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Engineering Economics Tutorial 7[1]

The document presents an engineering economics tutorial focused on annual worth analysis, comparing two pipes (A and B) and recommending Pipe B based on financial calculations. It also includes in-class assignments involving cash flow diagrams, present worth calculations, and supplier evaluations based on multiple factors. Additionally, it discusses investment proposals and the identification of debts and equities for determining the weighted average cost of capital (WACC).

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Niels Bohr
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Download as PDF, TXT or read online on Scribd
7 views

Engineering Economics Tutorial 7[1]

The document presents an engineering economics tutorial focused on annual worth analysis, comparing two pipes (A and B) and recommending Pipe B based on financial calculations. It also includes in-class assignments involving cash flow diagrams, present worth calculations, and supplier evaluations based on multiple factors. Additionally, it discusses investment proposals and the identification of debts and equities for determining the weighted average cost of capital (WACC).

Uploaded by

Niels Bohr
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Engineering Economics

Tutorial 7

Annual Worth Analysis


Eng. Shady Magdy
Pipe A
Recommend a Pipe
0 1 20 40 60

𝑨𝑷𝒊𝒑𝒆 𝑨 = -135,000 (A/P,6%,60) 3000


-15,000 (P/F,6%,20) (A/P,6%,60)
-15,000 (P/F,6%,40) (A/P,6%,60) 15,000 15,000
-3000
= -$11736
135,000

Pipe B
𝑨𝑷𝒊𝒑𝒆 𝑩 = -100,000 (A/P,6%,60)
-20,000 (P/F,6%,20) (A/P,6%,60)
0 1 20 30 40 60
- 80,000 (P/F,6%,30) (A/P,6%,60)
-20,000 (P/F,6%,40) (A/P,6%,60)
-4000 4000
= -$11559
20,000 80,000 20,000
Pipe B is Recommended 100,000
Model 127B 10,000 10,000

0 1 2 3 4 5 6 7 8 9 10

Model 334A
20,000
50,000

0 1 2 3 4 5 6 7 8 9 10

Model 127B is strongly


Recommended
80,000 80,000

𝑨𝑴𝒐𝒅𝒆𝒍 𝟏𝟐𝟕𝑩 = -50,000 (A/P,8%,10) +10,000 (A/F,8%,10) +10,000 = $ 3240

𝑨𝑴𝒐𝒅𝒆𝒍 𝟑𝟑𝟒𝑨 = -80,000 (A/P,8%,10) - 80,000 (P/F,8%,5) (A/P,8%,10) + 20,000 = -$ 32.752


In-Class Assignment 2020
Q1

Time Period 0 4-6 8 T= 9-12 15


Cash Flow -3000 -400 6000 -[200+100(T-9)] 1500

a) Draw the cash flow diagram and show the cash flow amount and direction for
each time period.
b) What is the equivalent present worth of the given cash flow if i = 6%?
6000
In-Class Assignment 2020
1500
Q1

0 1 2 3 4 5 6 7 8 9 10 11 12 15

200
3000 400 300 400 500
In-Class Assignment 2020

Q2 a) An employee is to leave 5,000 EGP on deposit in a savings account for 15


years at 6.5 percent interest compounded annually. Due to some
circumstances, he has to withdraw 1,500 EGP at the end of the fifth year.

a) Draw the cash flow.


b) Calculate how much will be in his deposit at the end of the 15-year
period?
F?
5000

i= 6.5%

0 5 15

𝑭𝟏𝟓 = 5000 (F/P,6.5%,15) – 1500


(F/P,6.5%,10) 1500

𝑭𝟏𝟓 = 5000 (2.578) – 1500 (1.879)= $10071.5


In-Class Assignment 2020

Q2. b) An automotive factory is seeking a supplier for glass. Three suppliers are
considered; A, B, and C. The prices per batch offered by each supplier are,
respectively, £50,000, £39,000, and £65,000.
Other factors are identified by the factory in addition to price. Each of the factors has
been weighted in terms of its importance. Factors and weights include Price (P)—
30%; Quality (Q)—50%; Reputation (R)—20%. The Procurement team has
researched and provided ratings on a 10-point maximum scale for each factor. These
are given in the following table:
In-Class Assignment 2020

Alternative A is the Best


In-Class Assignment 2020
Q3). Four proposals (A, B, C, and D) are available for investment. Proposals A and C
cannot both be accepted; Proposal B is contingent upon the acceptance of
either Proposal C or D; and Proposal A is contingent on D.
a. List all the possible alternatives that make combinations between the
different proposals
b. Exclude the infeasible alternatives and show which alternatives are
feasible.
Solution:
In-Class Assignment 2020
Q4) A company has the following sources of capital

a) Identify debts and equities?


b) What is the appropriate weighted average cost of capital to use in
determining MARR?

a) Debts: Loans, Accounts payable


Equities: Common stock
b) WACC= (0.3*6)+(0.4*8)+(0.3*10)= 8%

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