we l Palestine Polytechnic University ee Engineering & Technology Fe eee nee Lee &. 2 First Exam «Question 1 A manufacturing company made an investment 10 years ago that is now worth 1,300,000, How much was the initial investment at an-interest rate of 15% per year: a) Simple interest ») compound interest Question 2 Use the following table to determine which lease option should be selected on the basis of present worth comparison at an interest rate of 15% per year. ee Location A Location B First cost,$ 17,0007, 20,000 ‘Annual lease costS 3,500 3,000 Deposit retumn,$ 1,500 = 2,500 tem, years 5 e 10 a ‘food company plans to purchase five portable in-car systems to increase delivery speed ‘and accuracy. Each system costs $5,000, as a 5 years useful lie, and may be salvaged for an estimated $500. Total operating cost forall systems is $1,000 forthe frst year decreasing by $100 per year thereafter. The MARR is 15% per year. 2) How much new annual income is necessary to recover the investment at 15% MARR? ~ b) The owner estimates an income of $8,000 per year for all systems. Is this project financially viable at the MARR? Par a The electric company needs to upgrade a portion of its power systems. Based on the following costs, there are two options. “Option B Thitial upgrade cost $22,000 Second upgrade cost at year $25,000 If interest rates sbi ial disbursements and the fu12} Palestine Polytechnic University College of Engineering & Technology Conrge: Enginerring Feonomv & Management First Exam Question 1 If an engineer borrows $5,000 ai au iutesest rate of 12% per year, compute the total amount due after 10 years if the interest is (a) simple interest and (b) compound interest. Question 2 NASA is considering two materials for use in a space vehicle, the costs are shown below. ‘Which should be selected on the basis of a present worth comparison at an interest rate of 10% per year? Material TX Material KZ First cost -205,000 ~235,000, Maintenance cost, S/year -29,000 -27,000 Salvage value, S 2,000 20,000 Life, years 2 4 Question 3 The electric company needs to upgrade a portion of its power systems. Based on the following costs, there are two options. Option A Option 5 Tnitial upgrade cost $10,000 $22,000, Second upgrade cost at year x $46,550 $25,000 If interest rates are 5%, how many years between the initial disbursements and the future disbursements will make the two methods economically equal?” Question 4 ‘You are a member of an engineering project team that is designing a new processing facility. Based oon the following information, which pump model should you select if the MARR is 20%. Pump Model ‘A GP240) B (HEPSS) Capital investment 333,200, $47,600 ‘Annual expenses: Electrical energy $2,165 $1,720 Maintenance $1,100 in year 1, and $500 in year 4, and increasing increasing $500 / yr thereafter $100 / year thereafter Salvage value 0 $5,000 Useful Life, years 5 9ac} Palestine Polytechnic University ering Economy & College of Engineering & Technology First Exam Question 1 ‘A project manager is trying to decide whether he should purchase or lease new equipment to ‘complete his project, if purchased; the equipment will cost $150,000 and is expected to have ‘$65,000 salvage value in 8 years. In addition, it will be leased to other company whenever possible with expected revenue of $15,000 per year. temnatively, the manager can lease the equipment for $20,000 per year, but the lease payment will have to be made at the beginning of each year. If MARR is 12% per year, should the equipment be purchased or leased on the basis of future worth analysis? Question 2 ‘A food company plans to purchase two portable in-car systems to increase delivery speed and accuracy. Each system costs $4,000, has @ 3 years useful life, and may be salvaged for an estimated $300. Total operating cost for the two systems is $1,500 for the first year, decreasing by $100 per year thereafter. The MARR is 15% per year. 4) How much new annual income is necessary to recover the investment at 15% MARR? 'b) The owner estimates an income of $9,000 per year for the two systems. Is this project financially viable at the MARR? Question 3 Compare the altematives shown below on the basis of their capitalized costs, using an interest rate 0f 20% per year. ‘Alernative (E) | Alternative (F) | Altemative (G) First cost, $ -200,000 -300,000 906,000 ‘Annual income, $ 30,000 10,000 40,600 Salvage value,S 30,000 70,000 100,000 Life, years a 6 2 Eng. Motasem N.H Natsha2 7 Palestine Polytechnic University College of Engineering & Technology Course: Engineering Economy & Management First Exam Questiont 6 ‘A manufacturing company made an investment 10 years ago that is now worth 1,300,000. How such was the initial investment at an interest rate of 15% per year: a) Simple interest +b) compound interest Question2 7 ‘A food company plans to purchase five portable in-car systems to increase delivery speed and accuracy. Each system costs $5,000, has a 5 years useful life, and may be salvaged for an estimated $500. Total operating cost for all systems is $1,000 for the first year, decreasing by $100 per year thereafier, The MARR is 15% per year. a) How much new annual income is necessary to recover the investment at 15% MARR? b) The owner estimates an income of $8,000 per year for all systems. Is this project financially viable at the MARR? Question 3 7 ‘Compare the following alternatives on the basis of their eapitalized cost at an interest rate of 12% per year. ‘Altemative A Altemative B First Cost, § 250,000 120,000 ‘Annual Operating Cost, S/year 730,000, 70,000 ‘Annual Revenues, S/year 400,000. 