Table B. - Discounting table for telephone cord board problem
Year
Discount
Alternative 1 Alternative 2
factor (8.91%) Cost (P) Cost (P)
1
0.981
$11,476
410,535
$20,465
$18,787
2
.843
9,476
7,988
1,500
1,264
3
.774
9,476
7,334
1,500
1,161
4
.711
9,476
6,737
1,500
1,066
5
.653
9,476
6,188
1,500
980
6
.599
4,676
2,801
1,044
625
7
.550
4,676
2,572
1,044
574
8
.505
4,676
2,361
1,044
527
9
.464
4,676
2,170
1,044
484
10
.426
4,676
1,992
1,044
445
11
.391
4,676
1,828
1,044
408
12
.359
4,676
1,679
1,044
375
13
.330
4,676
1,543
1,044
344
14
.303
4,676
1,417
1,044
316
15
.278
5,676
1.578
245
68
Total present value
$58,723
$27,424
Therefore, this economic analysis will
compare only costs to determine the
most favorable alternative.
compare only costs to determine the
most favorable alternative.
Alternative 2. - Reclamation ownership. Recla-
mation personnel determine that equivalent
telephone switching equipment can be purchased
from a commercial supplier and installed and
maintained by force account labor. A tabulation of
the costs involved is:
mation personnel determine that equivalent
telephone switching equipment can be purchased
from a commercial supplier and installed and
maintained by force account labor. A tabulation of
the costs involved is:
Equipment cost from private supplier:
$15,980
$15,980
Installation and testing of new system at
3 percent of equipment cost: $479
3 percent of equipment cost: $479
Indirect costs covering Reclamation pro-
curement and finance office costs:
$2,397.
curement and finance office costs:
$2,397.
Estimated Federal tax credit on contract
procurement, 2 percent x $15,980: $230.
(Amount of Federal tax the contractor will
pay on equipment procurement. Rate
computed from Quarterly Financial
Report of Manufacturing Corporations.)
procurement, 2 percent x $15,980: $230.
(Amount of Federal tax the contractor will
pay on equipment procurement. Rate
computed from Quarterly Financial
Report of Manufacturing Corporations.)
Interest during construction; 2 months
at 8.91 percent on $15,980: $237.
at 8.91 percent on $15,980: $237.
(Amount of interest Reclamation pays on
the estimated contract cost during
construction. Construction period
estimated at 2 months and interest rate at
8.91 percent is the yield on long-term
treasury bonds taken from Treasury
Bulletin for January 1979.)
the estimated contract cost during
construction. Construction period
estimated at 2 months and interest rate at
8.91 percent is the yield on long-term
treasury bonds taken from Treasury
Bulletin for January 1979.)
Operation and maintenance annual costs
based on experience with similar
systems: $600.
based on experience with similar
systems: $600.
Annual allowance of 9.5 percent for
Federal income tax calculated using the
telephone company's 1979 expense
report and computed on the yearly costs
of the leased system: (0.095 x yearly cost
of leased system).
Federal income tax calculated using the
telephone company's 1979 expense
report and computed on the yearly costs
of the leased system: (0.095 x yearly cost
of leased system).
Net scrap value at end of service life, at
5 percent of new equipment cost (005 x
$15,980):-$799
5 percent of new equipment cost (005 x
$15,980):-$799
The estimated service life of telephone switching
equipment is 15 years.
equipment is 15 years.
7 (FIST 4- 3)