Engineering Economy |
|||
| Practice
Problems-set II
|
|||
| 1. A robot
costing $150,000 to purchase and install is expected to last for 10 years, have a salvage
value of $25,000 at that time and an annual maintenance expense of $10,000. The engineers
figure that this investment will save the firm $40,000 a year in labour and quality costs.
What rate of return would it generate for the company?
|
|||
| 2. A new
machine cost $120,000 expected to be used for five years and at that time sold for 20,000.
What would the depreciation charge for the second year be and the book value at the end of
the second year if a) straight line depreciation were used? b) sum of the years digits? c)double declining balance? d)declining balance method? e) ACRS system and the machine falls in the five year category with applicable percentages being: 1st year ------ 15% 2nd year------ 22% 3rd year------ 21% 4th year------ 21% 5th year------ 21%
|
|||
| 3. Three possible types of insulation are being considered with cost estimates as follows: | |||
| Type A | Type B | Type C | |
| Material Cost | 18,000 | 22,000 | 30,000 |
| Installation Cost | 20,000 | 20,000 | 20,000 |
| Annual Keep-up cost | 3,000 | 4,000 | 5,000 |
| Estimated Life | 5 | 8 | 10 |
| If the cost of
money is 10% per year , which would be the most economical choice?
|
|||
| 4. A pump
costing $6000 is now being used in a process. it has to be replaced every four years. A
more expensive model costing $10,000 is available.What minimum no of years must it be
usable to be competitive with the cheaper pump? Assume cost of money is 10%per year.
|
|||
| 5. A printing
company can make a brochure for $0.40 a copy for the first 50 and 40.20 for each
additional one or it can prepare a master for $30.00 and charge $0.10 for each copy. How
many should be ordered to make the master method cheaper?
|
|||
| 6. A company
has the choice of keeping a product which it estimates will earn it $5000 a year for the
next 10 years or selling it to a small company. If it figures his money is worth 10%, what
price should it ask for?
|
|||
| 7. A process is
presently being done by hand costing $25,000 in labour cost a year. The firm thinks that
it can substitute a robot to do this. Assume robot will cost $60,000 to purchase and
install, have annual maintenance costs of $6000 and an estimated service life of 10 years.
Assume zero salvage value and 20% cost of capital. Would you recommend this substitution.?
|
|||
| 8. Which would be the most economical of the following data? | |||
| A | B | C | |
| Capital cost | 300,000 | 380,000 | 620,000 |
| Labour Cost( annual) | 20,000 | 22,500 | 35,000 |
| Annual Operating and Maintenance cost | 330,000 | 300,000 | 175,000 |
| Assume 10 year
life of each and a desired 20% rate of return
|
|||