Wo

lloUni
ver
sit
y,Ko
mbo
lchaIns
tit
uteo
fTec
hno
log
y
Pl
antdes
ignandEc
ono
mic
s(ChEg
5193)
Wo
rks
heet2o
nco
stanal
ysi
s
[Link]
otaldes
ignandc
ons
truc
tio
nco
stfo
radi
ges
tert
ohandl
eafl
owr
ateo
f0.
5mi
ll
iong
all
onsperday
(
MGD)was$1.
7mi
ll
ioni
[Link]
timat
ethec
ostt
odayfo
rafl
owr
ateo
f2.
[Link]
ponentfr
omTab
le
fo
rtheMGDr
ang
eof0.
2to40i
s0.
[Link]
osti
ndexi
n2000o
f131hasb
eenupdat
edt
o225fo
rthi
syear
.
[Link] hmo ney( P)mus
tbesetasi
deatt i
mezer
otoprov
idethatapumpmayb erepl
acedever
y
3yearsthereafter?Thecos
tofpurchasi
nganewpumpandr epl
acingtheol
dpumpwiththenew
onewil
lbe$7, [Link]
edat8% i
nter
est
,whichisc
o mpo
undedannuall
y.
[Link]
nves
tmentc
ostfo
ra120,
000,
000l
b/yr
planti
ses
timat
edat$15,
000,
000. Thewo
rki
ngc
api
tali
s
$3,
000,
[Link]
omt
heuni
trat
iomat
eri
alb
alanc
e,t
heener
gyb
alanc
e,andanes
timat
iono
fthel
abo
r,t
he
fo
llo
wingc
ost
sperpo
und o
fpr
oduc
twer
edet
ermi
ned:
Whatmus
tbet
hes
ell
ingpr
icei
fther
etur
nont
he
i
nves
tmentb
efo
ret
axeso
ftheful
lyo
per
ati
ngpl
anti
stob
e30%? As
sumet
hatt
hepl
anti
stob
eful
lydepr
eci
ated
i
n12year
sus
ingas
trai
ght
-li
nemet
hod.

[Link]
cul
atet
hepr
esentv
alue(
PV)o
fa$2,
000g
iftt
hatwi
llb
erec
eiv
edaft
er3year
shav
epas
[Link]
sumemo
neyi
s
wo
rth6% peryear
.
[Link]
cul
atet
hemo
nthlyandyear
lypayment
sfo
rob
tai
ningal
oano
f$30,
000t
hati
stob
eful
lyr
epai
din20
years
.Ass
umeani
nter
estrat
eof8%.
5.
Det
ermi
nat
ionofr
ateofr
etur
noni
nves
tment
-cons
ider
ati
onofi
ncome-t
axeffec
ts.

Apr
opo
sedmanufac
tur
ingpl
antr
equi
resani
nit
ialfi
xed-c
api
tal
inv
est
mento
f$900,
000and$100,
000o
f
wo
rki
ngc
api
tal
.Iti
ses
timat
edt
hatt
heannuali
nco
mewi
llb
e$800,
000andt
heannualex
pens
esi
ncl
udi
ng
depr
eci
ati
onwi
llb
e$520,
000b
efo
rei
nco
met
axes
.Ami
nimum annualr
etur
nof15per
cent
befo
rei
nco
me
t
axesi
srequi
redb
efo
ret
hei
nves
tmentwi
llb
ewo
rthwhi
[Link]
omet
axesamo
untt
o34per
cento
fal
lpr
e-t
ax
pr
ofi
ts.
Det
ermi
net
hefo
llo
wing
:
(
a)Theannualper
centr
etur
nont
het
otali
nit
iali
nves
tmentb
efo
rei
nco
met
axes
.
(
b)Theannualper
centr
etur
nont
het
otali
nit
iali
nves
tmentaft
eri
nco
met
axes
.
(
c)Theannualper
centr
etur
nont
het
otali
nit
iali
nves
tmentb
efo
rei
nco
met
axesb
asedo
ncapi
talr
eco
ver
y
wi
thmi
nimumpr
ofi
t.
(
d)Theannualper
centr
etur
nont
heav
erag
einv
est
mentb
efo
rei
nco
met
axesas
sumi
ngs
trai
ght
-li
ne
depr
eci
ati
onandz
eros
alv
agev
alue.
