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    Eco Valuation

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    Anonymous RbmGbYv
    This document provides instructions and problems for an engineering economy take-home exam. It includes 5 multi-part problems involving calculation of IRR, PW, AW, and incremental analysis to evaluate investment alternatives. Students must show all computations and solutions are due by March 15, 2016.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd

    Eco Valuation

    Uploaded by

    Anonymous RbmGbYv
    89 views3 pages
    This document provides instructions and problems for an engineering economy take-home exam. It includes 5 multi-part problems involving calculation of IRR, PW, AW, and incremental analysis to evaluate investment alternatives. Students must show all computations and solutions are due by March 15, 2016.

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    take home

    Original Title

    Eco valuation

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    This document provides instructions and problems for an engineering economy take-home exam. It includes 5 multi-part problems involving calculation of IRR, PW, AW, and incremental analysis to evaluate investment alternatives. Students must show all computations and solutions are due by March 15, 2016.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    89 views3 pages

    Eco Valuation

    Uploaded by

    Anonymous RbmGbYv
    This document provides instructions and problems for an engineering economy take-home exam. It includes 5 multi-part problems involving calculation of IRR, PW, AW, and incremental analysis to evaluate investment alternatives. Students must show all computations and solutions are due by March 15, 2016.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 3

    ENGINEERING ECONOMY

    Take Home Exam 3


    Name(Type Your Name): ___________________________________ Class Schedule: ____________ Score: _________
    -

    Solve the following problems. (you must show all your computations)
    Write your solution on the space provided
    Late submission will not be accepted.
    Due Date: On or before 5pm of March 15,2016

    1)
    a. Determine the IRR of the project. Is it
    acceptable if MARR = 20%?
    b. What is the ERR for this project? Assume that
    = 20% per year.
    Proposal A
    Investment cost

    $10,000

    Expected life

    5 years

    Market (salvage) value

    $1,000

    Annual receipts

    $8,000

    Annual expenses

    $4,000

    roof repairs. At the end of five years (now), you sell


    the building for $120,000. During the period of
    ownership, you rented out the building for $10,000 per
    year paid at the beginning of each year. Use the AW
    method to evaluate this investment when your MARR
    is 8% per year.

    A negative market value means that there

    is a net cost to dispose of an asset.

    2) You purchased a building five years ago for $100,000.


    Its annual maintenance expense has been $5,000 per
    year. At the end of three years, you spent $9,000 on

    3. A computer call center is going to replace all


    of its incandescent lamps with more energy-

    efficient lighting fixtures. The total energy


    savings are estimated to be $1,875 per year,
    and the cost of purchasing and installing the
    fluorescent fixtures is $4,900. The study period
    is five years, and terminal market values to the
    fixtures are negligible.
    a) What is the PW of the investment when
    MARR = 8%?
    b) What is the IRR of this investment?
    c) What is the simple payback and the
    discounted payback of the investment?

    At the conclusion of the useful life, the investment will be


    sold
    A
    B
    C
    Capital
    $28,000
    $55,000
    $40,000
    Investment
    Annual
    15,000
    13,000
    22,000
    Expenses
    Annual
    23,000
    28,000
    32,000
    Revenues
    MV at EOY
    6,000
    8,000
    10,000
    10
    Useful life
    10 years
    10 years
    10 years
    A. Evaluate all alternatives using PW method and
    determine which alternative is preferable.
    Use incremental analysis to determine the best
    alternative on the basis of PW method

    4.Three mutually exclusive design alternatives are being


    considered. The estimated cash flows for each
    alternative are given next. The MARR is 20% per year.

    5. Three alternative designs are being considered for a


    potential improvement project related to the operation of
    your engineering department. The prospective net cash
    flows for these alternatives are shown in the following
    table, and the MARR is 15% per year.

    End of
    Year, k
    0
    1
    2
    3
    4
    5
    6

    Alternative Net Cash Flows


    A
    B
    C
    -$200,000 -$230,000 -$212,500
    90,000
    108,000
    -$15,000
    90,000
    108,000
    122,500
    90,000
    108,000
    122,500
    90,000
    108,000
    122,500
    90,000
    108,000
    122,500
    90,000

    108,000

    122,500

    Show that the same capital investment decision results


    from the IRR method and the PW method applied by
    using the incremental investment analysis procedure.

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