ENMA 302 – ENGINEERING ECONOMY Take-home Final Examination

ENMA 302 – ENGINEERING ECONOMY

 

Take-home Final Examination

 

The ODU honor system applies to the take-home problems for the final examination. The examination will be worked in an MS Excel workbook with one worksheet for each problem. The file name will be structured Lastname_FI_final_ENMA302.xls and will be submitted by e-mail (tcotter@odu.edu) no later than Sunday, August 7, 2016, 4:00 PM. Please include your name on each worksheet. Each student’s work will be her or his own; no working together, sharing, copying from current or prior semester’s students’ workbooks, etc. Reference the ODU Catalog. Each question is worth 5.0 of the 25 total points. Each question will be awarded 4.0 points for correct problem structure and use of correct financial functions and 1.0 point for obtaining the correct answer.

 

1. Fast PC, Inc., is considering a new automated assembly line to automate assembly of tablets. The new line can be installed for $12,450,000 today and will have a life of 7 years until technological obsolescence. At the end of its 7 year life, its components will have a salvage value of $1,200,000, and it will cost $356,250 to have the line removed. The line will produce $5,275,000 additional sales capacity per year due to productivity gains. Additional technical labor cost will be $1,305,000 per year and operating and maintenance costs will be $442,500 per year. The company’s MARR for this project is 18.0%. Based on net present value estimate, do you recommend installing the automated assembly line? What is the equivalent uniform annual worth and IRR of the project?

 

2. A firm is considering an investment in a robotic transfer cell needed for an eight (8) year project life. Three alternatives are under consideration. The firm uses an 18% MARR. The cash flows of the alternatives are as follows:

 

Cash Flow		A			B			C
Initial cost	$	20,800		$	14,700		$	23,250
O & M costs / year	$	2,650		$	2,750		$	1,100
Annual cost savings	$	7,700		$	7,500		$	6,500
Salvage value	$	3,825		$	4,125		$	5,600
Technical life – years		8			4			8

 

Using incremental rate of return analysis, determine which alternative the firm should select.

ENMA 302

ENMA 302