[Link] t
imatet
heFCI i n1980usi
ngpowerfact
orappli
edt ocapaci
tyrat
iometho
dfo raas imil
ar
processpl
antwit
ht wi
ceplantc
apac
ityiftheFCIofthesol
id-fl
uidproc
essi
ngpl
antis$436000in
1975.(0.6powerfactorandtheMarshal
landS wi
ftall
-indust
ryindexesi
n1975=444and1980
=660)
7.
Break-ev
enpoi
nt,g
ros
sear
ning
s,andnetpr
ofi
tforapr
oces
spl
ant
.
Theannualdi rectpro ducti
oncostsforapl antoperatingat70per c
entc apacit
yar e$280,000whi l
e
thesum oftheannualfi xedchar g
es,overheadcosts,andg eneral expensesis$200,[Link] he
break-ev
enpo intinuni tsofproduc t
ionperyeariftotalannuals alesar e$560,000andt hepr oduct
sell
sat$40peruni t?Whatwer etheannualg r
o ssear ni
ng sandnetpr ofi
tfo rthisplantat100
percentcapaci
t yin1988whenc orporateincometaxesr equireda15per centtaxont hefirs
t$50, 000
ofannualgrossear nings,25percento nannualgrossear ning sof$50, 000t o$75,000,34percento n
annualgrossear ni
ngsab ove$75,000,and5per cento ng r
oss ear
ni ngsfr om$100,000t o$335,000?
[Link] c
hasedcosto fas hel
l-and-t ubeheatexchanger(floatingheadandc ar
bon-steeltub
es)
2
with100fto fheati
ngs ur
facewas$3000i [Link] hepurc hasedcostofas i
milarheat
2
exchangerwit
h200ft o fheatingsur facein1980ift hepurchas ed-cost-capaci
tyexponentis0.60
2
forsurfacearearang ingfrom 100t o400ft ?Ifthepur chased-c o
st-c apaci
tyexponentfort hi
s
typeofexchangeri
s0.81fo rsur fac
ear easrangi
ngfro m400t o2000ft 2,whatwillbethepurchased
2
costofaheatexchangerwi th1000fto fheat i
ngsurfacein1985?
9.
Thepur chasedcos
to fequipmentfo raso l
id-proces
singpl
antis$500,[Link]
antistob e
const
ruct
edasanaddi ti
ontoanex is
tingpl
ant .Es
timatetheto
talcapi
tali
nvest
mentandthefix
ed
-capit
ali
nv est
mentfortheplant
.Whatper centageandamo untofthefix
ed-capit
ali
nves
tmentis
duetowstfo rl
andandc ont
ractor
’sfee?
[Link] c
has ed-equi
pmentc ostforapl antwhichproducespentaeryt
hrit
ol(so
lidfuel-pr
o c
ess
ing
plant)is$300, [Link] obeanaddi tio
nt oanex ist
[Link] or
partoft hebuildingcos
twil
lb eforindoorc ons
tructi
on,andt hecontrac
tor’
sfeewillbe7percentof
thedirec tplantc os
[Link] o
stsar eclosetot heaveragevaluesfoundfo rt ypi
calchemic
al
plants
.Ont heb asisoft
hisinformation,esti
matet hefol
lowi
ng :
(
a)Thet
otaldi
rec
tpl
antc
ost
.
(
b)Thefi
xed-c
api
tali
nves
tment
.
(
c)Thet
otalc
api
tali
nves
tment
.
[Link] i
cat
ionsofdiffer
enttypesofint
eres
[Link]
redt
obor
r o
w$1000tomeetafinancial
obl
igati
[Link] eb
orrowedfro
m aloanagenc
yatamonthlyi
nter
estr
ateof2percent.
Determinethefol
lowi
ng:
(a)Thet o
talamo unto
fpr
inc
ipalpl
uss
impl
eint
eres
tdueaft
er2 year
sifno
int
ermedi
ate
payment
sar emade.
(b)Thetot
alamo unto
fpr
inc
ipalpl
usc
ompo
undedi
nter
estdueaft
er2year
sifno
int
ermedi
ate
payment
sar emade.
(
c)Theno
minali
nter
estr
atewhent
hei
nter
esti
sco
mpo
undedmo
nthl
y.
(
d)Theeffec
tiv
eint
eres
trat
ewhent
hei
nter
esti
sco
mpo
undedmo
nthl
y.
12.
