3 - 1 ECOR3800 ENGINEERING ECONOMICS Assignment 3 (2010)...

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1 ECOR3800 ENGINEERING ECONOMICS Assignment 3 (2010) Solutions Question 1: CCA=20%. Half-yr rule applicable. BV at the beginning of Yr. 5 = BV at the end of Yr. 4 or BV(4) BV(4)=UCC(4)= (P/2)(1-CCA) 4 + (P/2)(1-CCA) 3 = $1,638.40 + $2,048.00 = $3,686.40 DC(during yr.5 -- this year )= $3,686.40x0.2 = $737.28 BV(5)= 43,686.40 - $737.28 = $2,949.12 ________________________________________________________________________________________________________________ Question 2: CCA=20% so d=0.2. Tax rate = 40% so t=0.40. MARR = 8% so i=0.08 Half-yr rule applicable. 1 2 3 4 5 6=4-5 7 8=4-7 Yr Income Cost BTCF CCA Taxable income Tax@40% ATCF 0 -32000 -32000 -32000 1 14000 1400 12600 3200 9400 3760 8840.00 2 14000 1600 12400 5760 6640 2656 9744.00 3 14000 1800 12200 4608 7592 3036.80 9163.20 4 14000 2000 12000 3686 8313.60 3325.44 8674.56 5 14000 2200 11800 2949 8850.88 3540.35 8259.65 5 CCA Recapture -81.41 5 Salvage 12000 Yr.1: CCA=32000x0.2x0.5=3200 UCC at the end of yr. = 32000-3200=28800 Yr.2: CCA=28800x0.2=5760 UCC=28800 - 5760 =23040 .. BV(5)=UCC= (P/2)(1-CCA) ) 5 + (P/2)(1-CCA) 4 = $11796 = UCC UCC @end of yr. 5 = $11,796.48 Since Salvage > UCC, CCA recapture applies CCA Recapture = (12000 – 11,796.48)(0.4) = $81.41 PW = -32000+8840 (P/F,8%,1)+9744(P/F,8%,2)+…+(8259.65-81.41+12000)(P/F,8%,5) =$11,922.17 Question 3: According to the approximate method of CCTF: CCTF (half-year rule) = 1- [(td)/(i+d)][(1+0.5i)/(i+1)] = 1- 0.275 = 0.725 CCTF (full year) = [(td)/(i+d)] = 1 - 0.286 = 0.714 PW= -32000(0.725) + [14000-{1400+200(A/G,i,5)}](P/A,i,5)(1-0.4) +12000(P/F,i,5)(0.714) = -23,200+29,300.20+5,843.46 = $11,943.66 _____________________________________________________________________
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2 Question 4: 1 2 3 4 5 6 7 8=4-5-7 9 10=4-6-7-9 yr Income Cost BTCF CCA Loan Principal Loan Interest
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This note was uploaded on 02/10/2011 for the course ECON 3800 taught by Professor Asnerob during the Spring '09 term at Spring Arbor University.

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3 - 1 ECOR3800 ENGINEERING ECONOMICS Assignment 3 (2010)...

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