EGG 307 Sample Exam 3 Solutions

EGG 307 Sample Exam 3 Solutions - University of Nevada Las...

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University of Nevada Las Vegas EGG 307: ENGINEERING ECONOMICS PRACTICE EXAM Third Midterm Exam (Closed Book/Notes) Duration: 75 minutes Instructions : Please attempt all four questions using both sides of the exam paper provided. Read the questions carefully and show your work clearly . Full credit to any part of a question will be given only if all the necessary steps are clearly shown and the answer is correct. Unless stated otherwise, all periodic cash flows occur at end-of-period. Use of cash flow diagrams will significantly help you in interpretation and understanding of the questions . GOOD LUCK !! Question 1 (25 points) A decision is being made on an old valve outlet for a small dam. There are three alternatives being considered, each with a service life of 10 years, namely: (a) Leave the valve as is: the probability of a major breakdown in any year is 40%. No salvage value at end of service. (b) Repair the valve with a one time initial repair cost of $30,000 with no salvage value: the probability of a major annual breakdown is reduced to 5% . (c) Buy a new valve with one time initial cost of $50,000 with a salvage vaue of $25,000 and the probability of major annual breakdown is reduced to only 1% . If the cost of fixing a breakdown if it happens in any year is $20,000, recommend the most economical alternative. Use a MARR of 15%. Question 2 (25 points)
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EGG 307 Sample Exam 3 Solutions - University of Nevada Las...

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