods for calculating depreciation expense for financial accounting purposes: straight-line, sum-ofyears digits and the sinking fund method. Each method involves the spreading of the amount to be depreciated over the recovery life of an asset in a systematic manner. Each depreciation method selected produces different patterns of depreciation expense per period. The straight-line method assumes linear depreciation or the depreciation cost is allocated equally over the asset useful life. The sum-of-years digits assumes high rate of depreciation at the early age of an asset and decreasing rate at its aged life. The Third method assumes lower rate at the early ages and faster rate at the late age Straight-Line method The simplest and best known of the various depreciation methods is the straight-line depreciation method. In this method a constant depreciation charge is made. To obtain the annual depreciation charge at any year, D n, the total amount to be depreciated (initial value, P salvage value, F) is divided by the useful life in years, N. (Annual depreciation charge) D n = (P F) / N (4.1) Where: D n = Annual depreciation P = Initial value of the asset (include purchase price, delivery cost, installation cost and other equipment related costs). P = Salvage value of the asset (the net value after dismantling or removal costs have been subtracted from the actual monetary value). N = Expected depreciable life of the asset. Engineering Economy 83 Dr. Emad Elbeltagi
3 The book value at any time, n, could be calculated as given in the following equation: BV(n) = P nd n (4.2) Example 4.1: If an asset has a initial value of LE50,000 with LE10,000 salvage value after five years. Calculate the annual depreciation and calculate the book value of the asset after each year. Solution: Annual depreciation: D n = (P - F) / N = 50,000-10,000 / 8 = LE8,000 per year Book value of the asset after each year: BV(n) = P nd n (n = 1, 2, 3, 4, 5) BV(1) = 50,000 (1) 8,000 = LE42,000 BV(2) = 50,000 (2) 8,000 = LE34,000 BV(3) = 50,000 (3) 8,000 = LE26,000 BV(4) = 50,000 (4) 8,000 = LE18,000 BV(5) = 50,000 (5) 8,000 = LE10,000 = F Example 4.2: If the purchase price of an equipment is LE60,000 and its salvage value after 8 years is LE6,000, calculate the annual depreciation and the book value of the equipment each year. Solution: P = 60,000; F = 6,000; N = 8; Total depreciation = = LE54,000 Annual depreciation = / 8 = LE6,750 Notice that the book value of the equipment equals its salvage value at the end of its useful life as shown in Table 4.1. Engineering Economy 84 Dr. Emad Elbeltagi
4 Table 4.1: Straight-line depreciation of Example 4.2 Year Annual depreciation Book value , ,750 53, ,750 46, ,750 39, ,750 33, ,750 26, ,750 19, ,750 12, ,750 6, Sum-of-years digits method Another method for allocating the cost of an asset minus its salvage value over its useful life is called sum-of-years digits depreciation method. The sum of the year digits is a rapid write-off technique by which most of the value of the asset is written off in the first one-third of its life. This method results in faster depreciation at the early life of an asset. Larger depreciation charges than straight-line depreciation during the early years of an asset and smaller charges as the asset nears the end of its estimated life. Each year, the depreciation charge is computed as the remaining useful life at the beginning of the year divided by the sum of the years digits for the total useful life, with this ratio multiplied by the total amount of depreciation (P F). The mechanics of the method involve finding the sum of the year digits from 1 through N. The depreciation charge for any given year is then obtained by multiplying total amount of depreciation by a ratio of the number of years remaining in the life of the asset to the sum of year digits. Thus means that the depreciation is calculated as the percentage of the remaining life to the original life. For an asset with useful life N, to obtain the annual depreciation charge, D n, at any year n, can be calculated as follows: D n = (Remaining useful life at beginning of a year / Sum of years digits) (P F) Engineering Economy 85 Dr. Emad Elbeltagi
5 Sum of years digits = N (N + 1) / 2 D n Ν - n 1 ( P F) N( N 1)/2 (4.3) Example 4.3: Resolve Example 4.2 using the straight-line depreciation method. Solution: P = 60,000; F = 6,000; N = 8 Sum-of-years digits = 8 (8 + 1) / 2 = 36 years The calculations are shown in the following table (Table 4.2). Table 4.2: Sum-of-years depreciation of Example 4.3 Year Remaining life / Annual sum-of-years depreciation Book value , /36 12,000 48, /36 10,500 37, /36 9,000 28, /36 7,500 21, /36 6,000 15, /36 4,500 10, /36 3,000 7, /36 1,500 6,000 Example 4.4: Calculate the depreciation charge for the first three years and the book value for year three for an asset which had a first cost of LE25,000, and a salvage value of LE4,000 and a life of eight years. Solution: The sum of years digits must be calculated first: Sum of Years Digits = 8 (8 + 1) / 2 = 36 D 1 = [( ) / 36] (25,000 4,000) = LE4667 Engineering Economy 86 Dr. Emad Elbeltagi
6 D 2 D 3 = [( ) / 36] (25,000 4,000) = LE4083 = [( ) / 36] (25,000 4,000) = LE3500 The book value for year three: BV(3) = 25,000 [ ] = LE12, Sinking fund method This method assumes that a uniform series of end-of-payments are deposited into an imaginary sinking fund at a given interest rate i. The amount of the annual deposit is calculated so that the accumulated sum at the end of the asset life, and at the stated interest rate, will just equal the value of the asset depreciated (i.e., P F). The amount of yearly depreciation is invested in a compound manner for the remaining period as a uniform series of payments using Eq. 4.4 as follows: A i ( P F) n (1 ) 1 i (4.4) Then the depreciation value, D n, at any year n is calculated using the following equation. D n = A (1 + i) n-1 ; n = 1, 2, 3,..., N (4.5) Example 4.5: Resolve Example 4.2 using the sinking fund depreciation method, assuming that the interest rate is 10%. Solution: P = 60,000; F = 6,000; N = 8; i =10% A = ( ) [(0.1) / ( )] = LE4,722 Accordingly, the annual depreciation could be calculated as follows: At the first year: D 1 = LE4,722 At the second year: D 2 = 4722 (1.1) = LE5,194 At the third year: D 3 = 4722 (1.1) 2 = LE5,714.. At the eighth year: D 8 = 4722 (1.1) 7 = LE9,202 The results of the depreciation calculations are summarized in Table 4.3. Engineering Economy 87 Dr. Emad Elbeltagi
7 Book value Table 4.3: Sinking fund depreciation of Example 4.5 Year Annual depreciation Book value , ,722 55, ,194 50, ,714 44, ,285 38, ,913 31, ,605 23, ,365 15, ,202 6,000 After studying depreciation calculations from the previous listed three methods, Figure 4.1 illustrates the difference between the three methods. The figure shows that the sum-of-year digits method gives an accelerated depreciation compared to the straight-line method. On the other hand, the sinking fund is a decelerated method compared with the straight-line method. However, the straight-line method is the commonly used for calculating asset depreciation. Initial value Sinking fund Straightline Salvage value Sum-of years Age Figure 4.1: Comparison among the three depreciation methods Engineering Economy 88 Dr. Emad Elbeltagi
