Faculty of Engineering Technology

INDIVIDUAL EXERCISE (CHAPTER 1, 2 & 3) –

BTV/BTM/1819II/BTV3433

Code and Course Name: BTV 3433 –ENGINEERING ECONOMY

NAME:
STUDENT ID.:

QUESTION 1
List down SEVEN (7) principles of Engineering Economy. Explain why we need to consider
non-monetary factors when analyze the potential alternatives for our business?
(5 Marks)

QUESTION 2
Ahmad just wrecked his old car! An automobile wholesaler offers him RM 2,000 for the car
“as is.” His insurance company estimates that there is RM 2,000 of damage to his car. The
insurance company can fix the car right away in a repair shop belonging to this company.
Because Ahmad has collision insurance with a RM 1,000 deductibility provision, the insurance
company mails him a check for RM 1,000. The odometer reading on his wrecked car is 158,000
km.

Additional Information:
 Ahmad has RM 7,000 in savings.
 Ahmad can buy a newer used car for RM 10,000 with an odometer reading of 80,000
km.
 After repairing the wrecked car, it can be sold for RM 4,500.
 A discount repair shop charges RM 1,100 and requires 1 month.
 A car rental for one month is RM 400.

a) Develop at least THREE (3) potential alternatives for Ahmad’s situation.

(6 Marks)
b) Based on the Engineering Economy principles, which alternative you would suggest to
Ahmad and explain why you choose that alternative.
(4 Marks)

1
QUESTION 3
Chua plans to charter a bus to take people to see a football match show in Bukit Jalil stadium.
He has to pay for the bus rental, fuel cost, bus driver, ticket and refreshments. Based on your
understanding, distinguish which are fixed and variable costs from the expenses?
(5 marks)

QUESTION 4
A sunk cost is money already spent due to a past decision. Give ONE (1) example of sunk cost.
As engineering economists, we deal with present and future opportunities. Did sunk cost has
influence in the present opportunity? Explain your answer. (5 marks)

QUESTION 5
Five years ago, an 80 MW gas power unit cost RM 150,000. The cost index for the turbine 5
years ago was 180 and it is now 196. The cost capacity factor is 0.7.

a) The plant engineering staff is considering a 100 MW unit of the same design to power a small
isolated plant. Assume we want to add an additional compressor, which (when isolated and
estimated separately) currently costs RM 25,000. Determine the total cost of the 100 MW unit.

(5 Marks)

b) Estimate the cost of a 50 MW unit of the same general design. Include the cost of the RM 25,000
compressors.

(5 Marks)

QUESTION 6
A 250 ft2 shell and tube heat exchanger was purchased for RM 13,500 in 2004 when the index
value was 830. Estimate the cost of a 150 ft2 shell and tube heat exchanger in 2016 when the
index value is 1,029 and the appropriate cost-capacity factor is 0.6
(5 Marks)