engineering economics
Project Description:
a garment manufacturing company makes 380,000 articles per year. each article takes 95 minutes of direct
labor at the rate of $9.00 per hour. the overhead costs are $7.50 per direct labor hour. the average price of
the ﬁnished product is $80 per article. a new machine will reduce the direct labor hour by 15 minutes per
article. what is the maximum amount the company should pay for the new machine if it wants to break even
by the end of the ﬁrst year?
an industrial engineer, who was formerly a real estate developer, wants to estimate the construction costs of
an apartment complex that he recently acquired. he gathered the following information:
cost element
studio units
one bedroom units
two bedroom units
three bedroom units
four bedroom units
central facilities and landscaping
if the total construction cost of the similar property was $2.5 million in the reference year, what is his
estimated construction cost in the current year?
the cost of construction for a hydrogen plant with a capacity of 7000 standard cubic feet per day (scfd) was
$10 million ten years ago, when the current construction cost index was 4535. if the index increased at an
average rate of 6.8% per year for the past ten years, what would a(n) 12,000scfd plant with a similar design
be expected to cost now? use the costcapacity exponent of 0.56.
an assembly task has a learning curve rate of 93% and reaches a steady state after 70 units with 15
manhours per unit. what is the estimated number of manhours required to complete the ﬁrst and the ﬁfth
units?
the costs of manufacturing horizontal ﬁxedmount barcode scanners are as follows:
cost elements
direct labor
material
overhead costs
cost rate
$24.5 per hour
$380 per 70 units
150% of direct labor
the production has a 89% learning curve applied to labor required, and the time to complete the ﬁrst unit
was 37 direct labor hours. determine the unit selling price based on the estimated time to complete the 100th
unit, if the company wants a proﬁt margin of 10% based on total manufacturing costs.
a u.s. auto maker plans to build two more plants in china as it aims to harness continued growth in asia.
the company estimates that it must make annual investments of $40 million over a 8year period. how
much would the company have to invest now at an interest rate of 3% per year to sufﬁciently provide for the
annual payments, if the ﬁrst payment will begin 4 years from now?
find the 7 uniform annual deposits that can provide a single withdrawal of $38,500, 2 years after the last
deposit is made at an interest rate of 5% per year.
susan made 4 uniform annual deposits of $1800 in a savings account that earned an interest rate of 2% per
year. her last deposit was made 7 years ago. what is the future value of her savings 13 years from now, if
she leaves the account untouched?
volunteer pharmaceuticals (vp) wants to set aside money in the r&d fund to seek supplemental drug
applications of its two newly developed drugs. instead of putting away $780 million now, vp plans to set
aside $a each year from year 1 through 40. what should the value of a be if vp expects to earn 7% per year
for the ﬁrst 5 years and 2% per year for the remaining years?
orlando international airport plans to extend passenger capacity of its existing terminal to accommodate its
forecasted growth. a new terminal would be needed once the state's busiest airport reached 40 million
passengers annually. based on current growth rates, orlando international should reach the 40 million mark
11 years from now. the expansion cost is expected to be $400 million. the airport service areas will also need
attention. these include passenger security checkpoints, ticketing lines, entering/exiting weaves, terminal
ramps, baggage claim, and baggage handling. improvements in these areas will cost an additional $240
million. how much does the airport need to set aside now to pay for these costs, if the company can earn
10% per year, compounded every 4 months.
find the equivalent of present worth (t = 0) of a uniform series of $4550 for 8 years, if the payment is made
every 12 months, starting 6 years from now. assume the interest rate is 12% per year, compound
continuously.
oregon ducks, inc. is considering buying licenses for 12 megahertz of wireless spectrum in the 700 mhz
range, which is suitable for delivering television to mobile phones. the 700 mhz signals can travel long
distances and more easily penetrate walls and other obstacles. the acquisition cost is $250 million. in
addition, because networks that operate in the 700 mhz range are less expensive to build than those in other
portions of the spectrum, ducks estimates annual costs of $25 million over the next 7 years and no salvage
value. during the same period, the company expects to generate annual revenue of $30 million by offering
television and video to mobilephone users. calculate the net present worth of this investment, and
determine the acceptability of the investment if the company's minimum attractive rate of return is 13% per
year.
as part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology,
gooddrugs inc. plans to set up a new division dedicated to developing biotherapeutic drugs and research
technologies. the company expects to pay $240 million for set up costs of its new division now and $12
million in operating costs each year for the next 13 years. the company estimates that the new division will
be able to generate annual revenue of $84 million 8 years from now. what is the net present worth of this
investment if the company's minimum attractive rate of return is 7% per year and the study period is 13
years? assume there is no salvage value. should they do the investment?
gobulls media is considering opening a new manufacturing facility to process and mail coupons to 660,000
households in the tampa bay area. the new facility will require an initial investment of $240,000 and an
annual operating cost of $22,000. it will have a $86,500 salvage value after 5 years. calculate the net present
worth of this investment if the company's minimum attractive rate of return is 5% per year, compounded
monthly.
highjump inc. is considering partnering with fieldfeet to open "athlete heaven" stores in the united states
as it seeks to expand its own retail network to better control how its products are displayed and sold. one
particular store will require an initial investment of $220,000 and an annual operating cost of $59,000. the
buildings and equipment will have a $62,500 resale value after 10 years. highjump expects the store to
generate annual revenue of $69,000. calculate the future worth of the investment in this particular store at
the end of year 10, and determine the acceptability of the investment if the company's minimum attractive
rate of return is 8% per year.
