Question

A specialized Construction vehicle will cost the company 200,000 ko. The vehicle will require maintenance and other fixed cost 20.000 kD per year, Starting from the end of third year till beginning of year six, these cost will be increasing with 250 kD every coming year. The Construction vehicle is expected to operate 2000 hours per year, and des Variable cost are expected to be 2.5 kd/hr. The vehicle is expected to be * sold after 6 years for 35.000 kD. The MARR is 12% per year. a) What is the capital recovery Cost of the jet ? b) What is the value of EUAC ? given

Answer 1

Initial cost = KD 200,000

Maintenance and operating cost = KD 20,000 from the end of yr 3 till beginning of yr 6

Variable cost = KD 2.5/hour

Total variable cost = KD 5,000

Capital recovery cost includes only initial cost and salvage value. It does not includes Annual operating cost.

CR = - 200,000(A/P,12%, 6) + 35,000(A/F,12%,6)

CR = -200,000 × 0.2432 + 35,000 × 0.1232

CR = - 48,645.14 + 4,312.90

CR = - KD 44,332.24

B. Equivalent uniform annual cost

EUAC = -200,000(A/P,12%, 6) -20,000(P/A,12%,3)(P/F,12%,2)(A/P,12%,6) -250(P/G,12%,3)(P/F,12%,2)(A/P,12%,6)- 5,000 + 35,000(A/F,12%,6)

EUAC = -48,645.14 - 20,000×2.4018 ×0.7972× 0.2432 -250× 2.2207×0.7972 ×0.2432- 5000 + 4,312.90

EUAC = -48,645.14 - 9,313.17 - 107.64 - 5,000 + 4,312.90

EUAC = - KD 58,753