270,000 ‘Salvage Value, $ 50,000 20,000 Life, years 3 3 ng. Motasem N.H Natsha6 Palestine Polvtechnic University College of Engineering & Te Course: En: ement, Question 1 ‘A manufacturing company made an investment 10 years ago that is now worth 1,300,000. How much was the intial investment at an interest rate of 15% per year: a) Simple interest f b) compound interest Question 2 NASA is considering two materials for use in a space vehicle, the costs are shown below. Which should be selected on the basis of a present worth comparison at an interest rate of 10% per year’? Material TX Material KZ First costs 205,000 235,000 Maintenance cost, $/year 29,000 27,000 Salvage value, $ 10,000 20,000 3 6 Question 3 ‘You are a member of an engineering project team that is designing a new processing facility. Based on the following information, which pump model should you select if the MARR is 20%. rw y Pump Model A (SP240) Capital investment $35,000 ‘Annual expenses: Electrical energy ___$1,500 | ‘Maintenance ———] [~~ $500.in year 5, and | * increasing $100 / year thereafter Salvage value $5,000 Useful Life, years | 5 10 Eng. Motasem Natshany Palestine Polytechnic University College of Engineering & Technology Course: Engineering Eeonomy & Management First Exams — Question 1 ‘A manufacturing company made an investment 10 years ago that is now worth 1,300,000. How much was the initial investment at an interest rate of 15% per year: 2) Simple interest ) compound interest Question 2 'A fond company plans to purchase five portable in-car systems to increase delivery speed and ‘accuracy. Each system costs $5,000, has a 5 years useful life, and may be salvaged for an estimated $500. Total operating cost for all systems is $1,000 for the first year, decreasing by $100 per year thereafter. The MARR is 15% per year. 8) How much new annual income is necessary to recover the investment at 15% MARR? b) The owner estimates an income of $8,000 per year for all systems. 1s this project financially viable at the MARR? Alternative A_ Alternative B First Cost, $ 250,000 120,000 ‘Annual Operating Cost, Slyear 130,000 70,000 ‘Annual Revenues,S/year 400,000, 270,000 Salvage Value, $ 50,000 20,000 Life, years 5 : 3 Eng. Motasem N.H Natsha) Palestine Polytechnic University College of Engineering & Technology Cours ;cono1 ent am nl 6 7 manufacturing company made an investfient 10 years ago that is now worth 1,300,000. How much wes the initial investment at an interest rate of 15% per year: 8) Simple interest ') compound interest 2 Rod company Plise to purchase five portable in-car systems to increase delivery speed and accuracy. Each system costs $5,000, has a 5 years useful life, and may be salvaged for an estimated $500, Total operating cost for all systems is $1,000 for the first year, decreasing by $100 per year thereafter. The MARR is 15% pet year. 2) ‘How much new anmual income is necessary to recover the investment at 15% MARR? b) The owner estimates an income of $8,000 per year for all systems. Is this project financially viable at the MARR? Question3 # ‘Compare the following alternatives on the basis of their eapitalized cost at an interest rate of 12% per year Alternative A Altemative B First Cost, $ 250,000. 120,000. Annual Operating Cost, S/year 130,000 70,000 ual Revenues, S/year 400,000, 270,000 ‘Salvage Value, $ 50,000 20,000 Life, years 5 3 Eng. Motasem N.H Natsha© Palestine Polytechnic University College of Engineering & Technology Course: Ens ;conomy & yement wt 2 Ques 6 ‘Hos he Dhllig the uy dedecae: wiildh Sedae-ogtilm shoal be: delectod/.on theibosls of a recent worth comparison at an interest rate : Toeation A Location First cost,$ 17,000, “20,000 Annual lease cost,$ 3,500 3,000 Deposit return § 1,500 00 Lease term, years 6 4 Question? ; A city that is attempting to attract a professional football team is planning to build a new stadium costing §200 million. Annual upkeep is $800,000 for the first 5 years and $900,000 thereafter. ‘The artificial turf will have to be replaced every 10 years at a cost of $700,000, Painting every 5 years will cox $50,000 the city expects to maintain the facility indefinitely, what will be its capitalized cost af an interest rate of 10% per year? Questions ‘You are a member of an exigineering project team that is designing a new processing facility. _ Based on the following informatin, which pump model should you select if the MARR is 20%. Pump Model ‘A (SP240) 'B (HEPS9) Capital investment 333.200 E7600 “Annual expenses: Electrical energy $2,165, $1,720 Maintenance ‘$1,100 in year 1, and ‘$500 in year 4, and increasing increasing $500// yr thereafter | ___$100 / year thereafter Salvage value 0 $5,000 Useful Life, years 5 3 ‘Eng. Mutasem Natshe=} Ses peer Palestine Polytechnic University College of Engineering & Technology an Fas éB First tio as manna 12% po year, compute the total amount due ‘compound interest. after 10 years if the interest is (a) simple interest a (_Qeeier Use the following table to determine which lease option should be selected on the basis of a present worth comparison at an interest rate of 15% per year» Location A Location B First cost 17,0007 20,000 Annual lease cost,$ 3,500 / 3,000 Deposit return,$ 1,500 \ 500 ‘Lease term, years 6 7 4 Question 3 AA city that is attempting to attract a professional football team is planning to build a new stadium ‘costing $200 million. Annual upkeep is, $800,000 first § years and $900,000 thereafter. ‘The artificial ev ‘2 cost of $700,000, Painting every 5 years will cost $50,000-TE the city expects to facility indefinitely, what will be its capitalized cost Fan interest rate of 10% per year? Comnonale ‘You are a member of an engineering project team that is designing a new processing facility. ‘Based on the following information, which pump model should you select if the MARR is 20%. ‘A SP240) B HEPS9) $33,200 $47,600 $2,165 $1,720 $1,100 in year 1, and $500 in year 4, and increasing increasing $500 / yr thereafter $100 / year thereafter 0 $5,000 5 9 )