labor at the rate of $9.00 per hour. the overhead costs are $7.50 per direct labor hour. the average price of
the ﬁnished product is $80 per article. a new machine will reduce the direct labor hour by 15 minutes per
article. what is the maximum amount the company should pay for the new machine if it wants to break even
by the end of the ﬁrst year?
an industrial engineer, who was formerly a real estate developer, wants to estimate the construction costs of
an apartment complex that he recently acquired. he gathered the following information:
cost element
studio units
one bedroom units
two bedroom units
three bedroom units
four bedroom units
central facilities and landscaping
if the total construction cost of the similar property was $2.5 million in the reference year, what is his
estimated construction cost in the current year?
the cost of construction for a hydrogen plant with a capacity of 7000 standard cubic feet per day (scfd) was
$10 million ten years ago, when the current construction cost index was 4535. if the index increased at an
average rate of 6.8% per year for the past ten years, what would a(n) 12,000scfd plant with a similar design
be expected to cost now? use the costcapacity exponent of 0.56.
an assembly task has a learning curve rate of 93% and reaches a steady state after 70 units with 15
manhours per unit. what is the estimated number of manhours required to complete the ﬁrst and the ﬁfth
units?
the costs of manufacturing horizontal ﬁxedmount barcode scanners are as follows:
cost elements
direct labor
material
overhead costs
cost rate
$24.5 per hour
$380 per 70 units
150% of direct labor
the production has a 89% learning curve applied to labor required, and the time to complete the ﬁrst unit
was 37 direct labor hours. determine the unit selling price based on the estimated time to complete the 100th
unit, if the company wants a proﬁt margin of 10% based on total manufacturing costs.
a u.s. auto maker plans to build two more plants in china as it aims to harness continued growth in asia.
the company estimates that it must make annual investments of $40 million over a 8year period. how
much would the company have to invest now at an interest rate of 3% per year to sufﬁciently provide for the
annual payments, if the ﬁrst payment will begin 4 years from now?
find the 7 uniform annual deposits that can provide a single withdrawal of $38,500, 2 years after the last
deposit is made at an interest rate of 5% per year.
susan made 4 uniform annual deposits of $1800 in a savings account that earned an interest rate of 2% per
year. her last deposit was made 7 years ago. what is the future value of her savings 13 years from now, if
she leaves the account untouched?
volunteer pharmaceuticals (vp) wants to set aside money in the r&d fund to seek supplemental drug
applications of its two newly developed drugs. instead of putting away $780 million now, vp plans to set
aside $a each year from year 1 through 40. what should the value of a be if vp expects to earn 7% per year
for the ﬁrst 5 years and 2% per year for the remaining years?
orlando international airport plans to extend passenger capacity of its existing terminal to accommodate its
forecasted growth. a new terminal would be needed once the state's busiest airport reached 40 million
passengers annually. based on current growth rates, orlando international should reach the 40 million mark
11 years from now. the expansion cost is expected to be $400 million. the airport service areas will also need
attention. these include passenger security checkpoints, ticketing lines, entering/exiting weaves, terminal
ramps, baggage claim, and baggage handling. improvements in these areas will cost an additional $240
million. how much does the airport need to set aside now to pay for these costs, if the company can earn
10% per year, compounded every 4 months.
find the equivalent of present worth (t = 0) of a uniform series of $4550 for 8 years, if the payment is made
every 12 months, starting 6 years from now. assume the interest rate is 12% per year, compound
continuously.
oregon ducks, inc. is considering buying licenses for 12 megahertz of wireless spectrum in the 700 mhz
range, which is suitable for delivering television to mobile phones. the 700 mhz signals can travel long
distances and more easily penetrate walls and other obstacles. the acquisition cost is $250 million. in
addition, because networks that operate in the 700 mhz range are less expensive to build than those in other
portions of the spectrum, ducks estimates annual costs of $25 million over the next 7 years and no salvage
value. during the same period, the company expects to generate annual revenue of $30 million by offering
television and video to mobilephone users. calculate the net present worth of this investment, and
determine the acceptability of the investment if the company's minimum attractive rate of return is 13% per
year.
as part of a broad effort to invigorate its pipeline and move more aggressively into biotechnology,
gooddrugs inc. plans to set up a new division dedicated to developing biotherapeutic drugs and research
technologies. the company expects to pay $240 million for set up costs of its new division now and $12
million in operating costs each year for the next 13 years. the company estimates that the new division will
be able to generate annual revenue of $84 million 8 years from now. what is the net present worth of this
investment if the company's minimum attractive rate of return is 7% per year and the study period is 13
years? assume there is no salvage value. should they do the investment?
gobulls media is considering opening a new manufacturing facility to process and mail coupons to 660,000
households in the tampa bay area. the new facility will require an initial investment of $240,000 and an
annual operating cost of $22,000. it will have a $86,500 salvage value after 5 years. calculate the net present
worth of this investment if the company's minimum attractive rate of return is 5% per year, compounded
monthly.
highjump inc. is considering partnering with fieldfeet to open "athlete heaven" stores in the united states
as it seeks to expand its own retail network to better control how its products are displayed and sold. one
particular store will require an initial investment of $220,000 and an annual operating cost of $59,000. the
buildings and equipment will have a $62,500 resale value after 10 years. highjump expects the store to
generate annual revenue of $69,000. calculate the future worth of the investment in this particular store at
the end of year 10, and determine the acceptability of the investment if the company's minimum attractive
rate of return is 8% per year.
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Project Stats:
Price Type: Negotiable
Expired
Total Proposals: 4
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