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# Engineering Economic Analysis & Life-Cycle Costing (25 points) 3.

5) A local government agency has asked you to consult regarding acquisition of land for recreation needs for the urban area. The following data are provided: Urban population 10 years ago Urban area population now Desired ratio of recreation land in acres per 1,000 population Actual acres of land now held by local government for recreational purposes 49,050 89,920 10 acres/1,000 803 acres

a. Find the annual growth rate in the urban area by assuming that the population grew at a compounded annual rate over the past 10 years. b. How many years ago was the desired ration of recreation land per 1,000 population exceeded if no more land was acquired and the population continued to grow at the indicated rate? c. The local government is planning to purchase more land to supply the recreational needs for 10 years past the point in time found in part (b). How many acres of land should they purchase to maintain the desired ratio, assuming that the population growth continues at the same rate? 3.10) Your firm wants to purchase a \$50,000 computer, no money down. The \$50,000 will be paid off in 10 equal end-of-year payments with interest at 8% on the unpaid balance. a. What are the annual end-of-year payments? b. What hourly charge should be included to pay off the computer, assuming 2,000 hours of work per year, credited at the end of the year? c. Assume that 5 years from now you would like to trade in the computer and purchase a new one. You expect a 5% increase in price each year. What would the new computer cost at the end of year 5? d. What is the unpaid balance on the current computer after 5 years? 3.18) Lu Hodler planned to buy a rental property as an investment. After looking for several months, she found an attractive duplex that could be purchased for \$93,000 cash. The total expected income from renting out both sides of the duplex would be \$800 per month. The total annual expenses for property taxes, repairs, gardening, and so on are estimated at \$600 per year. For tax purposes, Lu plans to depreciate the building by the SOYD method, assuming that the building has a 20-year remaining life and no salvage value. Of the total \$93,000 cost of the property, \$84,000 represents the value of the building and \$9,000 is the value of the lot (only the former can be depreciated). Assume that Lu is in the 38% incremental income tax bracket (combined state and federal taxes) throughout the 20 years. In this analysis, Lu estimates that the income and expenses will remain constant at their present levels. If she buys and holds the property for 20 years, then what after-tax ROR can she expect to receive on her investment, using the assumptions noted below?

a. The building and lot can be sold at the end of 20 years for the \$9,000 estimated value of the lot. b. A more optimistic estimate of the future value of the property is that it can be sold for \$100,000 at the end of the 20 years. 4.3) Develop three cost classifications for the LCC of an office building. 4.12) Maurice Micklewhite has decided to replant his garden. Show him what the cost is of making an erroneous decision at various stages of the project, starting with conceptual design and ending with the ongoing maintenance of the garden.