8 4.2 Estimating Equipment Costs (Rentals) The cost per unit of time of owning an item of equipment has to be determined. Costs associated with owing equipment called the ownership costs. Estimating equipment cost involves identifying the ownership and operating costs. Ownership costs include: initial cost, financing (investment) costs, depreciation costs and taxes and insurance costs. The operating costs include: maintenance and repair costs, storage costs and fuel and lubrication costs Initial cost The initial cost is the total cost required to purchase a piece of equipment. This initial cost is the basis for determining other costs related to ownership as well as operating costs. Generally, initial cost is made up of: price at the factory or used equipment price, extra options and accessories, sales tax, freight and assembly or setup charges. The initial cost is very straight forward, whereas the other costs require more analysis and computation. Te annual depreciated cost of the equipment should be calculated as described in the previous section Investment cost The purchase of construction equipment requires a significant investment of money. This money either be borrowed from a lender, or it will be taken from reserve fund of the contractor. Either the lender will charge an interest rate for the borrowed money, or the contractor will lose any interest money that could be gained if the contractor invest that amount of money used to purchase a piece of equipment. In order to calculate the cost of finance (or investment cost) of an equipment, both the purchase price, P, and the salvage value, F, should be converted into uniform annual values. In this situation, the purchase price is considered as a present value invested for n yeas as a series of uniform payments (equipment useful life) and the salvage value is considered as a future sum of money to be discounted for n years as a series of uniform payments. Engineering Economy 89 Dr. Emad Elbeltagi
9 Annual cos t of finance n i(1 i) (1 ) 1 P i P F n i n (1 i) n F 1 n (4.6) Example 4.6: An excavator purchase price is LE460,000 and its salvage value is Solution: LE40,000 after 10 years of useful life. Find the annual cost of finance of this excavator if the annual interest rate is 15%. P = 460,000; F = 40,000; n = 10; i = 15% Annual cost of finance = (1.15) (1.15) 1 10 (1.15) 1 10 = LE47,684/year Operating costs Operating cost accrue only when the unit of equipment is used, whereas ownership costs accrue whether or not the equipment is used. Operating costs include maintenance and repairs, fuel, oil and lubricants. The amounts consumed by a piece of equipment vary with the type and size of equipment, the conditions under which it is operated. An equipment is seldom used its total horse power and also it is seldom to work for 60 minute/hour. Thus, the fuel consumed should be based on the actual operating conditions. Perhaps the average demand on an engine might be 50 percent of its maximum power for an average 45 minutes/hour. Maintenance and repair costs: The cost for maintenance and repairs include the expenditures for replacement parts and the labor required to keep the equipment in good working condition. Historical cost records of maintaining and servicing equipment are the most reliable guide in estimating maintenance and repair cost. The manufacturers of construction equipment provide information showing recommended costs for maintenance and repairs for the equipment they Engineering Economy 90 Dr. Emad Elbeltagi
10 manufacture. The annual cost of maintenance and repairs is often expressed as a percentage of purchase prices or as a percentage of the straight-line depreciation costs. Fuel consumption: When operating under standard conditions, a gasoline engine will consume approximately 0.06 gallon of fuel for each horsepower-hour developed. A diesel engine will consume approximately 0.04 gallon of fuel for each horsepower-hour developed. Lubricating oil consumption: The quantity of lubricating oil consumed by an engine varies with the size of the engine, the capacity, the equipment condition and the number of hours between oil changes. Cost of rubber tires: Many types of construction equipment use rubber tires, whose life usually will not be the same as the equipment on which they are used. For example, a unit of equipment may have an expected useful life of six years, but the tires on the equipment may last only for two years. Therefore, a new set of tires must be placed on the equipment every two years, which would require three sets of tires during the six years the equipment will be used. Thus, the cost of depreciation and repairs for tires should be estimated separately from the equipment. Example 4.7: Calculate the ownership cost per hour for an excavator powered by a 250-hp engine based on the following data: - Purchase price (P) = LE420,000 - Salvage value (F) = LE250,000 - Operation factor = 50% - Useful life (N) = 6 years - Working hours per year = Maintenance and repair costs = 110% of annual depreciation - Diesel fuel price = 3.8/gallon Engineering Economy 91 Dr. Emad Elbeltagi
11 - Fuel consumption = 0.04 gallon/hp/hr - Lube oil cost = 10% of fuel - Interest rate (i) = 10% Solution: Depreciation (assume straight-line) = ( ) / 6 = LE /year Investment annual cost is calculated as follows: (1.1) (1.1) 1 6 (1.1) Annual investment = ( ) ( ) = ( ) = LE /year Maintenance and repair cost = = LE /year Then, the total yearly costs = = LE /year Accordingly, the hourly cost = / 2000 = LE47.6/hr Fuel consumption = = 5 gallon/hr Fuel cost = = LE19/hr Lubricate oil cost = = LE1.9/hr Finally, the total hourly cost = = LE68.5/hr Example 4.7: Calculate the hourly rate of equipment based on the following data: - Purchase price (P) = LE460,000 - Salvage value (F) = LE40,000 - Useful life (N) = 10 years - Working hours per year = 2000 years - Annual maintenance costs = 10% of purchase price - Annual operating costs = LE47,000 - Interest rate (i) = 15% Engineering Economy 92 Dr. Emad Elbeltagi
12 Solution: Depreciation (assume straight-line) = ( ) / 10 = LE42000/year Investment annual cost is calculated as follows: (1.15) (1.15) 1 10 (1.15) 1 10 Annual investment = LE47684/year Maintenance and repair cost = = LE46000/year Operating costs = LE47000/year Then, the total annual costs = = LE182684/year Accordingly, the hourly cost = / 2000 = LE91.34/hr Calculate the equipment rentals using cash flows In this method, the cash flow for both the costs and the revenues are calculated and the net present worth is calculated so that the net present worth equal zero taking into account the time value of money. Example 4.8: Resolve example 4.7 using the cash flows method. Solution: Let s assume that the annual return from renting the equipment is x, accordingly, the cash flows could be summarized as given in Table 4.4. Annual costs = annual maintenance + operating cost = = = = LE93,000 Engineering Economy 93 Dr. Emad Elbeltagi
