cee167-sp07-mt1-Ibbs-soln - CE167: Engineering Project...

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1 CE167: Engineering Project Management Spring 2007 Professor William Ibbs MIDTERM 1 SOLUTIONS Date: February 27, 2007 1. [15 points] 1.a. [3 points] A project is a temporary endeavor undertaken to create a unique product or service. Two characteristics make projects differ from operations: [1 points] Temporary vs. ongoing [1 points] Unique vs. repetitive 1.b. [4 points] Third-party beneficiary relationship: when each of two or more separate entities has a valid contract with a common third entity , they may be third-party beneficiaries of the contract between the “common” entity and the other noncommon entities. 1.c. [6 points] Give at least three of the following assumptions [2 points per assumption]: 1. Cash flows are known 2. Cash flows are in constant-value currency (dollars); that is, we ignore the effect of inflation and we assume technological stability 3. Interest rate is known. The rate of return i required by an organization is a function of its cost of capital, attitude toward risk, and investment policy. 4. Comparisons are made with before-tax cash flows 5. Comparisons do not include intangible considerations 6. Comparisons do not include consideration of the availability of funds to implement alternatives. 2. [20 points] (Note: Students can use the effective interest rate per year = (1 + 0.08 12 ) 12 – 1 = 0.083 = 8.3%) [3 points] The amount of the mortgage: P = $400K x 0.8 = $320K
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This note was uploaded on 12/01/2011 for the course CE 13972 taught by Professor Chow during the Spring '09 term at Berkeley.

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cee167-sp07-mt1-Ibbs-soln - CE167: Engineering Project...

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