MID TERM II, MS 4200 Monday, 2 April 2012 3 HOURS (19.00 — 22.00) OPEN BOOK (FUNDAMENTALS OF ENGINEERING ECONOMICS ,2"° EDITION,2008, CHAN S. PARK) |. (chapter 5) A bearing company is taking bids on the purchase, installation, and operation of microwave towers: Cost per Tower | Bid A Bid B Equipment cost $72,000 $64,000 Installation cost $10,000 $13,000 | ‘Annual maintenance and inspection fee $850 $1050 ‘Annual extra income taxes $320 Life 25 years 20 years Salvage value $0 $0 Which is the most economical bid, if the interest rate is 119%? Both towers will have no salvage value after 15 years of use?v 2. (chapter 6) a exclusive marine corporate with capacity of 25 has the following cost factors: item Cost Initial Cost $ 10,500,000 Service Life 8 years Salvage Value $ 1,600,000 Crew cost per year — $175,000 Fuel cost per mile $0.98 | Port fee $195 Maintenance costs per year $215,000 Insurance costs per year '$ 135,000 Catering cost per passenger round trip $68 The company sails four round trips from Spain to South Africa and per two week, a distance 2650 miles one way. How many passengers must be carried on an average trip in order to justify the use of the ship ifthe alternative commercial marine first- class round-trip fare is $3,200 per passenger? The firm’s MARR is 12%. (Ignore income-tax consequences.) 3. (chapter 7) Consider the investment project with the following net cash flows: End of Year (a) Net Cash Flow ° [$10,500 | 1 $2,100 2 $4,600 25 x 4 Xx What would be the value of X if the project’s IRR is 21%?v 4. (chapter 7) Consider the following two mutually exclusive investment projects: Net Cash Flow n Project AL Project AZ 0 - $12,000] - $13,000 1 $3,500 $18,500 2 $3,500 3 | $3,500] a. Touse the IRR criterion, what assumption must be made in order to compare a set of mutually exclusive investments with unequal service lives? b. With the assumption defined in part (a), determine the range of MARR that will indicate the selection of project Al. v5. (chapter 8) Asakura purchased new packaging equipment with an estimated useful life of four years. The cost of the equipment was $ 28,000, and the salvage value was estimated to be $2,500 at the end of four years. Compute the annual depreciation expenses through the four-year life of the equipment under each of the following methods of book depreciation: 2. The straight-line method b. The double-decli fourth year to an amount that will cause the book value of the equipment at year end to equal the $ 2,500 estimated salvage value.) ¥ 6. (chapter 8} Ramos Machine Works purchased a stamping machine for $120,000 on March 2, 2008, The machine is expected to have useful life of 8 years, salvage value of $10,500, production of 210,000 units, and number of working hours of 25,000. During 2008, Ramos used the stamping machine for 2,150 hours to produce 19,500 units. From the information given, compute the book depreciation expense for 2008 under each of the following methods: a. Straight-line Units of production Working hours Double-declining- balance (without conversion to straight-line depreciation) jing-balance method (Limit the depreciation expense in the aos