13 Table 4.4: Cash flows of Example 4.8 Year Initial cost Salvage value Annual costs Cash in Cash out Net cash x x x x x x x x x x x x x x x x x x x x By equating the PV for both the costs and revenues (i.e., NPV =0), as follows: 0 = (x 93000) (P/A, 15%, 10) (P/F, 15%, 10) = (x 93000) (5.0188) (0.2472) x = Then, x = LE182,685 / year The hourly rent = / 2000 = LE91.34/hr 4.3 Sensitivity Analysis All the previous analysis assumes that the data used for an economic decision is deterministic and certain. Also, since many data gathered in solving a problem represents projections of future consequences, there may be considerable uncertainty regarding the accuracy of that data. As the desired results of the analysis is decision making, as appropriate question is, to what extent do variations in the data affect my decision? What variations in a particular estimate would change selection of the alternative? In such case, the decision is said to be sensitive to the estimate. Engineering Economy 94 Dr. Emad Elbeltagi
14 The sensitivity analysis, as such, aims to check if the economic decision changes as one or more of the data used change such as the MARR, service life, annual maintenance cost, etc. This section is dedicated to show how the change of these values may change the economic decisions. To perform sensitivity analysis, follows the following steps: - Identify the factors(s) that values may change than that has/have been identified. - Identify the range of values change for this/these factor(s). - Identify the economic decision criterion (e.g., NPW, EUAW, IRR, etc.) that will be used to perform the economic analysis. - Calculate the values of this economic criterion at different levels of the changeable factor. - Draw a diagram for the obtained results from the previous step to study the effect of these changes on the economic criterion under study. Example 4.9: The purchasing cost of a given equipment is LE90,000 and its return for the first year is LE30,000 decreasing annually by LE3,000. If the investment rate changes between 10% and 25% and the equipment age ranges from 8 to 12 years. It is required to study the sensitivity of the decision considering the effect of the change of the investment rate and the age using the EUAW method. Neglect the equipment salvage value. Solution: The cash flow could be represented as follows: G = 3,000 LE30,000 LE90,000 Engineering Economy 95 Dr. Emad Elbeltagi
15 The sensitivity of the decision to the change is the investment rate: In this case, let s assume that the average age of the equipment is 10 years. Then, calculate the EUAW at different values for i, (10, 15, 20 and 25%) i = 10% EUAW = (A/P, 10%, 10) (A/G, 10%, 10) = ( ) (3.7255) = LE4177 Similarly, The EUAW could be calculated at different i as follows: i = 15% EUAW = LE1919 i = 20% EUAW = - LE687 i = 25% EUAW = - LE3600 The sensitivity of the decision to the change is the equipment age: In this case, let s assume that the average investment rate is 15%. Then, calculate the EUAW at different age values (8, 10 and 12 years). n = 8 EUAW = LE1601 n = 10 EUAW = LE1919 n= 12 EUAW = LE1673 The previous results show that all the values of the EUAW remain positive for all values of n (in the specified range). Accordingly, the decision does not affected with the change of the equipment life. On the other hand, the change of the investment rate changes the values of the EUAW from being positive to negative. Accordingly, the decision changes with the change of the i values. Example 4.10: A test vehicle has a cost of LE100,000 with a life of 10 years. Additional revenues of LE17,500 per year are expected and the required MARR is 15%. If the additional revenues are only estimates and might fluctuate 15%. Evaluate the sensitivity of the analysis. Engineering Economy 96 Dr. Emad Elbeltagi
16 Solution: EUAW= -100,000(A/P, 15%, 10) + Revenue = - 19,925 + Revenue Then, calculate the EUAW at different values for the revenue within the range of ±15% (14875 to 20125). Revenue EUAW 14,875-5,050 15,750-4,175 16,625-3,300 17,500-2,425 18,375-1,550 19, , Example 4.11: A company wants to purchase a new core driller for information gathering. It is expected that the machine can be purchased for LE275,000 it will last 8 years, expenses will total LE50,000 per year and that the revenues will be LE100,000 per year. The company requires a MARR of 10%. Engineering Economy 97 Dr. Emad Elbeltagi
17 Solution: a. Determine the sensitivity of the present worth to a change in the MARR. b. What would be the effects of a 10% range to all other parameters? a. PW = -275,000-50,000(P/A, i%, 8) + 100,000(P/A, i%, 8) = -275, (P/A, i%, 8) MARR (P/A, i%, 8) PW b. By changing the cost, expenses and revenues by 10% (-10% to +10%) at the interval of 5%, the effect on the present worth would be as shown in the following table. Engineering Economy 98 Dr. Emad Elbeltagi
18 Range Cost PW Cost Exp. PW Exp. Rev. PW Rev Breakeven Analysis A fundamental of accounting is that all revenues and costs must be accounted for and the difference between the revenues and costs is the profit, or loss, of the business. Costs can be classified as either a fixed cost or a variable cost. A fixed cost is one that is independent of the level of sales; rather, it is related to the passage of time. Examples of fixed costs include rent, salaries and insurance. A variable cost is one that is directly related to the level of sales, such as cost of goods sold and commissions. In planning and managing your business it is important to know what level of sales must be achieved in order to meet total costs. Every LE of sales above this will contribute to profits. Advantages of Break-even Analysis - It is simple to conduct and understand. - It shows profit and loss at different levels of output. - It can cope with changing circumstances, e.g. the following changes in the business environment can be shown in a break even chart. Disadvantages of Break-even Analysis - It assumes that all output is sold at the given price (this may well be untrue). - Although it can cope with changes in circumstances, these factors change regularly reducing its usefulness as a forecasting tool. - The model assumes that costs increase constantly and do not benefit from economies of scale. If the firm obtains purchasing economies of scale then its total cost line will no longer be straight. Engineering Economy 99 Dr. Emad Elbeltagi