Cal
cul
ati
onswithconti
nuousi
nter
estc
ompo
undi
[Link]
rthec
aseo
fano
minalannuali
nter
est
rat
e20perc
ent,deter
mine:
(a)Thet
otalamounttowhi
cho
nedo
llaro
fini
ti
alpr
inc
ipalwo
uldac
cumul
ateaft
ero
ne365dayyear
wit
hdaycompounding
(
b) Thetot
alamounttowhi
cho
nedo
llaro
fini
ti
alpr
inc
ipalwo
uldac
cumul
ateaft
ero
neyearwi
th
c
ont
inuouscompo
unding
.
(
c)Theeffec
tiv
eannuali
nter
estr
atei
fco
mpo
undi
ngi
sco
nti
nuo
us.
13.
Deter
minati
ono fpresentworthand dis
count.A bond hasamaturi
tyval
ueof$1000and i
s
payi
ngdisc
retecompoundinter
estataneffect
iveannualrateo
f3per
[Link]
ermi
net
hefol
lowi
ng
atatimefouryearsb
eforethebondreac
hesmaturit
yvalue:
(
a)Pr
esentwo
rth.
(
b)Di
sco
unt
.
(c) Di
scretecompoundrat
eofeffec
tiv
eint
eres
twhi
chwi
llb
erec
eiv
edb
yapur
chas
eri
ftheb
ond
wereobtainedfor$700.
(
d)Repeatpar
t(a)fo
rthec
asewher
etheno
minalb
ond i
nter
esti
s3per
cent
compo
unded
c
ont
inuo
usl
y.
[Link]
nati
onofcapital
izedcos
[Link]
fc o
mpletel
yi ns
tall
edequipmentc o
sts$12,000
andwi llhaveasc
rapv al
ueo f$2000attheendofits
usefull
[Link] eful-l
ifeperio
di s10
yearsandt heint
eres
ti scompoundedat
6per c
entperyear,whati sthecapitali
zedc o
sto fthe
equipment?
[Link] mparis
o no fal ternativ einvestment susingc apitali
zed [Link] eactor
,whi chwi l
lc ontain
corros
iveli
quids,hasb eendes [Link] her eactori smadeo fmi l
ds teel ,theinitiali nstall
edc os
t
wil
lbe$5000,andt heus eful-lifeperio
dwi llbe3year [Link]
ncestainlessst eelishighlyr esistanttot he
corros
iveactionoft hel i
quids ,s t
ainlesssteel
,ast hemat eri
alo fc onstr ucti
on,hasb eenpr opo sed
asanal ter
nat i
vet omi lds [Link] tai
nless-steelr eactorwo uldhav eani ni
tiali
ns tal l
edc osto f
$15,[Link] crapv al
ueatt heendo ftheus efullifewo uldbez erofo rei thertypeo fr eactor,and
bothcouldber eplacedatac ostequalt otheorig
inalpr i
[Link] asiso fequalc apitalizedc ostsfor
bothtypesofr eactors,
whats houldb etheus eful-li
feper i
odfo rthes tainless-st
eelr eac torifmo ney
is
worth6per centc o
mpo undedannual l
y?
[Link]
eptualdesi
gn and es
timat
esofc hemi
calplant,thefol
lowi
ngex
pendi
tur
eand
rev
enuesar
eestimatedaft
erthepl
anthasachi
eveddes
iredproduc
tio
nrate.
Totalcapi
tal i
nvest
ment: $ 100,000,
000,Wo r
king c
apital: $10,000,000,Annual
sal
es:
$80,000,
000andAnnualex pendi
ture(tot
alpr
oducti
oncost):$20,000,[Link]
umestr
aight
li
nedepreci
ati
onover10yearspro
jectli
feandtaxrateof35%, determine
[Link]
etur
noni
nves
tmentaft
ert
axes
[Link]
kper
iods
17.S
uppo
set
hatt
woequal
lys
oundi
nves
tment
scanb
[Link]
fthes
erequi
res$100,
000o
f
c
api
talandwi
lly
iel
dapr
ofi
tof$l
0,000/year
,andt
hes
eco
ndr
equi
res$1mi
ll
iono
fcapi
taland
wi
llyi
eld $25,
000/year
.Co
mpar
ethe year
lypr
ofi
tand t
he annualr
ateo
fret
urno
nbo
th
i
nves
tment
s?