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CC513 - 2008 Assignment #2

The cost of a paint system

A paint system originally cost $6.14 per square meter to apply and has totally failed after 4 years. Assume an interest rate of 7%; a tax rate of 47% and straight line depreciation to answer the following questions:

  1. If the paint system is renewed twice at the same cost for a total life of 12 years, what is the annual cost, assuming the first application is capitalized and those in the 4th and 8th considered to be expenses ?

  2. Total maintenance could be avoided by biennial touchup (wire brush, spot primer, and topcoat). What is the most that can be spent on this preventive maintenance ?

OK, you still need help! Please follow these steps:

  1. Again, take your calculator out of its case!

  2. Study carefully the following two pages of useful formula and definitions (maybe you should print for easier access).

  3. Try to solve the third problem given as an example. This one has a detailed solution that will show you more clearly what to do with all these equations.

  4. Now try to tackle the fourth problem given and compare your answer to the solution given.