GROUP B: IMPREGILLO COMPANY
In order to compare the bids by caterpiller and impregillo, kiewit has asked its staff to carryout an economic study based in present worth, annual worth and payback period analyses. It is your responsibility to perform the economic analysis only on your assigned alternative: in this case impregillo. Use the tables provided in this assignment. No other submissions will be accepted. The following cost/revenue schedule has been developed for the impregillo option by our accountant:
IMPERGILLO
INITIAL $600,000
COST
DELIVERY $15,000
COST
OPERATION/ $3000/YR
MAINTANENCE
UPGRADE/ $1000 EVERY 2TH
PARTS YEAR
INSURANCE $600/YR
FIRST YEAR INCOME $120000/YR
INCOME INCREASE $20,000/YR
SALVAGE $120000
LIFE 4 YR
INTEREST
COST 2%/QUARTER CP MONTHLY
REVENUE 3%/YR
1. Perform a present worth economic analysis on impregillo option: fill in tables neatly
IMPREGILLO OPTION
PRESENT WORTH: PW i = 8.300%/YR
COST n = 0 TO 12 YEARS
|
ELEMENT
|
TIME
|
P/F
|
P/A
|
AMOUNT
|
SOURCE
|
|
-$600,000
|
|
1.0000
|
|
-$600.000
|
Eq.
|
|
-$ 15,000
|
0
|
|
|
|
|
|
-$600,000
|
|
|
|
|
|
|
-$ 15,000
|
|
0.72692
|
|
-$ 10,904
|
Eq.
|
|
-$600,000
|
|
|
|
|
|
|
-$ 15,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
-
|
-$ 727
|
|
|
-$ 1,000
|
6
|
|
|
|
|
|
-$ 1,000
|
|
0.52841
|
|
|
|
|
-$ 1,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
-
|
|
|
|
-$ 3,000
|
|
-
|
|
|
|
|
-$ 600
|
12
|
-
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
TIME
|
(1 + i)n
|
1/(1 + i)n
|
(1 + i)n - 1
|
i · (1 + i)n
|
P/F
|
P/A
|
|
2
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
IMPREGILLO OPTION
PRESENT WORTH: PW i = 3%/YR
n = 4 TO 12 YEARS
REVENUE
|
ELEMENT
|
TIME
|
P/A
|
P/G
|
P/F
|
AMOUNT
|
SOURCE
|
|
$120,000
|
12
|
|
-
|
|
$1,194,480
|
TABLE 8
|
|
$ 20,000
|
|
|
51.2482
|
|
|
|
|
$120,000
|
|
-
|
|
0.8885
|
|
|
|
$120,000
|
8
|
|
|
|
|
|
|
$120,000
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
DETERMINE NET PRESENT WORTH:
REVENUE:______________
COST: _______________
NET PW:_________________
2. Perform an annualworth economic analysis on the impregillo option: fill in tables neatly
IMPREGILLO OPTION
ANNUAL WORTH: AW i = 8.300%/YR
COST n = 12 YEARS
|
ELEMENT
|
N
|
PW
|
A/P
|
AMOUNT
|
SOURCE
|
|
-$600,000
|
12
|
-$600,000
|
|
-$80,854
|
Eq.
|
|
-$ 15,000
|
|
|
|
|
|
|
-$600,000
|
|
|
0.134764
|
|
|
|
-$ 15,000
|
12
|
-$ 10,904
|
|
|
Eq.
|
|
-$600,000
|
|
|
|
|
|
|
-$ 15,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
|
-$ 98
|
|
|
-$ 1,000
|
|
|
0.134764
|
|
|
|
-$ 1,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
|
|
|
|
-$ 1,000
|
|
|
|
|
|
|
-$ 3,000
|
|
|
|
-$ 3000
|
|
|
-$ 600
|
12
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
TIME
|
(1 + i)n
|
(1 + i)n - 1
|
i · (1 + i)n
|
A/P
|
|
12
|
|
|
|
|
SHOW ALL WORK AND CALCULATIONS
IMPREGILLO OPTION
ANNUAL WORTH: AW i = 3%/YR
n = 12 YEARS
REVENUE
|
ELEMENT
|
n
|
PW
|
A/P
|
AMOUNT
|
SOURCE
|
|
$120,000
|
12
|
|
|
$120,000
|
|
|
$ 20,000
|
|
|
|
|
TABLE 8
|
|
$120,000
|
|
|
0.10046
|
|
|
|
$120,000
|
12
|
|
|
|
|
|
$120,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
DETERMINE NET ANNUAL WORTH:
REVENUE:___________
COST:_______________
NET:_________________
Show all work and calculations
3. Given the following annual worth for one life cycle. Determine the payback period of the impregillo option for a 0% rate of return:
IMPREGILLO OPTION
ANNUAL WORTH: AW i = 8.300%/YR
COST n = 4 YEARS
|
ELEMENT
|
n
|
AMOUNT
|
SOURCE
|
|
-$600,000
|
4
|
-$182,364
|
Eq.
|
|
-$ 15,000
|
4
|
-$ 4,559
|
Eq.
|
|
-$ 1,000
|
4
|
-$ 259
|
Eq.
|
|
-$ 1,000
|
4
|
-$ 221
|
Eq.
|
|
-$ 3,000
|
4
|
-$ 3,000
|
Eq.
|
|
-$ 600
|
4
|
-$ 600
|
Eq.
|
REVENUE i = 3%/YR
n = 4 YEARS
|
ELEMENT
|
n
|
AMOUNT
|
SOURCE
|
|
$120,000
|
4
|
$120,000
|
TABLE 8
|
|
$ 20,000
|
4
|
$ 29,261
|
TABLE 8
|
|
$120,000
|
4
|
$ 28,684
|
TABLE 8
|
SHOW ALL WORK AND CALCULATIONS
PAYBACK PERIOD CALCULATION: nP
SHOW CALCULATIONS
COST REVENUE
AW NCF
AWREVENUE = ___________
AWCOST = ___________
AW NET CASH FLOW = ___________
nP = ________________
Does the impregillo option payback period exceed within the useful life of drill: choose all correct answers
YES
NO
ONLY AFTER SALVAGE
NOT IMPORTANT