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Capitalized Cost

The document discusses four cases involving the calculation of capitalized costs for different projects. Case 1 determines the capitalized cost of a structure with an initial investment of P1,500,000 and annual maintenance of P150,000 with 15% interest. Case 2 compares the capitalized costs of two heat exchangers with different initial costs, scrap values, and useful lives using a 9% interest rate. Case 3 analyzes two types of bridges based on their capitalized costs using data on initial costs, renewal costs, salvage values, maintenance, repairs, and life spans with a 10% interest rate. Case 4 compares the capitalized costs of two projects with differing first costs, annual operating costs, salvage values, and

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Edriel Jim Ello
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298 views1 page

Capitalized Cost

The document discusses four cases involving the calculation of capitalized costs for different projects. Case 1 determines the capitalized cost of a structure with an initial investment of P1,500,000 and annual maintenance of P150,000 with 15% interest. Case 2 compares the capitalized costs of two heat exchangers with different initial costs, scrap values, and useful lives using a 9% interest rate. Case 3 analyzes two types of bridges based on their capitalized costs using data on initial costs, renewal costs, salvage values, maintenance, repairs, and life spans with a 10% interest rate. Case 4 compares the capitalized costs of two projects with differing first costs, annual operating costs, salvage values, and

Uploaded by

Edriel Jim Ello
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

CAPITALIZED COST

Case 1:

1. Determine the capitalized cost of a structure that requires an initial investment of


P1,500,000 and an annual maitenance of P150,000. Interest is 15%. ANS. P2.5M

Case 2:

2. A heat exchanger is needed in a chemical process. If interest is 9% compounded


annually, determine which of the following heat exchanger is cheaper by
comparing the capitalized cost:
a) Exchanger A costs P22,000 with a scrap value of P1,000 and a useful life of
7 years;
b) Exchanegr B costs P28,000 with a scrap value of P1,500 and a useful life of
10 years.

Case 3:

3. A financial analysis of two types of bridges based on capitalized cost and on the
following data is to be made:

Bridge A Bridge B
Initial Cost P200,000 P240,000
Cost of Renewal P200,000 P240,000
Salvage Value 0 P20,000
Annual Maintenance P1,000 None
Repairs every 5 years P10,000 P5,000
Life 30 years 40 years

4. Compare alternatives shown on the basis of their capitalized cost using an interest
rate of 10% per year.

Project A Project B
First Costs, Php P150,000 P800,000
Annual operating cost, Php P50,000 P12,000
Salvage Value, Php P8,000 P1,000,000
Life, years 5 years ∞

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