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Unformatted text preview: CE 167: Engineering Project Management Spring 2010 Quiz 1 Your Name: GENERAL INSTRUCTIONS While the exam is being handed out: 1. 2. 4. Read all instructions on this page carefully.
You will ﬁnd interest rate tables at the end of this quiz. Do not look at the other exam pages and do not start to work yet. Wait until all students
have an exam in hand and Kristen says you may proceed. Write your name in the upper—right corner of this page. Once you have been allowed to start: 5. 10. ll. '12. Write your name in the upper right corner of pages 2 through 11. Read the exam all the
way through before starting to write answers to questions. Pace yourself so you get to
answer all questions. Partial credit will be given—draw your cash ﬂow diagrams! To receive full credit, your work must be neat, orderly, and easy to follow. Think before
writing so as to make your points directly and concisely. State all assumptions. Any answer requiring a calculation or rational process must show the method of arriving
at the answer. The answer alone is not sufﬁcient. This is a closed—book examination but you are allowed to use a calculator. If you do not have enough space for answering a question where space is provided,
please continue on the back side of the page you were writing on. Write that you are
doing so next to the question. If you ﬁnd it more convenient to take the staple out from this packet, go ahead and do
so. When you turn in your exam, put all pages back in order and staple them back
together (a stapler will be available). In case you have questions for clarification you may ask Kristen or William privately.
Raise your hand to call their attention; do not get up! This quiz consists of pages 1 through 15, there are six (6) main problems and they have
several parts. The total point value is 100. It is your responsibility to check that all pages
are included and tuined in, in the proper order and stapled together. Tuesday, February 23, 2010 I 1 CE 167: Engineering Project Management Spring 2010
NAME: 4L§ Problem 1 (12 Points): Vocabulary Deﬁne the foliowing terms. Provide an example that is relevant to the Architecture—
EngineeringConstruction Industry. 1.1. Time Value of Money (4 points): 1N1 mom mom/o} L3 WOW (1. mm WW
W25 Mm oarsom mm mm Wimpﬁww
mm, 80mm ‘HW gawk). WW6? If gout. mad $100M for a 0/0meng New on 5 {gm/s, L40“, cow tux/12% was .man $100 M Maj MdeWmWEﬁrm/L Utfb worm MWMW 1.2. Offor (as a part of a Contract) (4 points): of (Mb? or +0 6W HMO W
W mm W mev 0v WWW W momma ' ‘ “W133 W WWSWMOL ‘ abackde awe/manna, may
3m W WWH. _ ‘ ‘ OW [3 to WW 4 SS To campus 09 ‘ Ufwo’o’p‘fGYOtSﬁ—U €awofW,
mbmﬂai i W‘LU bw‘ld 0L Wasz far WWWW Jain ’LV Feb 13 for a cow of $50,000. wqp/Lagt my W12 VDOWL
1.3. Proﬁt Life of an Asset (4 points): Tm ow ovm WWW (M awr CAN eat/m. 01/ W W”. A W CL Ukj’lm Of \O for 2 cows sm—vawm CL gauge CE 167: Engineering Project Management Spring 2010 /
NAME.i_tfﬁ___ Problem 2 (20 points): Comparison of Alternatives A university is considering two new classroom buildings, each with the following costs: Classroom Building A Classroom Building B Initial Cost $100 million $120 million
Annual Operating Cost $0.5 million $0.25 million $15 million $ 15 million Annual Benefit (room for
more students, able to attract
better faculty) Lifetime 3 6 years $ 1 0 million 40 years
$15 million ' Salvage Value Assume the MARR is 10%. As a design consultant working with the university, they have asked you to help them
determine which building project to fund. 2.1. Draw the cash ﬂow diagrams for each alternative. You may show the ﬁrst three years
of the cash ﬂow diagram and the last three years of the cash ﬂow diagram (6 points): 2.2. Due to changes in the building technology over the buildings’ lifetimes, you
determine that the data presented above is NOT repeatable. What study period,
reported as it years, do you suggest we use for our analysis and why (4 points)? in“: ac. Wt n an multin. WVW» Van/M. of So we ow not want To mum/1 a W100,
Y\/ Wait/l W WiOlJm/V8 léhégb Tuesday, February 23, 2010 3 CE 167: Engineering Project Management Spring 2010
NAME: 2.3. You explain your approach for comparing the alternatives over the study period of a
years (found in 2.2), but the university informs you they have their own methodology
for comparing alternatives. They perform present worth analysis considering a 10—
year lifetime (10 years is their near—term planning horizon). They provide you the
following information about the salvage values of each project after 10 years: Salvage Value at 10 years
Classroom Building A $62.5 million Classroom Buiiding B $81 million Show your present worth analysis, state which proj eat you advise the university to fund,
7 and state your rationale (10 points): 7 .:,, ‘.C¥’\6M.
