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# CAPITAL RECOVERY, BOND AND BREAK-EVEN ANALYSIS.pptx

8. Feb 2023                1 von 16
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### CAPITAL RECOVERY, BOND AND BREAK-EVEN ANALYSIS.pptx

1. CAPITAL RECOVERY
2. CAPITAL RECOVERY • Capital cost of an asset is the sum of the first cost and present worth of all future payments and replacements which are assumed to continue for a long time.
3. Problem 1 Determine the capitalized cost of an equipment costing P2M with and annual maintenance of P200,000.00 if money is worth 20% per annum.
4. Problem 2 How large a contribution is required to endow perpetually a research laboratory which requires P500,000 for original construction, P200,000 per year for operating expenses, and P100,000 every three years for new and replacement equipment? Interest is 4%.
5. Problem 3 (CE NOV 1996) At 6%, find the capitalized cost of a bridge whose cost is P200 M and life is 20 years, if the bridge must be partially rebuilt at a cost of P100M at the end of each 20 years.
6. Problem 4 The average annual cost of damages caused by floods to a certain subdivision located along Pasig River is estimated at P5M. To build a gravity dam to protect the area from floods would cost 25M and would involve an annual maintenance cost of P2M. Interest rate is 11%. What is the present worth of all the damages for 15 years? What is the capitalized cost of the dam? How many years will it take for the dam to pay for itself?
7. BOND
8. BOND • A written contract to pay a certain redemption value (c.) on a specified redemption date and to pay equal dividend (d) periodically.
9. Problem 1 A P100,000, 6% bond, pays dividend semi- annually and will be redeemed at 110% on July 1, 1999. Find its price if bought on July 1, 1996, to yield an investor 4%, compounded semi- annually.
10. Problem 2 A community wishes to purchase an existing utility valued at P500,000 by selling 5% bonds that will mature in 30 years. The money to retire the bond will be raised by paying equal annual amounts into a sinking fund that will earn 4%. What will be the total annual cost of the bonds until they mature?
11. Problem 3 A company issued 50 bonds of P1,000.00 face value each, redeemable at par at the ends of 15 years to accumulate the funds required for redemption, the firm established a sinking fund consisting of annual deposits, the interest rate of the fund being 4%. What was the principal in the fund at the end of the 12th year?
12. BREAK-EVEN ANALYSIS
13. BREAK-EVEN ANALYSIS • Break even analysis is concerned with finding the point at which revenues and costs are exactly equal. This point is known as BREAK-EVEN- POINT.
14. Problem 1 A Company that manufactures electric motors has a production capacity of 200 motors a month. The variable costs are P150.00 per motor. The average selling price of the motors is P275.00. Fixed costs of the company amount to P20,000.00 per month which includes taxes. The number of motors that must be sold each month to break even is closest to.
15. Problem 2 XYZ Corporation manufacturers bookcases that it sells for P65.00 each. It costs XYZ P35,000.00 per year to operate its plant. This sum includes rent, depreciation charges on equipment, and salary payments. If the cost to produce one bookcase is P50.00, how many cases must be sold each year for XYZ to avoid taking a loss?
16. Problem 3 Determine the break-even point in terms of number of units produced per month using the following data: (the costs are in pesos per unit) Selling price per unit…..600 pesos Total Monthly overhead expenses…..428,000 pesos Labor Cost.….. 115 pesos Cost of Materials…… 76 pesos Other Variable Cost…….2.32 pesos
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