Engineering Economy class. I got c. and d. wrong on the homework, and was hoping
ID: 2816396 • Letter: E
Question
Engineering Economy class. I got c. and d. wrong on the homework, and was hoping someone could solve it for me and draw a cash flow diagram. Any steps and equations you can write for me would really help. Thanks.
4. Engineers from Fedup are investigating the possibility of shifting some of thei delivery services from trucks to drones. They have identified a suitable drone for delivery operations. The Air Strato Pioneer drone uses solar power, batteries and a small gasoline motor to power itself for up to sixteen hours. It has a range of more than 1,000 kilometers and it can reach altitudes of 26,000 to 40,000 feet. The initial cost of the drone is $125,000. FedUp plans to finance the drones over a four year period at an interest rate of 8% per year. A fifteen percent down payment will be required. The operating and maintenance cost of the drone is expected to be $5,200 in the third year of its operation with an increase of 4.5% per year thereafter, The salvage value is estimated to be ten percent of the initial cost after eight years of use. Fedup will require a MARR of 7% per year for this project. a. Construct an amortization table for the financial arrangement indicating the interest payment, principal payment, and balance for each year of the loan. b. Compute the amount of interest charged in the third year of the financial C. Compute the present worth cost of the drone over its eight year life. d. Compute how much money FedUp must make each year for them to breakeven on their investment in the drone.Explanation / Answer
Answer A
Costof equipment (A)
125000
Down payment @15% (B)
18750
Finance amount (A-B)
106250
Equal yearly installment
$32,079
PMT(8%,4,106250,0,0)
Amortisation Schedule
Year
Opening balance (1)
Interest 2=(1)*8%
Installment(3)
Principal 4=(3-2)
Closing balance (1)-(4)
1
106250
8,500
32079
23579
82671
2
82671
6,614
32079
25465
57206
3
57206
4,576
32079
27503
29703
4
29703
2,376
32079
29703
0
Answer B
$4576
Answer C
Present worth is $143882
Year
0
1
2
3
4
5
6
7
8
Down payment
18750
installment payments
32079
32079
32079
32079
Operation and maintenance cost
5200
5,408
5,624
5,849
6,083
6,327
Salvage value (125000*10%)
-12500
Total year wise Cashflow (1)
18750
32079
32079
37279
37487
5624
5849
6083
-6173
Dis factor @7% MARR (2)
1.0000
0.9346
0.8734
0.8163
0.7629
0.7130
0.6663
0.6227
0.5820
Discounted cashflow (3)=(1)*(2)
18750
29980
28019
30431
28599
4010
3898
3788
-3593
Present worth (Total of 3)
143882
Answer D
Each year cash flow to make breakeven
=Present worth/Total of discount factor of 8 years
=143882/5.9713
=$24096
Costof equipment (A)
125000
Down payment @15% (B)
18750
Finance amount (A-B)
106250
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