Reference no: EM131316114
Engineering Economics/Construction Project Management Question
QUESTION 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?
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A
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B
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C
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Investment
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$110,000
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$125,000
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$138,000
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Useful life
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10 years
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10 years
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10 years
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Total annual expenses
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$53,800
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$51,625
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$45,033
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a. Alternative C
b. Alternative A
c. Alternative B
QUESTION 2
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
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A
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B
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C
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D
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E
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F
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Capital Investment
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$900
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$1,500
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$2,500
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$4,000
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$5,000
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$7,000
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Annual Revenues
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150
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276
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400
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925
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1,125
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1,425
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IRR on total CF
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10.6%
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13.0%
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9.6%
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19.1%
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18.3%
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15.6%
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Figure 2. Incremental Analysis using the IRR Method
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A
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B
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C
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D
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E
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F
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Capital Investment
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$900
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$1,500
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$2,500
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$4,000
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$5,000
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$7,000
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Annual Revenues
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150
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276
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400
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925
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1,125
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1,425
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IRR on total CF
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10.6%
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13.0%
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9.6%
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19.1%
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18.3%
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15.6%
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a. Alternative B
b. None of the above
c. Alternative D
d. Alternative A
e. Alternative E
f. Alternative F
g. Alternative C
QUESTION 3
Four mutually exclusive projects are shown below. Which, if any, of these projects should be selected? Please use an interest rate of 12%.
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Alt. A
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Alt. B
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Alt. C
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Alt, D
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Investment
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$23M
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$18M
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$31M
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$26M
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Annual O&M
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$1.8M
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$1.2M
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$2.1M
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$2.0M
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Salvage Value
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$2.4M
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$2.2M
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$4.0M
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$3.1M
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Annual Benefits
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$5.0M
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$4.5M
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$6.5M
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$5.8M
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Useful Life
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50 years
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50 years
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50 years
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50 years
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Useful Life 50 years 50 years 50 years 50 years
a. Alt. C
b. Alt. A
c. Alt. D
d. None should be selected
e. Alt. B
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