KHWOPA ENGINEERING COLLEGE Q.4.

a) Use Gradient Formula to find the present equivalent of the

following cash flow diagram. [15]
VI SEMESTER ASSESSMENT - 2006 (EVEN)
i=10%
650
LEVEL:- B. E. (Computer/Elx. & Comm.) III/II 540
SUBJECT:- BEG495MS, Engineering Economics 430
320
FULL MARKS:- 80 210
TIME:- 03:00 hrs. PASS MARKS:- 32 100
Candidates are requested to give their answers in their own words as far as practicable.
Figures in the margin indicate full marks.
Attempt any FOUR questions. 0 1 2 3 4 5 6 7
Q.1. a) Consider a project that costs Rs.14762, with an indefinite life. If
the cash flow in years 1,3, 5, ...... (every odd year) is Rs.1000 b) What is the significance of payback period method? What are its
and the cash flow in years 2,4,6,.......(every even years) is 2000, drawbacks? [5]
find the rate of return of the investment. [15]
b) Explain different types of Economic systems. [5] Q.5. a) Recommend which alternative should be selected from the two
Q.2. a) A leading wireless communication device manufacturer is mutually exclusive projects given below. The MARR is 10%
considering three cost reduction proposals in its batch job shop End of Year Alternative 1 Alternative 2
manufacturing operations. The company already calculated rates 0 -40000 -50000
of return for the three projects along with some incremental rates 1 12000 10000
of return. If the MARR is 15 %, what system should be selected? [12] 2 12000 10000
Project Required investment Rs. Incremental Rate of Return (%) 3 12000 10000
A1 -420000 18 4 36000 10000
A2 -550000 20 5 10000
A3 -720000 25 6 10000
A2-A1 10 7 10000
A3-A1 18 8 10000
A3-A2 23 +40000(Salvage Value)
b) What are the drawbacks of IRR method? How does ERR method Use
help to eliminate some of these drawbacks? [8] * The repeatability assumption
* The co-terminated assumption with an eight year study period
Q.3. a) A piece of new equipment has been proposed by engineers to (Alternative 1 would not be repeated.) [12]
increase the productivity of a certain manual welding operation.
The investment cost is Rs.250000 and the equipment will have a b) Write short notes on (Any TWO): [8]
market value of Rs.50000 at the end of the study period of five • Mutually Exclusive, Independent and Contingent projects.
years. Annual income of the equipment after deducting • Direct and Indirect Cost
operating cost from revenue is Rs.80000. Is the project sound • Fixed Cost and Variable Cost
one? Use ERR method. MARR is 20% per year. [10]
b) Compute the value of 'F' in the following Cash Flow diagram. Some useful Formula:
Assume i =10% compounded annually. [10] 1  (1  i)N  1 N 
F P  G   
 i  i(1  i) (1  i)N 
0 1 2 3 4 5 6 16 17 18 19 20 n

300 300 300 300 300 300

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