Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 6

A highway construction company operates a quarry. During the last 5 years, the amount extracted each year was 60,000, 50,000, 58,000 60,000, and 65,000 tons. The mine is estimated to contain a total of 2.5 million tons of usable stones and gravel. The quarry land had an initial cost of $3.2 million. The company had a per-ton gross income of $30 for the first year, $25 for the second year, $35 for the next 2 years, and $40 for the last year.
a) Determine the depletion charge each year, using the larger of the values for the two depletion methods. Assume all depletion amounts are less than 50% of taxable income.
b) Compute the percent of the initial cost that has been written off in these 5 years, using the depletion charges in part
a).
c) If the quarry operation is reevaluated after the first 3 years of operation and estimated to contain a total of 1.5 million tons remaining, rework parts
a) and b).