19 - Break-even analysis is only as good as the data upon which it is based. Poor quality data will lead to inaccurate conclusions being drawn. Example 4.12: A factory produces concrete blocks units. Each unit sells for LE15 and costs LE5. The annual maintenance and operation costs are LE75,000. Calculate the number of blocks that should be produced to justify keep this business running. Solution: Let s assume that number of units produced is x. Accordingly, the cost of blocks equal 5x and the annual revenue is 15x. The annual cost = x At breakeven point when total costs equal total revenue: x = 15x Then, x = number of units produced = 7500 blocks The investment in this project would be acceptable when the production increases than 7500 units per year, otherwise it is rejected. Cost Revenue Total cost Fixed cost Units Engineering Economy 100 Dr. Emad Elbeltagi
20 In case of evaluating alternatives using the breakeven analysis, the breakeven point represents the point at which the total cost for alternatives are equal considering that all alternatives have equal revenue. In case of having alternatives with different revenues, the breakeven for each alternative is identified first, then the breakeven between each two alternatives is identified as follows: - Identify the common criterion (IRR, NPW, etc.) among alternatives. - Calculate the cost in one of these criteria. - For each two alternatives, find the value at which the two alternatives have equal cost. - Represent the results graphically and compare between alternatives on the breakeven point. Example 4.13: There are two proposals to buy a new production line for brick manufacturing. The information related to both alternatives is shown in the following table. If the interest rate is 10%, find: a. The volume of production that justifies the purchase of Alternative A. b. If the demand on the production of this factory is 2000 ton annually, which alternative do you recommend for purchasing? Alternative A B Initial cost LE230,000 LE80,000 Annual costs LE35,000 LE15,000 Salvage value LE40,000 - Labor cost (EL/ton) Age (years) 10 5 Solution: First, let s calculate the EUAW for both alternatives: EUAW A = (A/P, 10%, 10) (A/F, 10%, 10) = LE69,922 EUAW B = 80000(A/P, 10%, 5) Engineering Economy 101 Dr. Emad Elbeltagi
21 = LE36,103 Assume that x represents the annual production (ton/year), the direct costs for both alternatives could be represented as: Direct cost A = 15x Direct cost B = 40x Accordingly, the total cost for both alternatives are: Total cost A = x Total cost B = x By equating the total cost for both alternatives, then, the breakeven point equals; x = 1353 ton/year a. Thus means that, if the annual production is more than 1353 ton, then alternative A is better. b. In case of the required production is 2000, then alternative A is better. As shown in the figure below, if the production is less than 1353 ton annually then it is better to use alternative B. While alternative A is better in case of production is more that 1353 ton annually. A B Engineering Economy 102 Dr. Emad Elbeltagi
22 Example 4.14: It is required to calculate the breakeven point for the three options listed in the table below. Which alternative do you recommend? Annual fixed Variable cost Sell price Alternative cost (LE/ unit) (LE/unit) A LE30, B LE50, C LE60, Solution: First, calculate the breakeven point for each alternative (the point at which the total costs and the revenue are equal). Alternative A: x = 27x; then x = 3000 units Alternative B: x = 35x; then x = 2174 units Alternative C: x = 40z; then x = 2000 units Second, draw the relation between the total cost and the number of units produced. A B C Engineering Economy 103 Dr. Emad Elbeltagi
23 To find the points of intersection, you may solve each two equations together or you may find it from the graph shown above. The above shows the following: - If the production is less than 4000 units, then alternative A is the best. - If the production is greater than 4000 and less than 5000, then alternative B is the best. - Finally, if the production is greater than 5000 units, then alternative C is the best. 4.5 Exercises 1. A company purchased a piece of equipment 3 years ago with an initial value of LE15,000, salvage value of LE3,000, annual operating cost of LE2,000, and estimated life of 10 years. Calculate the book value of the machine now using the straight-line, sum-of years digits and sinking fund depreciation method. Assume interest rate 10%. 2. A backhoe will be purchased for a cost of LE109,750. After a useful life of 5 years, it is assumed the equipment will be sold for LE35,000. Assume interest of 8% for borrowing money, 4% for risk and 2% for taxes, insurance and storage. Calculate the annual ownership cost and the cost per hour assuming the equipment will be used 1800 hr/year. 3. Calculate the ownership cost per hour for a dump truck powered by a 120-hp gasoline engine based on the following data: - Purchase price = LE175,000 - Freight charges = LE2,000 - Estimated salvage value = LE57,500 - Operation factor = 40% - Useful life = 5 years - Hours used per year = 1800 Engineering Economy 104 Dr. Emad Elbeltagi
24 - Maintenance and repair = 130% of annual depreciation - Tire cost = LE5,000 - Tire life = 4,000 hours - Maintenance and repairs (tires) = 15% of tire depreciation - Gasoline fuel price =LE4.0/gallon - Fuel consumption = 0.06 gallon/hp/hr - Lube oil cost = 10% of fuel - Interest rate (i) = 10% 4. When studying the different alternative air conditioning systems for a building, there were two available systems with their information as shown in the table below. It is required to calculate the decision of selecting any of the two systems to if the interest rate ranges from 8% to 15%. Use the EUAW method. Alternative A B Initial cost LE100,000 LE150,000 Annual costs LE2,000 LE1,500 Salvage value LE5,000 LE10,000 Maintenance at mid-age LE20,000 - Age (years) Find the breakeven point for the following two alternatives. Assume that the investment rate is 10%. Which one do you select if the expected production is 2000 m 3 /year? Alternative Equipment A Equipment B Initial cost LE23,000 LE8,000 Maintenance cost/year LE3,500 LE1,500 Salvage value LE4,000 - Labor cost/hr LE12 24 Age (years) 10 5 Production (m 3 /hr) 8 6 Engineering Economy 105 Dr. Emad Elbeltagi
25 REFERENCES Newman, D.G., and Lavelle, J.P., Engineering Economic Analysis, 7 th Engineering Press, Austin, Texas, edition, Ammar, M., Principles of Engineering Economy, Lecture Notes, Tanta University, Griffis, F.H., Farr, J.V., and Morris, M.D., Construction Planning for Engineers, McGraw-Hill, Inc., New York, Engineering Economy 106 Dr. Emad Elbeltagi
Construction Economics & Finance. Module 4 Lecture-1
Construction Economics & Finance Module 4 Lecture-1 Equipment costs:- For construction firms, it is important to accurately estimate the equipment cost as part of the total cost of the construction project.
