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