Department of Civil and Environmental Engineering

GDB 3023 ENGINEERING ECONOMY AND

ENTREPRENEURSHIP
JAN 2020

ASSIGNMENT 6
Group 19
Name ID
WONG KAI WING 23874
MUHAMMAD AFIQ AIMAN BIN MOHD 23930
ZAHID
NG YEE YONG 23946
RAY LOUIS VICMARK RICHARD 23933
NURBAZILAH BINTI AZMI 23867
5-9
Assume: Car driven = 120 000 miles for 10 years
4 speed car = 30 mpg and $4.00 per gallon
Car driven = 12000 miles per year
4 speed car = 12000/30 = 400gallon/year
= 400*$4.00 = $1600 per year
6 speed = (1+0.04)(30mpg) = 31.2 mpg
12000/31.2 = 384.6 gallon/year
Fuel cost of 6 speed = 384.6 * $4.00 = $1538.4
Saving = $1600-$1538.4 =$61.6
Over 10 year $61.6 (P/A, 6%, 10) = $61.6*7.36 = $453.38

5-19
$290 $290 $280 $270 $260 $240 $230 $220 $210
0 0 0 0 0 $500 0 0 0 0
year 1 2 3 4 5 6 7 8 9 10

A = $2900; G = -$100; F6 = -2000; N = 10 years; MARR = 6%

Present = A (P/A, 6%, 10) – G (P/G, 6%, 9) (P/F, 6%, 1) – F6 (P/F, 6%, 6)
= $2900 (P/A, 6%, 10) - $100 (P/G, 6%, 9) (P/F, 6%, 1) - $2000 (P/F, 6%,6)
= $2900 (7.360) - $100 (24.577) (0.9434) - $2000 (0.7050)
= $17615.41
FW10 = PW (F/P, 6%, 10)
= $17615.41 (F/P, 6%, 10)
= $17615.41 (1.791)
= $ 31549.19
5-34
a) AW = 0 = -10,000,000 (A/P, i′, 4) + 2,800,000 + 5,000,000 (A/F, i′, 4)
Solving yields i′ = 18.5%
b) Yes, IRR (18.5%) > MARR (15%). The plant should be built

5-47
N N
Present Worth (PW) = ∑ R k ( P /F ,i ' % , k ) −¿ ∑ Ek ( P/ F , i' % , k )=0 ¿
k=0 k=0

= [500,000 (P/F, i’%, 1) + 300,000 (P/F, i’%, 2)

+ 100,000 (P/F, i’%, 3) + 150,000 (P/F, i’%, 5)

+ 200,000 (P/F, i’%, 6) + 250,000 (P/F, i’%, 7)

+ 300,000 (P/F, i’%, 8) + 350,000

(P/F, i’%, 9), 400,000 (P/F, i’%, 10)]

– 2,400,000 (P/F, i’%, 4) = 0

i'% Present Worth

1 $ 103,275.00
2 $ 63,825.00
3 $ 30,205.00
4 $ 2,190.00
There are two 5 $ -21,150.00 internal rates of return
6 $ -40,265.00
(IRRs). By interpolating, i’ = 4.09%
7 $ -55,840.00
and 31.85% per 8 $ -68,035.00 year.
9 $ -77,565.00
10 $ -84,680.00
12 $ -92,725.00
ERR Method 15 $ -93,470.00
18 $ -84,565.00
20 $ -75,430.00
25 $ -45,570.00
30 $ -12,140.00
35 $ 20,595.00
 N N
'
∑ E k ( P /F , ε % , k ) (F / P ,i % , N )=∑ Rk ( F/ P , ε % , N−k )
k=0 k=0

2,400,000 (P/F, 8%, 4)(F/P, i’%, 10) = 500,000 (F/P, 8%, 9) + 300,000 ( F/P,
8%,8) + 100,000 (F/P, 8%, 7) + 150,000 (F/P, 8%, 5) + 200,000 (F/P, 8%, 4)
300,000 (F/P, 8%, 3) + 350,000 (F/P, 8%, 1) + 400,000

2,400,000 (0.735)(F/P, i’%, 10) = 500,000 (1.999) + 300,000 (1.851) + 100,000

(1.714) + 150,000 (1.469) + 200,000 (1.360) + 250,000
(1.260) + 300,000 (1.166) + 350,000 (1.080) + 400,000

1,764,000 (F/P, i’%, 10) = 3,661,350

(F/P, i’%, 10) = 2.076

2.076 = (1+i)N

2.076 = (1+i)10

i’% = 7.58%

Therefore, the ERR is 7.58% per year

5-51
a) 0 = -$4900 + $1875(P/A, i’, 5)

i’= 26.4%

b) θ = $4,900 / $1,875 = 3 years (to the integer year)

c) The IRR will signal an acceptable (profitable) project if the MARR is

less than 26.4% and the value of θ may indicate a poor project in
terms of liquidity.

d) 1/ θ = 33.3%. This is the payback rate of return, and it over-estimates the

actual IRR.