Engineering economics/construction project management question

Engineering Economics/Construction Project Management Question

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  1. Your company is evaluating the three mutually exclusive mechanical systems shown in the table below.  Using a MARR of 15%, which alternative should be chosen?

 

A

B

C

Investment

$110,000

$125,000

$138,000

Useful life

10 years

10 years

10 years

Total annual expenses

$53,800

$51,625

$45,033

 

 

a.

Alternative C

 

b.

Alternative A

 

c.

Alternative B

1 points  

QUESTION 2

  1. You are analyzing six mutually exclusive alternatives using the IRR method. The useful life of each alternative is 10 years and the MARR is 10%. Cash flow information is given in Figures 1 & 2 below.

Figure 1. Total Cash Flows for each Alternative

 

A

B

C

D

E

F

Capital Investment

$900

$1,500

$2,500

$4,000

$5,000

$7,000

Annual Revenues

150

276

400

925

1,125

1,425

IRR on total CF

10.6%

13.0%

9.6%

19.1%

18.3%

15.6%

Figure 2. Incremental Analysis using the IRR Method

 

∆(B – A)

∆(D – B)

∆(E – D)

∆(F – E)

∆ Capital Investment

$600

$2,500

$1,000

$2,000

∆ Annual Revenues

$126

$649

$200

$300

∆ IRR

16.4%

22.6%

15.1%

8.1%

 

 

a.

Alternative B

 

b.

None of the above

 

c.

Alternative D

 

d.

Alternative A

 

e.

Alternative E

 

f.

Alternative F

 

g.

Alternative C

1 points  

QUESTION 3

  1. Four mutually exclusive projects are shown below. Which, if any, of these projects should be selected? Please use an interest rate of 12%.
 

Alt. A

Alt. B

Alt. C

Alt, D

Investment

$23M

$18M

$31M

$26M

Annual O&M

$1.8M

$1.2M

$2.1M

$2.0M

Salvage Value

$2.4M

$2.2M

$4.0M

$3.1M

Annual Benefits

$5.0M

$4.5M

$6.5M

$5.8M

Useful Life

50 years

50 years

50 years

50 years

  1.  
 

a.

Alt. C

 

b.

Alt. A

 

c.

Alt. D

 

d.

None should be selected 

 

e.

Alt. B