Question 10: The Rolla Construction Company specializes in developing large shopping centres. The company is considering the purchase of a new earth-moving machine and has gathered the following information: $600,000 $100,000 Purchase Price Residual Value Desired payback period Minimum rate of retum 3 years 15% The cash flow estimates are as follows: Year 1 2 Cash Inflows $500,000 450,000 400,000 350,000 1,700,000 Cash Outflows $260,000 240,000 220,000 200,000 920,000 Net Cash Inflows $240,000 210,000 180.000 150,000 780,000 Projected Net Income S115,000 85,000 35,000 25,000 280,000 3 4 Totals December 4,200 22.250 Required: a) Using the high-low method, develop a cost function for monthly electricity costs. (10 Marks) b) Using the regression analysis method, develop a cost function for monthly electricity costs (20 Marks) c) Determine the r of the distribution and comment on the use of machine hours as a basis for the estimation of electricity costs. (6 Marks) d) Estimate electricity costs for a month in which 1,300 machine hours are worked. (4 Marks) Total (40 Marks) Question 10: The Rolla Construction Company specializes in developing large shopping centres. The company is considering the purchase of a new earth-moving machine and has gathered the following information: $600,000 $100,000 Purchase Price Residual Value Desired payback period Minimum rate of retum 3 years 15% The cash flow estimates are as follows: Year 1 2 Cash Inflows $500,000 450,000 400,000 350,000 1,700,000 Cash Outflows $260,000 240,000 220,000 200,000 920,000 Net Cash Inflows $240,000 210,000 180.000 150,000 780,000 Projected Net Income S115,000 85,000 35,000 25,000 280,000 3 4 Totals December 4,200 22.250 Required: a) Using the high-low method, develop a cost function for monthly electricity costs. (10 Marks) b) Using the regression analysis method, develop a cost function for monthly electricity costs (20 Marks) c) Determine the r of the distribution and comment on the use of machine hours as a basis for the estimation of electricity costs. (6 Marks) d) Estimate electricity costs for a month in which 1,300 machine hours are worked. (4 Marks) Total (40 Marks)