Engineering Economy Sheet 2
Engineering Economy Sheet 2
Engineering Economy Sheet 2
Sheet 2
1- A new street seeping equipment can be purchased for $ 75,000. its expected useful
life is 8 years, at which time its market value will be zero. Annual receipts less
expenses will approximately $20,000 per year over the 8 years study period. Use
the PW method and MARR of 15% to determine whether this is a good
investment?
2- You are faced with making a decision on a large investment proposal. The capital
investment amount is $640,000. Estimated annual revenue at the end of each year
in the eight years study period is $180,000. the estimated annual year end
expenses are $42,000 starting in year one. These expenses begin decreasing by
$4,000 per year at the end of year four and continue decreasing through end of
year eight. Assuming a $20,000 market value at the end of year eight and MARR =
20% per year, answer the following:
a- What is the PW of this proposal?
b- What your conclusion about the acceptability of this project?
3- Determine the FW of the following engineering project when MARR=12% per year.
Is this project attractive?
Investment Cost $15,000
* The negative market value means that the asset needs cost to dispose of an
asset.
7- The pure Oil Company must install antipollution equipment in a new refinery to
meet the KSA clean air standards. Four designs alternatives are being considered,
which will capital investment and annual operating expenses as shown in the
table. Assuming a useful life of 10 years for each design, no market value, a
desired MARR of 10 % per year, and an analysis period of 10 years, determine
which design should be selected on the basis of PW method. Confirm your
selection by using the FW and AW methods.
Alternative Design
D1 D2 D3 D4
Annual expenses
8- A three design alternatives are being considered. The estimate sales and cost for
each alternative are given in the table. The MARR is 20% per year.
Alternative
A B C
Annual revenues are based on the number of units sold and selling price. Annual
expenses are based on fixed and variable costs. Determine which alternative is
preferable based on AW.
9- Two electrical motors are being considered to drive a centrifugal pump. One of the
motors must be selected. Each motor capable of driving 70 horse power (output)
to the pump operation. It is expected that the motor will be in use 1,000 hours per
year. The following data are available:
Motor A Motor B
E1 E2