Reference no: EM131054053
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.
Consider the following cash flow data for two competing investment projects:
n A B
0 $-1,500,000 $-1,250,000
1 $800,000 $600,000
2 $1,350,000 $1,250,000
At i=10%, which of the two projects would be a better choice?
2.
Consider the following cash flow for a given project:
n Cash Flow
0 $-5,000
1 $1,000
2 $1,250
3 $2,000
4 $2,250
5 $3,000
6 $3,250
(a) Find the conventional payback period for the project.
(b) Find the discounted-payback period for the project, assuming i = 12%.
3. Consider the following set of investment projects, each with a four-year investment life:
n A B C D
0 $-2,000 $-4,000 $0 $-7,500
1 $-4,000 $5,000 $-1,000 $1,500
2 $2,000 $-4,000 $2,000 $2,000
3 $2,000 $5,000 $3,000 $2,500
4 $3,000 $5,000 $4,000 $3,000
Compute the net future worth of each project at i=7%.
4.
Consider the following investment projects, all with a three-year investment life:
n A B C D
0 $-5,000 $-4,000 -$7,500 $-6,000
1 $750 $3,000 $1,750 $1,000
2 $1,000 $5,000 $2,750 $1,000
3 $4,000 $5,000 $3,750 $5,500
Compute the net present worth of each project at i=6%.
5. B&C Manufacturing is planning on purchasing a new assembly machine for $32,500 to automate one of its current manufacturing operations. It will cost an additional $2,500 to have the new machine installed. With the new machine, B&C expects to save $10,000 in annual operating and maintenance costs. The machine will last 5 years with an expected salvage value of $3,500. How long will it take to recover the investment (plus installation cost)?