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

    a.

    Alt. C

    b.

    Alt. A

    c.

    Alt. D

    d.

    None should be selected 

    e.

    Alt. B

 

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