QUESTION $1$: Cost Engineering

$1\mathrm{.}1.$ Define cost engineering and elaborate on its primary objectives.

$1\mathrm{.}2.$ Describe the following categories of costs and give examples for each category.

$1\mathrm{.}2\mathrm{.}1.$ Fixed costs

$1\mathrm{.}2\mathrm{.}2.$ Variable costs

$1\mathrm{.}3.$ Draw a neatly labelled diagram to indicate the relationship between fixed costs, variable costs, and total costs.

$1\mathrm{.}4.$ Distinguish between direct costs and indirect costs in the context of cost engineering.

$[20]$

QUESTION $2$: The time value of money

$2\mathrm{.}1.$ If you invest $R5,000$ today in a savings account that offers an annual interest rate of $6\%,$ how much will you have in the account after $5$ years?

$2\mathrm{.}2.$ You are considering two investment options. Option A offers a lump sum payment of R$10,000$ in $3$ years, while Option B offers a lump sum payment of R$12,000$ in $5$ years. Evaluate the two options and suggest the more valuable option, assuming a discount rate of $8\%?$

$2\mathrm{.}3.$ You are considering investing in a project that will generate cash flows of $R5,000,$ R$8,000,$ and R$12,000$ at the end of the next three years, respectively. If the required rate of return is $8\%,$ what is the present value of these cash flows? $(5)$

$2\mathrm{.}4.$ If an interest rate of $7\mathrm{.}5\%$ per year is applied, how long will it take your investment of R$150,000$ to grow to R $300000?$

$[20]$

$3$

EEC$3701$

Sept $2023$

QUESTION $3$: The valuation of projects

$3\mathrm{.}1.$ Define the Internal Rate of Return $($IRR$)$ and explain its significance in project valuation.

$3\mathrm{.}2.$ It is estimated that $R3\mathrm{.}2$ million will be required to implement a project. Once implemented, the facility that was established during the project will generate the following cash flows:

$\backslash$table$[[$EOY$,$Cash flow$],[1,$R$800000],[2,$R$800000],[3,$R$800000],[4,$R$800000],[5,$R$800000],[6,$R$800000],[7,$R$800000],[8,$R$800000]]$

$3\mathrm{.}2\mathrm{.}1.$ Describe the payback period method and its limitations in project evaluation.

$3\mathrm{.}2\mathrm{.}2.$ Determine the simple payback period for the project.

$3\mathrm{.}2\mathrm{.}3.$ Use Microsoft Excel to solve the discounted payback period if the MARR is $8\mathrm{.}3\%$

$(8)$

$3\mathrm{.}2\mathrm{.}4.$ Calculate the Net Present value at the end of the $7$ year period.

$(4)$