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# CE40 / B1

## C9 June 15, 2018

PAGUIA, Krizzia Mae P.
2015105282 CE – 3
C03 – CW1

A corporate jet costs \$1,350,000 and will incur \$200,000 per year in fixed cost
(maintenance, …) and \$277 per hour variable cost (fuel, …). The jet will be
operated 1200 hours per year for 5 years and then sold for \$650,000. The jet
revenues \$1,000 per hour. The MARR is 15% per year.
(a) Determine the Capital Recovery (CR) value of the jet.
(b) Determine the Annual Worth (AW) of the jet.
(c) Determine the Equivalent Uniform Annual Cost (EUAC) of the jet.

Given:
𝐼 = \$1,350,000 1200 ℎ𝑜𝑢𝑟𝑠 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟 𝑓𝑜𝑟 5 𝑦𝑒𝑎𝑟𝑠
𝑆𝑉 = \$650,000 𝑅 = \$1,000 𝑝𝑒𝑟 ℎ𝑜𝑢𝑟
𝐸𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 = \$200,000 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟 𝑖 = 15%
𝐸𝑥𝑝𝑒𝑛𝑠𝑒 − 𝐹𝑢𝑒𝑙 = \$277 𝑝𝑒𝑟 ℎ𝑜𝑢𝑟

## (a) Capital Recovery (CR) value of the jet

𝐴 𝐴
𝐶𝑅 = 𝐼 ( , 𝑖, 𝑛) − 𝑆𝑉 ( , 𝑖, 𝑛)
𝑃 𝐹

## 0.15 (1.15)5 0.15

𝐶𝑅 = \$1,350,000 ( 5 ) − \$650,000 ( )
(1.15) − 1 (1.15)5 − 1

𝑪𝑹 = \$𝟑𝟎𝟔, 𝟑𝟐𝟎. 𝟖𝟗
(b) Annual Worth (AW) of the jet
𝐴𝑊 = 𝑅 − 𝐸 − 𝐶𝑅

𝑅 = \$1,200,000

𝐸 = \$532,400

## 𝐴𝑊 = \$1,200,000 − \$532,400 − \$306,320.89

𝑨𝑾 = \$𝟑𝟔𝟏, 𝟐𝟕𝟗. 𝟏𝟏

## (c) Equivalent Uniform Annual Cost (EUAC) of the jet

𝐸𝑈𝐴𝐶 = 𝐶𝑅 + 𝐸
𝐸𝑈𝐴𝐶 = \$306,320.89 + \$532,400