Question

Please answer 3 - 5 thank you! - 5 thank you!

3. In his neighborhood, a businessman would be setting up a repair shop. At a cash price of P 2.8 Million, he would be getting a complete set of tools and equipment from a vendor. If by installment, he would need to pay today P 280,000 and the balance is payable at the end of each quarter for 5 years. The interest is at 18% cpd. qtr. Determine the following: a) the quarterly payment; b) If he chooses to pay at the end of each year for 5 years, how much should it pay?i and c) The value of the investment on the repair shop at the end of 5 years? Please find the data of two (2) alternatives to improve a plant's current production system: Machine A Machine B Initial Installment Cost =P= 20,000 =P= 40,000 Annual Operating Cost 10,000 8,000 Service Life 2 years 3 years Salvage Value 0 0 4. At 12% interest, which alternative should be selected using the a) Annual Equivalent Cost Method, and b) Present Value Method. 5. Boracay government has two (2) plans to deal with their water supply problem. Option 1 is to build a complete water pumping plant costing P 2 Billion, which would meet all needs during the 1st 30 years. Annual maintenance costs are estimated to be at P 2 Million for the 1st 15 years and P 3 Million for the succeeding 15 years. Option 2 is to build a partial water pumping plant at a cost of P 1.25 Billion, which would be sufficient for the 1st 15 years. At the end of 15 years, the pumping plant will be completed at an estimated cost of P 1.5 Billion. Annual maintenance cost is P 1.5 Million during the 1st 15 years and P3 Million for the succeeding 15 years. At 8% interest, which plan would you recommend?

Answer 1

EUAC for Plant 1 = 2 billion + 2 milion(A/P, 8%, 15) + 3 million (A/P, 8%, 15)

(A/P, 8%, 15) = 0.1168 (using factor table for 8% and 15 years)

EUAC = 2 billion + 2 million *0.1168 + 3 * 0.1168 = 2 billion + 233600 + 350400 = 2,000,584,000

P_{cost of plant after 15 years} = 1.5 billion(P/A, *%, 15) = 12839250000

EUAC for plant 2 = 1.25 billion + 12839250000(A/P, 8%, 15) + 1.5 million (A/P, 8%, 15) + 3 million (A/P, 8%, 15)

(P/A, 8%, 15) = 8.5595 (from factor table)

EUAC = 1.25 billion + 1,499,624,400 + 175200 + 350400 = 3,000,150,000

SInce, Option 1 has lower EUAC, It is better option than option 2.