assignment

Page 1 of 3 University of Manitoba Centre for Engineering Professional Practice and Engineering Education Price Faculty of Engineering Engineering Economics - ENG3000 Assignment # 4 Due Friday October 16 th, 20 20 (11:59PM) General g uidelines (Please read carefully) : 1. Both hand -written and typed submissions are acceptable. But remember that typing is not required. 2. Your submissio n must be readable, clear, easy -to-follow, neat , and submitted in pdf format . 3. Sideways, blurry, and out -of-order answers will not be marked. 4. Write your name on each page of your submission. 5. Insert page numbers on each page and scan the pages in order. 6. Keep the hard copies till the end of the semester. 7. Each student must submit only one file including all of the answers to the problems . 8. You do not need to include the problems but if you feel like it, go ahead. 9. Highlight your final ans wers and show all the steps. 10. Includ e at least 2 d ecimal places for your answers . 11. One pr oblem per page is the ideal submission format. 12. Any questions regarding the marking must be directed to the TAs. 13. Please submit your work before the due date as late submissions cause extra work for all of us. Page 2 of 3 1. Alphaville’s mayor is planning to construct a bridge across the Deep Purple river to facilitate the transportation of the seasonal tourist s to the city’s famous ski resort , Red Snow Slopes. The initial cost for the bridge construction will be $5,400,000. For each of th e first 6 years, the annual maintenance and inspection is going to be $27,000, $29,000 for each of the next 4 years, and $37,000 for the last ten years. In addition to those costs, at the end of the tenth year, a costly overhaul of $500,000 will be require d as well. Determine the equivalent uniform annual cost for a 20 -year period using an effective interest rate of 6%. (5 Marks) 2. Using annual cash flow analysis , find the best alternative given the following information. Use a MARR of 7%. Comment on your findings and explain your decision. (10 Marks) Option A Option B Option C Initial Cost $2 4,700 $30,500 $29 ,200 Income at year: 1 3000 1000 7000 2 3500 10 000 7000 3 4000 9000 7000 4 4500 8000 6000 5 63 00 7000 6000 6 63 00 6000 6000 End -of-life Value 3000 6000 54 00 3. A barber shop can be purchased for $33,600 now . A fter 6 years, is expected that the equipment is going to have a salvage value of $9,800. Instead, the barber shop can be leased for $ 7,400 per year which must be paid at the beginning of each year. The barber shop is expected to yield end - of-year income of $22,000 per year for 6 years whether purchased or leased. Determine if the barber shop should be purchased or leased based on an interest rate of 7% per year and an annual worth analysis technique. (10 Marks) 4. Fancy limousines at Royal Limousine Inc. get driven about 65,000 km every year year. Royal Limousine has the option of choosing between limousines with hybrid or gas engines. If interest rate is 12% per annum, which option would make more sense for purchasing ? (10 Marks) Hybrid Gas Initial cost of each limo $36 ,000 $31 ,000 Maintenance (per year) $11 00 $99 0 Cost of i nsurance (per year) $2,200 $2,200 Salvage Value $3,500 $5,500 Cost of driving per km $0.09 $0.14 Useful life ( years ) 7 6 Page 3 of 3 5. For the diagram below, compute the value of ‘D’ that results in a net equivalent uniform annual cost (EUAC) of zero. (5 Marks) 6. With the extremely low interest rate of 3% available in the market , you are tempted to upgrade the filtration system of your in -ground pool. The old system can be d ismantled and sold for $3000 to day. The new system costs $19,800 and will last for 8 years. The expected savings (compared to the old system) is going to be $11 per each hour of operation while the costs are estimated at $6/hour of use. The new system will yield a salvage value of $1800 at the end of its useful life. (5 Marks) a) If you run your filtration system for about 1,100 hours per year, w hat is the equivalent uniform annual worth of the new filtration system ? (4 Marks) b) What is the number of operating hours at break -even which makes the EUAW equal to zero? (1 Mark ) 7. Two pot ential routes for a hydro power -line have been studied. The data on the options have been summarized as follows. (5 Marks) a. Clean up the given data and fill out the provided blank table . (0.5 Mark ) b. Draw the cash flow diagrams . (1 Mark ) c. Determine which option is economically more desirable using an interest rate of 5%. (3.5 Marks ) Side of the mountain Through the mountain Length (km) 22 12 First Cost ($/km) 5,000 25,000 Maintenance ($/km/year) 35 0 56 0 Useful life, in years 19 17 Salvage value ($/km) 2,400 6,100 Yearly power loss ($/km) 700 400 Property tax (per year) 3% of the first cost 3% of the first cost Side of the mountain Through the mountain First Cost ($ ) Maintenance ($ /year) tha Yearly power loss ($ ) Salvage value ($ ) Property tax (per year) Useful life ( years ) i = 9% 2D i = 9% $800