KHWOPA ENGINEERING COLLEGE b) There are four engineering projects , the interrelationships among the projects and

the estimated net cash flows are as follows.

VI SEMESTER ASSESSMENT - 2009 (EVEN) Estimated cash flows
LEVEL:- B. E. (Computer/Elx. & Comm.) III/II project Cash Flow in thousands for the end of year
SUBJECT:- BEG495MS, Engineering Economics 0 1 2 3 4
FULL MARKS:- 80 B1 -545 220 220 220 220
B2 -444 120 120 120 120
TIME:- 03:00 hrs. PASS MARKS:- 32
C1 -114 60 60 60 60
Candidates are required to give their answers in their own words as far as practicable. C2 -100 50 50 50 50
Figures in the margin indicate full marks. Projects B1 and B2 are mutually exclusive projects.
Attempt any FIVE questions Projects C1 and C2 are mutually exclusive and dependent on acceptance of B2.
Use present worth method to determine the best combination of projects.
take MARR = 10 % per year. [10]
1. a) How does effective interest rate differ from nominal interest rate? Explain. Derive an
expression for relating effective and nominal interest rate. [6]

b) A building is priced at 10000000.If a down payment of 3000000 is made, and a 5. a) Recommend which alternative should be selected from the two
payment of 100000 every month thereafter is required, how many months will it take mutually exclusive projects given below. The MARR is 10%
to pay for the building? i = 10 % compounded monthly. [10] End of Year Alternative 1 Alternative 2
0 -40000 -50000
2. a) Describe Annual work method for evaluating projects. Under what conditions is 1 12000 10000
Annual worth method preferred to present worth method? Explain with suitable 2 12000 10000
examples. [6] 3 12000 10000
4 36000 10000
b) Consider the following cash flow. 5 10000
6 10000
EOY 0 1 2 3 4 5 6
7 10000
Cash flow -100 -50 0 20 120 220 320
8 10000 + 40000(Salvage
If MARR is 15%, is the project financially profitable? Use PW method. Value)
 Calculate discounted payback period. Use
 The repeatability assumption
 Draw the investment balance diagram. [10]
 The co-terminated assumption with an eight year study period (Alternative 1 would
 not be repeated.)
3. a) What are the drawbacks of IRR method? How does ERR method eliminates some of  The co-terminated assumption with a four year study period using imputed market
these drawbacks? [6] value technique. [12]
b) Consider the following three sets of mutually exclusive projects. Use incremental
increase method to choose the best alternative assuming MARR =15%. [10] b) Write a note on benefit cost ratio method for analysis of projects. [4]
n A B C
0 -3000 -2000 -1000 6 Write Short Notes on: (Any Four) [16]
1 1500 1500 800 a. Single payment compound amount factor
2 2000 1000 500 b. Uniform series present worth factor
3 1000 800 500 c. Simple and non-simple investments.
d. Deffered Annuity
e. Break even analysis
4. a) Explain the following [6]
 Decision tree
 Elements of Cost 