More informationCHAPTER 4 COST OF CONSTRUCTION LABOR AND EQUIPMENT
CHAPTER 4 COST OF CONSTRUCTION LABOR AND EQUIPMENT Construction labors influence every part of a project. They operate equipment and fabricate and install materials. Detailed estimate requires the breakdown
More informationICASL - Business School Programme
ICASL - Business School Programme Quantitative Techniques for Business (Module 3) Financial Mathematics TUTORIAL 2A This chapter deals with problems related to investing money or capital in a business
More informationCONSTRUCTION EQUIPMENT
Equipment is a critical resource in the execution of most construction projects. The equipment fleet may represent the largest long-term capital investment in many construction companies. Consequently,
More informationTools for Project Evaluation. Nathaniel Osgood 1.040/1.401J 2/11/2004
Tools for Project Evaluation Nathaniel Osgood 1.040/1.401J 2/11/2004 Basic Compounding Suppose we invest $x in a bank offering interest rate i If interest is compounded annually, asset will be worth $x(1+i)
More informationCHAPTER 11. DEPRECIATION & Depletion DEPRECIATION. Property is Depreciable if it must:
DEPRECIATION & Depletion CHAPTER 11 By: Magdy Akladios, PhD, PE, CSP, CPE, CSHM DEPRECIATION Decrease in value of physical properties with passage of time and use Accounting concept establishing annual
More informationAPPENDIX. Interest Concepts of Future and Present Value. Concept of Interest TIME VALUE OF MONEY BASIC INTEREST CONCEPTS
CHAPTER 8 Current Monetary Balances 395 APPENDIX Interest Concepts of Future and Present Value TIME VALUE OF MONEY In general business terms, interest is defined as the cost of using money over time. Economists
More informationCHAPTER 6 PROJECT CASH FLOW
CHAPTER 6 PROJECT CASH FLOW In the previous chapters, techniques for project planning, scheduling, resources management, and timecost trade off have been introduced. This chapter will deal with project
More informationConstruction Planning, Equipment, and Methods
CHAPTER Construction Planning, Equipment, and Methods EQUIPMENT COST Sixth Edition A. J. Clark School of Engineering Department of Civil and Environmental Engineering 3a By Dr. Ibrahim Assakkaf ENCE 420
More informationConstruction Economics & Finance. Module 3 Lecture-1
Depreciation:- Construction Econoics & Finance Module 3 Lecture- It represents the reduction in arket value of an asset due to age, wear and tear and obsolescence. The physical deterioration of the asset
More informationNet Present Value (NPV)
Investment Criteria 208 Net Present Value (NPV) What: NPV is a measure of how much value is created or added today by undertaking an investment (the difference between the investment s market value and
More information1.1 Introduction. Chapter 1: Feasibility Studies: An Overview
Chapter 1: Introduction 1.1 Introduction Every long term decision the firm makes is a capital budgeting decision whenever it changes the company s cash flows. Consider launching a new product. This involves
More informationNet Present Value and Capital Budgeting. What to Discount
Net Present Value and Capital Budgeting (Text reference: Chapter 7) Topics what to discount the CCA system total project cash flow vs. tax shield approach detailed CCA calculations and examples project
More informationEngineering Economics Cash Flow
Cash Flow Cash flow is the sum of money recorded as receipts or disbursements in a project s financial records. A cash flow diagram presents the flow of cash as arrows on a time line scaled to the magnitude
More informationChapter 10 Replacement Analysis
Chapter 10 Replacement Analysis 10-1 One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new
More informationENGINEERING ECONOMICS AND FINANCE
CHAPTER Risk Analysis in Engineering and Economics ENGINEERING ECONOMICS AND FINANCE A. J. Clark School of Engineering Department of Civil and Environmental Engineering 6a CHAPMAN HALL/CRC Risk Analysis
More informationChapter 9. Plant Assets. Determining the Cost of Plant Assets
Chapter 9 Plant Assets Plant Assets are also called fixed assets; property, plant and equipment; plant and equipment; long-term assets; operational assets; and long-lived assets. They are characterized
More informationDepreciation and Depletion
CHAPTER Depreciation and Depletion CHAPTER OBJECTIVES After careful study of this chapter, you will be able to: 1. Identify the factors involved in depreciation. 2. Explain the alternative methods of cost
More informationReal Estate. Refinancing
Introduction This Solutions Handbook has been designed to supplement the HP-2C Owner's Handbook by providing a variety of applications in the financial area. Programs and/or step-by-step keystroke procedures
More informationCharacteristics of the Participants
3 Financial Analysis for Replacement of Construction Equipment in Saudi Arabia Ali A. Shash (Center for Engineering Research, Research Institute, King Fahd University of Petroleum & Minerals, Saudi Arabia)
More informationLearning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.
0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting
More informationChapter 13 Income Taxes
Chapter 13 Income Taxes 13-1 A tool costing $300 has no salvage value and will be depreciated over 3 years according to the sum-of-the-years-digits method. The cash flows before tax due to the tool are
More informationCHAPTER 9 NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA
CHAPTER 9 NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA Basic 1. To calculate the payback period, we need to find the time that the project has recovered its initial investment. After two years, the
More informationCE 314 Engineering Economy. Interest Formulas
METHODS OF COMPUTING INTEREST CE 314 Engineering Economy Interest Formulas 1) SIMPLE INTEREST - Interest is computed using the principal only. Only applicable to bonds and savings accounts. 2) COMPOUND
More informationUnderstanding budgets and the budgeting process R. L. Smathers
ALTERNATIVE AGRICULTURAL ENTERPRISES PRODUCTION, MANAGEMENT & MARKETING Understanding budgets and the budgeting process R. L. Smathers As a business owner, the primary problem you face is a limited supply
More informationCHAPTER 9 PROJECT FINANCE AND CONTRACT PRICING
CHAPTER 9 PROJECT FINANCE AND CONTRACT PRICING In the previous chapters, techniques for project planning, scheduling, resources management, and timecost trade off have been introduced. This chapter will
More informationChapter. Break-even analysis (CVP analysis)
Chapter 5 Break-even analysis (CVP analysis) 1 5.1 Introduction Cost-volume-profit (CVP) analysis looks at how profit changes when there are changes in variable costs, sales price, fixed costs and quantity.