iWCQ “may (PIA, memo)
tea M r W, totem) imam « W: m (Wm WWW L W) sum new (can)
+ am in (943355> : $l, set/i Tuesday, February 23, 2010 4 CE 167: Engineering Project Management Spring 2010 . ,
NAME: Problem 3 (20 points): Comparison of Alternatives,
Sensitivity Analysis, and Internal Rate of Return (IRR) A general contractor plans to buy one of two new cranes. The Picker costs $500,000 and has a
lifetime of 5 years. At the end of 3 years, it will need a new operator elevator, which costs
$25,000, though this value is somewhat uncertain. At the end of 5 years, the Picker is expected
to have no salvage value. The Grabber costs $600,000 and also has a lifetime of 5 years. The
original parts of the Grabber will last throughout its lifetime. The Grabber has a $75,000
salvage value at the end of its life. Assume the MARK is 8%. 3.1. Which crane is preferred, the Picker or the Grabber? Why (5 points)? tragedy“; W
p $00 *5 sea in: )‘ 3.2. What cost of erator lator wuld revere yor decision from 3.1 (5 points)? ($60010  Cos (wile) VWCan)”; tiara e
$60019, «243$ £0054“) mamM): .r
/ Tuesday, February 23, 2010 5 CE 167: Engineering Project Management Spring 2010
NAME: K g Problem 4 (20 points): Annual Worth Comparison It costs $1 million to retroﬁt an operational ice arena for use in the Olympics. Fuel, water, and
minor maintenance of the ice (e.g., smoothing ice with a Zamboni) are estimated to cost $3 5000 for each day the arena is used. The operational costs of the arena are $75,000 every
300 days. Major repairs to the spectator seating after 600 days are expected to cost $400,000.
The arena is expected to last 1800 days, after which it will have a salvage value of $300,000. The owner expects the arena to be used 300 days/year. Assume an interest rate of 15%. 4.1.
Ufitlrvw «to constante Calculate the annual cost of the $1 million retroﬁt (5 points). lYOOelalglgetyi/W :— e gr. 08?:34‘3‘0 Ana/fro ‘3 $1M CM?» ‘9‘“ (a) g. em brown)
5 1762104" M/ _ Aral—r0 . Mm 4.2. Calculate the annual cost of the fuel, water, and minor maintenance of the ice (5
points). P‘iwmm 3 $550.00/dat}; Swallow
Ir 4% loaeow U29 4.3. Calculate the annual worth of the salvage value (2 points). Afﬂer 9 EOOJOWCHE E31320) . EMC ulV‘rZ‘i’) Tuesday, February 23, 2010 7 .Izecre‘ar
i$tt$¢bn~§ WWW“ ‘. CE 167: Engineering Project Management Spring 2010
NAME: 3.3. If the Grabber produces an annual income of $140,000, what is the RR 0f the
Grabber (8 points)? Mm: @WCacuoWﬁ ~$to00b * SW (WWW/a) + may at n 8520
Rig/M“ ‘?W(®WW)‘ 'Sww Wilton (PMS) 1* W~ “(F7 b
0n " . A _ ’ x
I « 0 ~ch emu/1): $500K )r $ Home £61615) + $96 \L Webb)
ML MW‘E :ﬂmomﬁb _ ‘ A ; 0‘
.715“) 'r bio > WCQWW) ‘: "$ bOOL ’r 9} mom,» Tuesday, February 23, 2010 6 CE 167: Engineering Project Management Spring 2010 .
