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    Chapter 2 - Tutorial - W.R. Economy Management (2017-2018)

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    Pesar Bawani
    This document provides examples of project scheduling and resource allocation problems involving calculation of net present worth, internal rate of return, future worth, and annual worth to evaluate whether proposed investments or projects should be recommended. The examples include municipal projects, equipment purchases, water supply projects, machine selection, hydroelectric plants, and software system costs for a dam. Calculations are demonstrated using uniform annual series, non-uniform series, and infinite time horizons to assess whether projects earn specified rates of return.

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    Chapter 2 - Tutorial - W.R. Economy Management (2017-2018)

    Uploaded by

    Pesar Bawani
    49 views4 pages
    This document provides examples of project scheduling and resource allocation problems involving calculation of net present worth, internal rate of return, future worth, and annual worth to evaluate whether proposed investments or projects should be recommended. The examples include municipal projects, equipment purchases, water supply projects, machine selection, hydroelectric plants, and software system costs for a dam. Calculations are demonstrated using uniform annual series, non-uniform series, and infinite time horizons to assess whether projects earn specified rates of return.

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    This document provides examples of project scheduling and resource allocation problems involving calculation of net present worth, internal rate of return, future worth, and annual worth to evaluate whether proposed investments or projects should be recommended. The examples include municipal projects, equipment purchases, water supply projects, machine selection, hydroelectric plants, and software system costs for a dam. Calculations are demonstrated using uniform annual series, non-uniform series, and infinite time horizons to assess whether projects earn specified rates of return.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    49 views4 pages

    Chapter 2 - Tutorial - W.R. Economy Management (2017-2018)

    Uploaded by

    Pesar Bawani
    This document provides examples of project scheduling and resource allocation problems involving calculation of net present worth, internal rate of return, future worth, and annual worth to evaluate whether proposed investments or projects should be recommended. The examples include municipal projects, equipment purchases, water supply projects, machine selection, hydroelectric plants, and software system costs for a dam. Calculations are demonstrated using uniform annual series, non-uniform series, and infinite time horizons to assess whether projects earn specified rates of return.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Chapter 2

    W.R. Economy & Management

    Tutorial
    Chapter 4: Project Scheduling and Resources Allocation

    Example (1):

    An investment of $10,000 can be made in a municipal project that will produce


    uniform annual revenue of $5,310 for 5 years, and then has a salvage value of
    $2000. The annual disbursement (cost) for operation and maintenance is $3,000.
    The company is willing to accept any project that earns 10% or more in all
    invested capital. Show whether this is a desirable investment using:
    (1) PW method (2) IRR method

    Example (2):

    New equipment has been proposed to increase the productivity of a drainage


    project by $8,000 per year. The purchase value of the equipment is $25,000 and
    the salvage value is $5,000 at the end of its economic life of 5 years. Using FW
    and AW methods determine whether the equipment is recommended or not. i =
    20%.

    Example (3):

    As groundwater wells age, they sometimes begin to pump sand (and become
    known as sanders). This can cause damage to downstream desalting equipment.
    The situation can be dealt with by drilling a new well at a cost of $1,000,000 or
    by installing a tank and self-cleaning screen ahead of the desalting equipment.
    The tank and screen will cost $230,000 to install and $61,000 per year to operate
    and maintain. A new well will have a pump that is more efficient than the old
    one, and it will require almost no maintenance, so its operating cost will
    be$18,000 per year. If the salvage values are estimated at 10% of the first cost,
    calculate the incremental rate of return and determine which alternative is better
    at a MARR of 6% per year over a 20-year study period.

    Example (4):

    Two alternative water supply projects are described in the table below. Project A
    has a large initial investment to meet the water demands for 40 years. Project B
    uses investment in two stages to meet the same demand. Decide which project
    should be selected using: (1) PW method (2) IRR method
    Chapter 4: Project Scheduling and Resources Allocation

    Example (5):
    Two equivalent machines are being considered for purchase. Machine 2 is
    expected to be technologically advanced enough to provide net income longer
    than machine 1.

    Which machine should be recommended?

    Example (6):
    A small hydroelectric plant was built for $800,000 during a decade(without
    considering the time value of money). The plant consists of a canal 6.7 m deep,
    carries water 304.8 m along a river to a “trash rack,” where leaves and other
    debris are caught. A pipeline 1.8 m wide capable of holding 1,360,777 kg of
    liquid then funnels the water into the powerhouse at 2.29m/sec, thereby creating
    14,968.55kg of thrust against the turbines. A company will purchase any
    electricity the plant can supply, which is estimated as 6 million kilowatt-hours
    per year. Suppose that the net annual income will be $120,000. With normal
    maintenance, the plant is expected to provide service for at least 50 years.
    Chapter 4: Project Scheduling and Resources Allocation

    Was the $800,000 investment a wise one? Examine the situation by computing
    the project NPW at return rates of 8% and 12%.

    Example (7):
    Resolve the previous example using infinite service life of the project. Examine
    the use of the CE(i) criterion for engineering projects with long lives.

    Example (8):
    A dam has just installed new software system for management and monitoring
    of water storage in the reservoir. The system is to be used for the indefinite
    future. The director wants to know the total equivalent cost of the system: (a)
    now (CE cost), and (b) for each year hereafter (AW value). The system has an
    initial cost of $150,000 and an additional cost of $50,000 after 10 years. The
    annual software maintenance contract cost is $5,000 for the first 4 years, and
    $8,000 thereafter. In addition, there is expected to be a periodic major upgrade
    cost of $15,000 every 13 years. Assume that i= 5% per year.

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