More informationChapter 9 Project Cash Flow Analysis
Chapter 9 Project Cash Flow Analysis 9.1: (c) Given: accounting and cash flow data Find: income tax rate to use in project year 1 Approach: find the taxable incomes and income taxes with and without project
More informationIn this chapter, you will learn to use cost-volume-profit analysis.
2.0 Chapter Introduction In this chapter, you will learn to use cost-volume-profit analysis. Assumptions. When you acquire supplies or services, you normally expect to pay a smaller price per unit as the
More informationPart II: Evaluating business & engineering assets
Part II: Evaluating business & engineering assets Ch 5: Present worth analysis Ch 6: Annual equivalence analysis Ch 7: Rate-of-return analysis Rate of return Methods for finding rate of return Internal
More informationPreparing cash budgets
3 Preparing cash budgets this chapter covers... In this chapter we will examine in detail how a cash budget is prepared. This is an important part of your studies, and you will need to be able to prepare
More informationCollege Accounting Chapter 10 Plant Assets, Natural Resources, and Intangibles
College Accounting Chapter 10 Plant Assets, Natural Resources, and Intangibles 1. HOW DOES A BUSINESS MEASURE THE COST OF A PLANT ASSET? Plant assets are long-lived, tangible assets used in the operation
More informationHow To Calculate Discounted Cash Flow
Chapter 1 The Overall Process Capital Expenditures Whenever we make an expenditure that generates a cash flow benefit for more than one year, this is a capital expenditure. Examples include the purchase
More informationChapter 8 Benefit/Cost Ratios and Other Measures
Chapter 8 Benefit/Cost Ratios and Other Measures BENEFIT COST 8-1 Rash, Riley, Reed, and Rogers Consulting has a contract to design a major highway project that will provide service from Memphis to Tunica,
More informationCOMPUTER APPLICATIONS IN HVAC SYSTEM LIFE CYCLE COSTING
COMPUTER APPLICATIONS IN HVAC SYSTEM LIFE CYCLE COSTING Fundamental Principals and Methods For Analyzing and Justifying System Installation and Upgrade Costs Communication White Paper by: Craig J. Gann,
More informationCOURSE SUMMARY CASH FLOW $4500
COURSE SUMMARY This chapter is a brief review of engineering economic analysis/engineering economy. The goal is to give you a better grasp of the major topics in a typical first course. Hopefully, this
More informationHouse Published on www.jps-dir.com
I. Cost - Volume - Profit (Break - Even) Analysis A. Definitions 1. Cost - Volume - Profit (CVP) Analysis: is a means of predicting the relationships among revenues, variable costs, and fixed costs at
More information11 PERFORMING FINANCIAL ANALYSIS
11 PERFORMING FINANCIAL ANALYSIS 11.1 Introduction When planning an energy efficiency or energy management project, the costs involved should always be considered. Therefore, as with any other type of
More informationHow To Compare The Pros And Cons Of A Combine To A Lease Or Buy
Leasing vs. Buying Farm Machinery Department of Agricultural Economics MF-2953 www.agmanager.info Machinery and equipment expense typically represents a major cost in agricultural production. Purchasing
More informationDEPRECIATION AND INCOME TAX
Dr. Hassan, Y. 91.380 1 DEPRECIATIO AD ICOME TAX General Depreciation is a decrease in worth Production equipment gradually becomes less valuable though wear Instead of charging the full purchase price
More informationModule 2: Preparing for Capital Venture Financing Financial Forecasting Methods TABLE OF CONTENTS
Module 2: Preparing for Capital Venture Financing Financial Forecasting Methods Module 2: Preparing for Capital Venture Financing Financial Forecasting Methods 1.0 FINANCIAL FORECASTING METHODS 1.01 Introduction
More informationCapital Investment Appraisal Techniques
Capital Investment Appraisal Techniques To download this article in printable format click here A practising Bookkeeper asked me recently how and by what methods one would appraise a proposed investment
More informationChapter 10: Depreciation
Chapter 10: Depreciation Depreciation A decrease in value of an asset each year A non-cash cost (no money changing hands) that affects income taxes An annual deduction against before-tax income A business
More informationCapital Investment Analysis and Project Assessment
PURDUE EXTENSION EC-731 Capital Investment Analysis and Project Assessment Michael Boehlje and Cole Ehmke Department of Agricultural Economics Capital investment decisions that involve the purchase of
More informationChapter 4.11: Financial Management
Chapter 4.11: Financial Management Short type questions 1. What s the need for performing financial analysis of an energy saving proposal? Plant managements invest in capital which will yield the greatest
More informationFINANCIAL INTRODUCTION
FINANCIAL INTRODUCTION In earlier sections you calculated your cost of goods sold, overhead expenses and capital cost in order to help you determine the sales price of your product. In your business plan,
More informationFarm Financial Management
Farm Financial Management Your Farm Income Statement How much did your farm business earn last year? There are many ways to answer this question. A farm income statement (sometimes called a profit and
More informationENGINEERING ECONOMICS PROBLEM TITLES
Professional Development Associates ENGINEERING ECONOMICS PROBLEM TITLES Econ 00 Econ 01 Econ 02 Econ 03 Econ 04 Econ 05 Econ 06 Econ 07 Econ 08 Econ 09 Econ 10 Econ 11 Econ 12 Econ 13 Econ 14 Econ 15
More informationReference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapters 10 and 11. Gross Domestic Product
Macroeconomics Topic 1: Define and calculate GDP. Understand the difference between real and nominal variables (e.g., GDP, wages, interest rates) and know how to construct a price index. Reference: Gregory
More informationEconomics of Traditional Planning Methods
Economics of Traditional Planning Methods 1.0 Introduction These notes are partly adaptations of information from four sources in the bibliography [1], [2], [3, ch. 5], with some information obtained from
More informationConstruction Economics & Finance. Module 6. Lecture-1
Construction Economics & Finance Module 6 Lecture-1 Financial management: Financial management involves planning, allocation and control of financial resources of a company. Financial management is essential
More informationInvestment Appraisal INTRODUCTION
8 Investment Appraisal INTRODUCTION After reading the chapter, you should: understand what is meant by the time value of money; be able to carry out a discounted cash flow analysis to assess the viability
More informationUnderstanding Financial Statements. For Your Business
Understanding Financial Statements For Your Business Disclaimer The information provided is for informational purposes only, does not constitute legal advice or create an attorney-client relationship,
More informationMethods for Project Evaluation
Methods for Project Evaluation March 8, 2004 1 Alternative Methods Present worth (PW) method Future worth (FW) method Annual worth (AW) method Benefit-cost ratio (BC) method Internal rate of return (IRR)
More informationHow to Forecast Your Revenue and Sales A Step by Step Guide to Revenue and Sales Forecasting in a Small Business
How to Forecast Your Revenue and Sales A Step by Step Guide to Revenue and Sales Forecasting in a Small Business By BizMove Management Training Institute Other free books by BizMove that may interest you:
More informationWeek- 1: Solutions to HW Problems
Week- 1: Solutions to HW Problems 10-1 a. Payback A (cash flows in thousands): Annual Period Cash Flows Cumulative 0 ($5,000) ($5,000) 1 5,000 (0,000) 10,000 (10,000) 3 15,000 5,000 4 0,000 5,000 Payback
More informationManagerial Accounting Prof. Dr. Vardaraj Bapat Department of School of Management Indian Institute of Technology, Bombay
Managerial Accounting Prof. Dr. Vardaraj Bapat Department of School of Management Indian Institute of Technology, Bombay Lecture - 26 Cost Volume Profit Analysis Dear participations in our early session,
More informationUsing Enterprise Budgets To Make Decisions about Your Farm Richar d Carkner
PNW0535 Using Enterprise Budgets To Make Decisions about Your Farm Richar d Carkner A Pacific Northwest Extension Publication Washington Oregon Idaho Enterprise budgets are important decision making tools.
