Engineering Economics

 

Assignment:
Complete the following numbered problems using an Excel spreadsheet. Each person is responsible for their own response to the questions. You must show your work to get full credit.

1. Compute the net present worth at i=8% for your assigned group's business startup.

2. Consider the following cash flow data for two competing investment projects:

n                      A                                 B                                            

0                      $-1,403,028               $-1,216,803                            
1                      $685,123                   $745,871                                
2                      $565,581                   $384,514     
3                      $418,212                   $338,182      
At i=6%, which of the two projects would be a better choice?

3. Consider the following investment projects, all with a four-year investment life:

n                      A                     B                     C                     D 

0                  $-4,712         $-5,913            $-36,611          $-64,820
1                  $2,763           $1,933             $20,000           $16,440
2                  $1,278           $1,811             $19,610           $18,250
3                  $1,640           $1,033             $11,170           $19,560
3                  $1,293           $1,752             $18,600           $17,580
a. Compute the net present worth of each project at i=10%.
b. Compute the net future worth of each project at i=7%.
c. Determine the acceptability of each project based on PW criterion.

4. S&S Industries is planning on purchasing a new assembly machine for $58,040 to automate one of its current manufacturing operations. It will cost an additional $8,425 to have the new machine installed. With the new machine, J&C expects to save $15,950 in annual operating and maintenance costs. The machine will last 8 years with an expected salvage value of $9,550. How long will it take to recover the investment (plus installation cost)?

5. Consider the following cash flow for a given project:

n          Cash Flow

0          $-8,300
1          $1,052
2          $1,832
3          $1,060
4          $1,119
5          $1,751
6          $1,495
7          $1,162
8          $1,930

(a) Find the conventional payback period for the project.
(b) Find the discounted-payback period for the project, assuming i = 9%.