Which among these pairs would provide a good market feasibility judgment on a given project? a. Benefit-Cost Ratio method and breakeven point b. External Rate of Return method and Internal Rate of Return method c. Benefit-Cost Ratio method and payback period d. Minimum Attractive Rate of Return and Present Worth method
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Which among these pairs would provide a good market feasibility judgment on a given project?
a. Benefit-Cost Ratio method and breakeven point
b. External
c. Benefit-Cost Ratio method and payback period
d. Minimum Attractive Rate of Return and Present Worth method
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Solved in 3 steps
- Solve the Engineering Economics Problem: Project Feasibility Indicator Which alternative should be selected based on BCR? Assume i=7% and a study period of 10 years. Sensor A: First cost: Php 87,000 Annual M&O: Php 64,000 Annual Benefits: Php 160,000 Annual Disbenefits: --- Sensor B First cost: Php 38,000 Annual M&O: Php 49,000 Annual Benefits: Php 110,000 Annual Disbenefits: Php 26,000Which statement is not true with respect to estimating the economic impacts of proposed engineering projects? (a) Order-of-magnitude estimates are used for high-level planning. (b) Order-of-magnitude estimates are the most accurate type at about –3 to 5%. (c) Increasing the accuracy of estimates requires added time and resources. (d) Estimators tend to underestimate the magnitude of costs and to overestimate benefits.The California Forest Service is considering two locations for a new state park. Location Ewould require an investment of $3 million and $50,000 per year in maintenance. Location Wwould cost $7 million to construct, but the Forest Service would receive an additional $25,000per year in park use fees. The operating cost of location W will be $65,000 per year. The revenueto park concessionaires will be $500,000 per year at location E and $700,000 per year at locationW. The disbenefits associated with each location are $30,000 per year for location E and $40,000per year for location W. Use(a) The B/C method, and(b) The modified B/C method to determine which location, if either, should be selected, using aninterest rate of 12% per year. Assume that the park will be maintained indefinitely.
- If the capital budget limit is $120,000, the MARR is 10% per year, and all projects have a 10-year life, rank and select from the independent projects using the (a) PI measure, (b) IROR measure, and (c) PW at the MARR. (d) Are different projects selected using the three methods? First Net Income, IROR, PW at Project Cost, $ $ per Year % 10%, $ A −18,000 4,000 18.0 6,578 B −15,000 2,800 13.3 2,205 C −35,000 12,600 34.1 42,422 D −60,000 13,000 17.3 19,879 E −50,000 8,000 9.6 −843Q)1.The benefit-cost ratio of a project represents its time-valued benefit per unit investment (first cost) Select one: True FalseQutestion 3 Solve this problem using the incremental Benefit - Cost ration with, expected life of 10 years and rate of return of 10% Alternative A Initial cost $50,000 Annual maintenance cost $4,000 Estimated annual benefit $15,000 Alternative B Initial cost $30,000 Annual maintenance cost $3,000 Estimated annual benefit $9,000 a. Select B with B/C=1.14 b. Select B with B/C=1.41 c. Select A with B/C=1.14 d. Reject A with B/C=1.14
- Initial Cost: ($300,000)The Study Period: 15 yearsSalvage (Market) Value of the Project: 12% of the initial costOperating Costs in the first year: ($7,500)Operating Costs increase by 5% per yearBenefits in the first year: $30,000 Benefit increase by 13% per yearMARR: 9% per year 1)Determine the NPW, AW, FW of the project. 2) Is the Project acceptable? WHY?A municipal landfill and incineration facility is planned. (a) Name at least three benefits, three disbenefits, and three costs. What stakeholder viewpoints will need to be considered? (b) Burning landfill materials produces environmental and health issues. List the primary issues in each case.The city of Oakmont is interested in developing some lake front property into a sports park (picnic facilities, boat docks, swimming area, etc.). A consultant has estimated that the city would need to invest $3 million in this project. In return, the developed property would return $500,000 per year to the city through increased tax revenues and recreational benefits to the public. Whatwould the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 6% per year.
- When evaluating n large-scale engineering project, which of the following items is important?(a) Expected profitability(b) Timing of cash nows(c) Degree of financial risk(d) All of the aboveFor each of the following problems, (a) draw the cash flow diagram (as needed); (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem) by enclosing it within a box. A professional photographer who specializes in wedding-related activities paid $50,000 for equipment that will have a $2000 salvage value after 5 years. He estimates that his costs associated with each even amount to $80 per day. If he charges $300 per day for his services, how many days per year must he be employed in order to breakeven at an interest rate of 8% per year? NO EXCELThe following estimates (in $1000 units) have been developed for a security system upgrade at Chicago’s O’Hare Airport. (a) Calculate the conventional B/C ratio at a discount rate of 10% per year. Is the project justified? (b) Determine the minimum first cost that is possible to render the project just economically unjustified. Item Cash Flow First cost, $ 13,000 AW of benefits, $ per year 3,800 FW of disbenefits, year 20, $ 6,750 M&O costs, $ per year 400 Life, years 20