Engineering, Terotechnology

This report is aimed at explaining and understanding the process of assets lifecycle costing and application of Terotechnology in evaluation of long-term investment in capital assets. Every business organisation invests major part of their capital in long-term capital assets, which helps in revenue generation for a longer period of time. Before making such an investment in the long-term capital assets, the costs and revenues associated with such investment must be analysed and evaluated to make a conscious investment decision. In this report a detail analysis has been done on the investment evaluation process with reference to the Terotechnology. Lastly the report concludes with some recommendation for improvement in the investment evaluation and appraisal process.

Running head: ENGINEERING, TEROTECHNOLOGY
Engineering, Terotechnology
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to question 1: Report:.........................................................................................................2
Introduction:................................................................................................................................3
Concept and meaning of Terotechnology:...................................................................................3
Concept of Assets Lifecycle Costing:..........................................................................................4
Company background and context to the case:...........................................................................4
Gaps verified in Lifecycle Costing:.............................................................................................5
Conclusion and recommendation:...............................................................................................5
Answers to the practical questions:.................................................................................................7
Answer to question 2:......................................................................................................................8
Sub part (a):.................................................................................................................................8
Sub part (b):.................................................................................................................................8
Sub part (c):.................................................................................................................................9
Answer to question 3:......................................................................................................................9
Answer to question 4:....................................................................................................................10
Sub part 1:..................................................................................................................................10
Sub part 2:..................................................................................................................................10
Answer to question 5:....................................................................................................................11
References and bibliography:........................................................................................................12

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Appendix:......................................................................................................................................13
Answer to question 1: Report:
Executive summary:
This report is aimed at explaining and understanding the process of assets lifecycle costing and
application of Terotechnology in evaluation of long-term investment in capital assets. Every
business organisation invests major part of their capital in long-term capital assets, which helps
in revenue generation for a longer period of time. Before making such an investment in the long-
term capital assets, the costs and revenues associated with such investment must be analysed and
evaluated to make a conscious investment decision. In this report a detail analysis has been done
on the investment evaluation process with reference to the Terotechnology. Lastly the report
concludes with some recommendation for improvement in the investment evaluation and
appraisal process.

3ENGINEERING, TEROTECHNOLOGY
Introduction:
Long-term capital assets are the main part of investment of an organisation, which helps
in manufacturing and revenue generation. It involves huge fund investment and it is mainly long
term in nature. Therefore, to make such a long-term investment every business organisation must
evaluate the feasibility of such investment. The feasibility means the ultimate profitability of the
investment. There must be net earnings generating from such investment after recovering all the
costs and required rate of return (Kaplan & Atkinson 2015). There are various investment
evaluation and appraisal tools and techniques, which can successfully be implemented in every
business organisation to evaluate their long-term capital investment and to make certain
important investment decision related to such long-term investment (Woodhouse 2014). To
understand the process in a better way, the term Terotechnology and the Assets lifecycle costing
has been described with the help of data related to the long term assets and investments of Santa
FE Minerals Limited.
Concept and meaning of Terotechnology:
Every long-term capital investments generate revenues throughout its useful life and it
requires additional investment time to time to keep the capital assets in productive condition as
well. Therefore, the revenues would be generated throughout the life of the assets and the
expense on such investment continues after the initial investment in such a capital assets. To
make a conscious investment decision all those costs which has been incurred and which needs
to be incurred in future must be analysed in comparison with the benefits or revenues generated
or expected to be generated from such assets (Kaplan & Atkinson 2015). There may be certain
changes and fluctuations in the future earnings and futures investments and costs associated with
such investment. All those costs and benefits associated with the investment in such a long term

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capital assets must be ascertained in terms of present value, and compared with each other to
make a conscious investment decision. This process of balancing the costs and benefits arising
from an investment in capital assets is termed as Terotechnology.
Concept of Assets Lifecycle Costing:
Every capital asset have a definite lifecycle, it starts with the initial investment to acquire
such assts and to install such assets and to make it in working condition. It starts generating
revenues from then and requires additional investment in repeating, maintenance, erection and up
gradation of the assets (Kaplan & Atkinson 2015). After the end of the useful life of the assets
also it might require certain costs to be incurred to demolish and destruct or to recompose the
environment. Ascertainment and analysis of all those costs throughout the useful life of the
assets is known as the assets lifecycle costing. In the following paragraphs the assets lifecycle
costing and Terotechnology have been have been described with the help of financial
information from the annual report of Santa FE Minerals Limited (Woodhouse 2014).
Company background and context to the case:
The Santa FE Minerals Limited is an ASX listed Australian company engaged in the
field of exploration of gold and base metals and various other precious minerals and metals.
They have been performing very well since their inception but in recent couple of years, their
performance has shown a very poor financial and operational remark. They have been making a
significant amount of loss year after year, and it is increasing year after year. As they are
engaged in various mining and exploration activities, their success and profitability depends on
efficient and optimal utilisation of their capital assets. In the following paragraphs, their long-
term capital investment can be assessed in terms of Terotechnology and assets lifecycle costing
taking information from their recent annual reports (santafeminerals.com.au 2019).