More informationUniform Accounting Network Inventory Manual. Table of Contents. Warranty Maintenance Debt Management Depreciation Disposal
Inventory Manual Uniform Accounting Network Inventory Manual Table of Contents Introduction Parts of the Manual Part 1 Assets Chapter 1 Acquisition Warranty Maintenance Debt Management Depreciation Disposal
More information3.3 Applications of Linear Functions
3.3 Applications of Linear Functions A function f is a linear function if The graph of a linear function is a line with slope m and y-intercept b. The rate of change of a linear function is the slope m.
More informationFinancial Accounting and Reporting Exam Review. Fixed Assets. Chapter Five. Black CPA Review www.blackcpareview.com Chapter 5
Fixed Assets Chapter Five Black CPA Review www.blackcpareview.com Chapter 5 Objectives: Objective 1: Know which costs associated with the purchase of fixed assets are capitalized Objective 2: Understand
More informationFinance 445 Practice Exam Chapters 1, 2, 5, and part of Chapter 6. Part One. Multiple Choice Questions.
Finance 445 Practice Exam Chapters 1, 2, 5, and part of Chapter 6 Part One. Multiple Choice Questions. 1. Similar to the example given in class, assume that a corporation has $500 of cash revenue and $300
More informationChapter 011 Project Analysis and Evaluation
Multiple Choice Questions 1. Forecasting risk is defined as the: a. possibility that some proposed projects will be rejected. b. process of estimating future cash flows relative to a project. C. possibility
More informationCourse 3: Capital Budgeting Analysis
Excellence in Financial Management Course 3: Capital Budgeting Analysis Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a concise overview of capital budgeting analysis. This course is recommended
More informationDUKE UNIVERSITY Fuqua School of Business. FINANCE 351 - CORPORATE FINANCE Problem Set #1 Prof. Simon Gervais Fall 2011 Term 2.
DUKE UNIVERSITY Fuqua School of Business FINANCE 351 - CORPORATE FINANCE Problem Set #1 Prof. Simon Gervais Fall 2011 Term 2 Questions 1. Two years ago, you put $20,000 dollars in a savings account earning
More informationCHAPTER 9 NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA
CHAPTER 9 NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA 1. To calculate the payback period, we need to find the time that the project has recovered its initial investment. After three years, the project
More informationAccounting Notes. Types (classifications) of Assets:
Types (classifications) of s: 1) Current s - short lived assets used in the operations of a business 2) Plant s - long lived tangible assets used in the operations of a business 3) Long Term Investment
More informationASSIGNMENT CHARACTERISTICS TABLE
CHAPTER 9 Long-Lived Assets ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Apply the cost principle to property, plant, and equipment.
More information3. Time value of money. We will review some tools for discounting cash flows.
1 3. Time value of money We will review some tools for discounting cash flows. Simple interest 2 With simple interest, the amount earned each period is always the same: i = rp o where i = interest earned
More informationWORKBOOK ON PROJECT FINANCE. Prepared by Professor William J. Kretlow University of Houston
WORKBOOK ON PROJECT FINANCE Prepared by Professor William J. Kretlow University of Houston 2002 by Institute for Energy, Law & Enterprise, University of Houston Law Center. All rights reserved. TABLE
More informationExercises. Differential Analysis Sell (Alt. 1) or Lease (Alt. 2)
Chapter 24 and Product Pricing Study Guide Solutions Fill-in-the-Blank Equations 1. Differential revenue 2. Differential costs 3. Differential income (Loss) 4. Markup per unit 5. Estimated units produced
More informationStocker Grazing or Grow Yard Feeder Cattle Profit Projection Calculator Users Manual and Definitions
Stocker Grazing or Grow Yard Feeder Cattle Profit Projection Calculator Users Manual and Definitions The purpose of this decision aid is to help facilitate the organization of stocker or feeder cattle
More informationComparison of Alternatives
Comparison of Alternatives 1. Alternative Comparisons................. 53-1 2. Present Worth Analysis... 53-1 3. Annual Cost Analysis... 53-1 4. Rate of Return Analysis................. 53-1 ---5: -Berrefit::eost-A:nalysis::...
More informationCHAPTER 8: ESTIMATING CASH FLOWS
CHAPTER 8: ESTIMATING CASH FLOWS 8-1 a. Straight line depreciation = ($15 - $3)/10 = $1.20 Annual Tax Savings from Depreciation = $ 1.2 (0.4) = $0.48 Present Value of Tax Savings from Depreciation = $
More informationChapter 8: Using DCF Analysis to Make Investment Decisions
FIN 301 Class Notes Chapter 8: Using DCF Analysis to Make Investment Decisions Capital Budgeting: is the process of planning for capital expenditures (long term investment). Planning process involves 1-
More informationFarm Financial Management
Farm Financial Management EC920e How to Calculate Machinery Ownership and Operating Costs Burton Pflueger, SDSU Farm Financial Management Specialist Machinery ownership and operating costs represent a
More informationI. Business Transfer Strategies
In many two-generation farming arrangements, the younger party begins by working for a fixed wage. Eventually, however, he or she will want to become an owner/operator not just an employee. Achieving this
More informationAgriculture & Business Management Notes...