NAME: 4.4. What is the annual cost of Operations for the ice arena (1 point)? 4.5. Caleuiate the annuai cost of the spectator seating repairs (5 points). $430]; i‘tCOib
Am 3 Ay‘wq' 1%“ J" Asewargx‘w.
" [$400M F/r, 15%,29] (“It [5%) a) + [Moot (PIP, [Sm/Q] ( “tr, 1.3%, (a) : [MDOLCJWW 626942?) 1'— CHUCK (5113)] (92.4942?) e “9 ML + $bO4ﬂrk: =~ We a? W: 4.6. How much should the owner of the ice arena 0 arge, per day of use (2 points)?
_ _ ' _  in _' ( CoSt mg I coat/05L (33%;?) I ‘1 P‘tej’ro ’* f‘fwwn 1‘ Ange/1* J Ail/W $74”? * 31mm +$1t§¥~v Want“ $3‘tL I Tuesday, February 23, 2010 8 CE 167: Engineering Project Management Spring 2010 K NAME: £5 ﬁﬁ Problem 5 (8 points): Interest Rates You are planning to open anew savings account at Bank A or Bank B. Bank A offers you a
nominal interest rate of 12%, compounded semi—annually. Bank B offers you a nominal interest
rate of 10%, compounded quarterly. 5.1. What is the effective interest rate at Bank A (4 points)? . ,  '1‘ was/ti
H ban? :0 "‘ my” 64 it???” / U51
1* FW ﬂow/L30 a W
Le“ ’(“aﬁhiwtr " ﬂea rtit “viAD“! '3 {ﬁts} 5.2. What is the effective interest rate at Bank 13 (4 points)? {hm yWW/m
#‘PULI'OCMILXL —'“ ‘ Tuesday, February 23, 2010 _ 9 CE 167: Engineering Project Management Spring 2010
NAME: Problem 6 (20 Points): MACRS Depreciation and Tax A new tractor has a useful life of 3 years. This tractor costs $12,000. The tractor is expected to
generate $10,000 in revenue each year for its 3—year life. At the end of its life, it will have a
salvage value of $4,000. The company that would be purchasing this tractor expects to pay a
40% tax rate and has a MARK of 10%. Is this tractor worth buying? 6.1. Draw the cash flow diagram (2 points). .A‘Xftl” _ 6.2. The company accountant provides you with most of the depreciation charges, but
forgets to give you the ﬁrst year Depreciation Charges and the Book Values. Fill in
the missing Depreciation Charges and Book Values in the table below (7 points): MACRS Double Declining MACRS Straight Line Balance Depreciation Depreciation Charge,
Charge, DCDDB DCSL
DCi : BVi*C/N DCjH I BVi/(Nl+.5)
Where N : lifetime of asset, C = depreciation rate Book Value, BV $12,000 Tuesday, February 23, 2010 10 CE 167: Engineering Project Management Spring 2010 ’
NAME: 6.3. Calculate the taxes you will need to pay each year and show these on your cash flow
diagram. You may assume that Depreciation Charges accrued in Year 4 are treated as
tax deductions in Year 3 (6 points). Revenue Salvage Db Taxwo‘lb “(Mm
am, $4000 $9000 $2400
El: \0 Y2 $65723 agave3b} Si: lib?
‘1; to L fiat» $2100? em aaaiiaoeaﬁ 4553
C“? \aﬂ‘isar 3% A Vt
W" W“ "Mint
0..
are 6.4. The accountant provides you with the following cash flow diagram. Based on this
cash ﬂow diagram, would you recommend purchasing the tractor? Show your
rationale (5 points). $7,600 $8,133 $4,000 $12,000  I " i ' ' + J?l¢€i?1l0ﬁ°)a¥ LPWCJWchov/D '4 “i? ma i am it, (Primal) at) 7 “32% t‘lﬂla'iatﬂoci 0W3. \aect‘szecgitaaaLmeie) Tuesday, February 23, 2010 1 1 l’if, [0% a) ...
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