ass2 - 1 Carleton University Department of Civil and...

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1 Carleton University Department of Civil and Environmental Engineering ECOR3800B Engineering Economics ASSIGNMENT 2 Due Date: Assignment 2, Monday, March 1, 2010, 12:00 Noon L ocation : Filing cabinet near the entrance to the Civil & Environmental Wing of Mackenzie Engineering Building 1. The CAM Company has to evaluate the following requests for expenditures. Proposal Initial Investment Uniform Annual Cash Flow Expected Life (Yrs) A $10,000 $2,500 12 B 19,000 3,500 15 C 5,000 1,000 10 D 20,000 4,500 10 (a) Rank the economic attractiveness of the proposals using the present worth index (i.e. (NPW/Initial Investment)x100) with an MARR of 8%. (b) How much money will be required to fund all feasible proposals? 2. Use the data given for question 1 and decide which project(s) would you select if a total of $44,000 were available? Unused funds can be invested at 8%. 3. A used old model testing machine was donated to a University by a company one year ago. It is expected that this machine will continue to serve its function for ten more years provided that a maintenance agreement is signed with another firm requiring 10 yearly payments of $9,000 each, with the first payment made now. A new model can be leased for ten years. The terms of lease include maintenance. For leasing the new model, a payment of $40,000 is due now and $40,000 will be due in 3 years. Should the old model machine be replaced now, at MARR = 10%? (a) Use incremental PW method. (b) Use incremental IRR method.
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