Agriculture & Business Management Notes... Farm Machinery & Equipment -- Buy, Lease or Custom Hire Quick Notes... Selecting the best method to acquire machinery services presents a complex economic problem.
More informationDepartment of Humanities. Sub: Engineering Economics and Costing (BHU1302) (4-0-0) Syllabus
Department of Humanities Sub: Engineering Economics and Costing (BHU1302) (4-0-0) Syllabus Module I (10 Hours) Time value of money : Simple and compound interest, Time value equivalence, Compound interest
More informationMODULE 2. Capital Budgeting
MODULE 2 Capital Budgeting Capital Budgeting is a project selection exercise performed by the business enterprise. Capital budgeting uses the concept of present value to select the projects. Capital budgeting
More informationCHAPTER 7 MAKING CAPITAL INVESTMENT DECISIONS
CHAPTER 7 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will
More informationCC.2.1.HS.F.5 -- Essential Choose a level of accuracy appropriate to limitations on measurement when reporting quantities. 1 -- Essential. them.
Topic: 04-Business Expense Management Know: Understand: Do: CC.2.1.HS.F.5 -- Essential Choose a level of accuracy appropriate to limitations on measurement when reporting quantities. CC.2.2.HS.D.8 -- Essential
More informationhp calculators HP 12C Depreciation Depreciation Depreciation on the HP12C Practice solving depreciation problems
on the HP12C Practice solving depreciation problems Practice solving partial-year depreciation problems Additional information (Latin 'Depretium': 'decline in price' or 'value') is an accounting term that
More information1.040 Project Management
MIT OpenCourseWare http://ocw.mit.edu 1.040 Project Management Spring 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms. Project Financial Evaluation
More informationChapter 5 Present Worth
Chapter 5 Present Worth 5-1 Emma and her husband decide they will buy $1,000 worth of utility stocks beginning one year from now. Since they expect their salaries to increase, they will increase their
More informationStrategy and Analysis in Using NPV. How Positive NPV Arises
Strategy and Analysis in Using NPV (Text reference: Chapter 8) Topics how positive NPV arises decision trees sensitivity analysis scenario analysis break-even analysis investment options AFM 271 - Strategy
More informationFIN 614 Cash Flow Forecasting. Professor Robert B.H. Hauswald Kogod School of Business, AU. Vitamin C. Cash flows matter: focus on economics
FIN 64 Cash Flow Forecasting Professor Robert B.H. Hauswald Kogod School of Business, AU Vitamin C Cash flows matter: focus on economics not earnings or other accounting measures Continue our focus on
More informationChapter 24. What will you learn in this chapter? Valuing an economy. Measuring the Wealth of Nations
Chapter 24 Measuring the Wealth of Nations 2014 by McGraw-Hill Education 1 What will you learn in this chapter? How to calculate gross domestic product (GDP). Why each component of GDP is important. What
More informationChapter 3 Unit 1. IET 35000 Engineering Economics. Learning Objectives Chapter 3. Learning Objectives Unit 1
Chapter 3 Unit 1 The Accounting Equation Depreciation, Inventory and Ratios IET 35000 Engineering Economics Learning Objectives Chapter 3 Upon completion of this chapter you should understand: Accounting
More informationCHAPTER 29. Capital Budgeting
CHAPTER 9 Capital Budgeting Meaning The term Capital Budgeting refers to the long-term planning for proposed capital outlays or expenditure for the purpose of maximizing return on investments. The capital
More informationProperty Report : House in Dallas
Property Report : House in Dallas Generated on: Jul 6, 2016 Author: Guest Page 1 of 11 Table of Contents Executive Summary 3 Property Description 4 Operational Effectivness 5 Financial Effectivness 6 Financing
More information380.760: Corporate Finance. Financial Decision Making
380.760: Corporate Finance Lecture 2: Time Value of Money and Net Present Value Gordon Bodnar, 2009 Professor Gordon Bodnar 2009 Financial Decision Making Finance decision making is about evaluating costs
More informationAssessment Schedule 2014 Demonstrate understanding of accounting concepts for an entity that operates accounting subsystems (91174)
NCEA Level 2 Accounting (91174) 2014 page 1 of 6 Assessment Schedule 2014 Demonstrate understanding of accounting concepts for an entity that operates accounting subsystems (91174) Evidence Statement Question
More informationANSWERS TO END-OF-CHAPTER QUESTIONS
ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms
More informationManual of Accounting and Financial Reporting for Pennsylvania Public Schools CHAPTER 11 TABLE OF CONTENTS 11.A. Chapter 11 11.1
Manual of Accounting and Financial Reporting for Pennsylvania Public Schools CHAPTER 11 TABLE OF CONTENTS 11.1 Capital Assets And Infrastructure 11.1 What Are Capital Assets? 11.1 Valuation Of Capital
More informationPart 610 Natural Resource Economics Handbook
Part 610 Natural Resource Economics Handbook 610.20 Introduction Subpart C Discounted Cash Flow Analysis A. Benefits and costs of conservation practices do not necessarily occur at the same time. Certain
More informationCHAPTER 9 Building the Aggregate Expenditures Model
CHAPTER 9 Building the Aggregate Expenditures Model Topic Question numbers 1. Consumption function/apc/mpc 1-42 2. Saving function/aps/mps 43-56 3. Shifts in consumption and saving functions 57-72 4 Graphs/tables:
More informationActivity 28.1 (page 509): Types of costs. Business Indirect cost Explanation. digger
28Costs Activity 28.1 (page 509): Types of costs 1 Identify one indirect cost for each of these businesses: a building firm a high-street bank a TV repairer an oil-fired power station. [4] 2 Explain why
More informationAccounting 2910, Summer 2002 Practice Exam 4. 1. The cost of materials entering directly into the manufacturing process is classified as:
Accounting 2910, Summer 2002 Practice Exam 4 1. The cost of materials entering directly into the manufacturing process is classified as: a. direct labor cost b. factory overhead cost c. burden cost d.
More information