ENGINEERING ECONOMICS & COSTING ASSIGNMNET

1. Suggest which machine should be purchased at 15% interest rate based on annual
equivalent worth method.
Machine A

Machine B

First Cost

Rs.3,00,000

Rs.6,00,000

Life period

4 years

4 years

Rs.2,00,000

Rs.3,00,000

Rs.30,000

Rs.0

Salvage value
O & M Cost

2. Two mutually exclusive projects are being considered for investment. Project Al requires
an initial outlay of Rs. 30, 00, 000 with net receipts estimated as Rs. 9, 00, 000 per year
for the next 6 years. The initial outlay for the project A2 is Rs. 60, 00, 000, and net
receipts have been estimated at Rs. 15, 00, 000 per year for the next 6 years. There is no
salvage value associated with either of the projects. Using the benefit cost ratio, which
project would you select? Assume an interest rate of 10%.
3. The annual maintenance cost of a small office building is Rs. 1,200 for the first year and
increases by Rs. 100 each year thereafter. The life of the building is assumed to be 25
years; the interest rate is 9 percent compounded annually; and the payments can be
assumed to be made at the end of the time periods. What is the present worth of the
maintenance costs?
4. A company is considering purchasing a truck for Rs.80, 000. Assume this purchase saves
the company Rs.12, 000 each year for the 10 year life of the truck, and the salvage value
of the truck at the end of this ten year period is $30,000. What is their rate of return on
this investment?
5. What do you mean by Depreciation? What are the causes of depreciation & methods
adopted for calculation of depreciation? DBM & FIM.
6. Compare between NPW & IRR methods.