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Gaps verified in Lifecycle Costing:
Santa FE Minerals Limited is a gold, base metals and various other precise materials
exploration and extraction company. They are continuously working towards achieving their
success through maximum exploration of such materials and minerals. From their balance sheet
it can be observed that they are having $521,067 in their Deferred exploration expenditure and
$62,472 in their plant and equipment (santafeminerals.com.au 2019). Despite having a huge part
of their investment in their minerals exploration activities still they are making a significant
amount of loss. They must conduct an asset lifecycle cost analysis and apply Terotechnology to
justify their investment in such capital assts (santafeminerals.com.au 2019).
The Terotechnology requires making a balance between the costs and benefits arising
from their investment in capital assets. In doing so, they need to maintain their quality of product
and services, and the demands and production schedules must be maintained in time. Lastly they
must be meeting the investment criteria to maintain the profitability and sustainability of the
business. They must be maintaining all the investment and profitability requirements with
conformation to the customer responsiveness.
Conclusion and recommendation:
It can be concluded from the above discussion and analysis that, before making any long
term investment in any capital assets, costs and benefits associated with such assts throughout
the life of the assts must be ascertained and analysed to make a conscious investment decision.
Various assets valuation tools investment appraisal techniques can be applied in achieving a
successful investment in long-term capital assets. Lastly, it can be recommended for the
company to reassess their long term assets and make additional long term investment to their

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assts portfolio to improve and maintain the productivity of their assets to generate a sustainable
return from their operating activities.

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Answers to the practical questions:
Basic Information:
After tax rate of return 10.00%
Expected life of the project 6
Salvage value at the end of the project 5.00%
Annual Contract of supply (Units) 5000
Sales Price of product per unit($P) $25.00
Degree of automation A B C D
First cost ($I) $300,000.00 $310,000.00 $320,000.00 $360,000.00
Annual labour cost ($L) $40,000.00 $46,000.00 $49,000.00 $26,000.00
Annual power and maintenance cost($M) $2,500.00 $2,100.00 $1,500.00 $4,600.00
Computation Presesnt Worth
Salvage value at the end of 6 years (S) $15,000.00 $15,500.00 $16,000.00 $18,000.00
Net Annual Cash Flow - Annuity (A) $82,500.00 $76,900.00 $74,500.00 $94,400.00
Initial Investment - Principal Amount (P) $300,000.00 $310,000.00 $320,000.00 $360,000.00
Present Worth Factor (P/F) 0.56447393 0.56447393 0.56447393 0.56447393
Annuity Factor (P/A) 4.355260699 4.355260699 4.355260699 4.355260699
Present Worth (PW) $67,776.12 $33,668.89 $13,498.50 $61,297.14
Computation of Annual Worth
Salvage value at the end of 6 years (S) $15,000.00 $15,500.00 $16,000.00 $18,000.00
Net Annual Cash Flow - Annuity (A) $82,500.00 $76,900.00 $74,500.00 $94,400.00
Initial Investment - Principal Amount (P) $300,000.00 $310,000.00 $320,000.00 $360,000.00
Sinking Fund Factor (A/F) 0.12960738 0.12960738 0.12960738 0.12960738
Capital Recovery Factor (A/P) 0.22960738 0.22960738 0.22960738 0.22960738
Annual Worth(AW) $15,561.90 $7,730.63 $3,099.36 $14,074.28
Computation of Internal Rate of Return (IRR)
Degree of Automaton Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 IRR
A -$300,000.00 $82,500.00 $82,500.00 $82,500.00 ### ### ### 17%
B -$310,000.00 $76,900.00 $76,900.00 $76,900.00 ### ### ### 13%
C -$320,000.00 $74,500.00 $74,500.00 $74,500.00 ### ### ### 10%
Initial
Investment

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Answer to question 2:
Sub part (a):
Sub part (b):

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Sub part (c):
Answer to question 3:

10ENGINEERING, TEROTECHNOLOGY
Answer to question 4:
Sub part 1:
Sub part 2:

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Answer to question 5:

12ENGINEERING, TEROTECHNOLOGY
References and bibliography:
Damodaran, A. (2016). Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
DRURY, C. M. (2013). Management and cost accounting. Springer.
El-Akruti, K., & Dwight, R. (2013). A framework for the engineering asset management
system. Journal of Quality in Maintenance Engineering, 19(4), 398-412.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Kirkham, R. (2014). Ferry and brandon's cost planning of buildings. John Wiley & Sons.
Kovacic, I., & Zoller, V. (2015). Building life cycle optimization tools for early design
phases. Energy, 92, 409-419.
Langston, C. (2013). Life-cost approach to building evaluation. Routledge.
santafeminerals.com.au. (2019). Annual Reports - Santa Fe Minerals Limited. Retrieved from
https://www.santafeminerals.com.au/investors/annual-reports
Spickova, M., & Myskova, R. (2015). Costs Efficiency Evaluation using Life Cycle Costing as
Strategic method. Procedia economics and finance, 34, 337-343.
Woodhouse, J. (2014). Asset Management is growing up. Tutorial at the 9th WCEAM,
Pretoria, 670.

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Appendix: