ETGR3222 Engineering Economics

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                                  ETGR3222 Engineering Economics

Problem Set 3 – Spring 2020

 

The answers submitted with this exam reflect my own work, in compliance
with the UNC Charlotte Code of Student Academic Integrity.

 

 

Name:_____________________________________

 

 

 

Signature:__________________________________

 

 

Notes:

  1. This is an open book, open notes exercise.
  2. Financial calculators, and scientific calculators with financial functions like the
    TI-83, are permitted.
  3. You may use the interest tables from your textbook and/or financial calculator.
  1. Work neatly.  BOX YOUR ANSWERS. .

 

 

  1. The Mowbot plant must replace an existing HVAC unit (doing nothing is not an option). You are evaluating two pieces of equipment.  Each unit offers a saving in annual energy cost over the existing equipment.

Unit A                        Unit B                      Unit C

Up front cost                                           $44,000                     $65,000                   $84,000

Operating cost/year                              $1,900                       $1,400                     $900

Energy savings / year                            $14,000                     $16,500                   $17,500

Salvage Value                                          $2,000                       $4,000                     $5,000

Economic life, years                                    5                                 7                               7

Mowbot’s MARR is 12%.  Based on annual worth analysis, which unit should you recommend?

 

 

 

  1. Mowbot’s management is evaluating new proposals for production machines from three companies:

Use incremental present worth analysis to decide which alternative should be recommended.  MARR is 12%.

 

 

 

  1. Cameo’s sales representative has offered an up front price reduction. The proposals are now as follows:

 

 

Use incremental rate of return analysis to decide which alternative should be recommended.  MARR is 12%.

 

 

  1. Mowbot Company is evaluating the production of a new part. It would require the acquisition of a special machine costing $120,000.  The machine would be used for five years then sold for $40,000.  Mowbot’s MARR is 15%.
    1. In addition to the sales quotation, the sales representative has quoted a five year lease for $25,000 per year, with the first year’s payment due on delivery. Based on pretax analysis, should Mowbot choose leasing or buying?
    2. The lathe is expected to result in net benefits (income in excess of costs) of $35,000 per year. Based on the choice of leasing or buying from above, should Mowbot acquire the lathe?
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