IE2308 Economics for Engineers

Excel Practice (10 Bonus Points)

Due: 12/8 (Wed), 11:59PM

Practice 1

A construction company bought a 180,000 metric ton earth sifter at a cost of $65,000. The company expects to keep the equipment a maximum of 7 years. The operating cost is expected to follow the series described by 40,000 + 10,000k, where k is the number of years since it was purchased (k = 1, …, 7). The salvage value is estimated to be $20,000. At i = 10% per year, determine the equivalent (1) present worth and (2) annual worth of the sifter using a spreadsheet.

Please enter the data in Excel using the following template:

=-40,000 – 10,000*A4

=-40,000 – 10,000*A4

=-40,000 – 10,000*A3

=-40,000 – 10,000*A3

=-40,000 – 10,000*A9 + 20,000

=-40,000 – 10,000*A9 + 20,000

Practice 2

Steel cable barriers in highway medjans are a low-cost way to improve traffic safety without busting state department of transportation budgets. There are two mutually exclusive alternatives: Cable barriers cost $44,000 per mile, compared with $55,000 per mile for guardrail. Furthermore, cable barriers tend to snag tractor-trailer rigs, keeping them from ricocheting back into same-direction traffic. The state of Ohio spent $4,972,000 installing 113 miles of cable barriers.

(a) If the cables prevent accidents totaling $1.1 million per year, determine the rate of return that this represents over a 10-year study period. Use a spreadsheet.

(b) Now, determine the rate of return for 113 miles of guardrail if accident prevention is $1.3 million per year over a 10-year study period.

(c) Conduct incremental ROR analysis to determine the more economical alternative. Assume the MARR is 10% per year.

Practice 3

Allison and Joshua are engineers at Raytheon. Each has presented a proposal to track fatigue development in composite materials installed on special-purpose aircraft. Which is the better plan economically, if i = 12% per year compounded monthly? Use PW analysis.

Allison’s Plan

Joshua’s Plan

First cost, $

-40,000

-60,000

Monthly M&O costs, $per month

-5,000

–

Semiannual M&O costs, $per 6-month

–

-13,000

Salvage value, $

10,000

8,000

Life, years

5

5

(Hint: Use an effective rate per month for Allison’s plan and an effective rate per 6-month for Joshua’s plan)

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