QUESTION ONE

(a) i. What do you understand by the term "Engineering Economics"?

ii. describe what you understand by "Time Value of Money

(b) A N 2.5 million loan was originally made 8% simple interest for 4 years. At the end of this

period the loan was extended for 4 years, without the interest being paid, but the new interest

rate was made 10% compounded semi - annually, How much should the borrower pay at the end

of the 8 years? Draw the cash flow diagram.

QUESTION TWO

How much money should be deposited in a bank paying interest at the rate of 10% per year

compounded monthly so that at the end of 5 years the accumulated amount will be N50,000.00

The Federal Government of Nigeria has agreed to pool road tax resources already designated for

bridge refurbishment. At a recent meeting, the engineers estimated that a total of N 600,000.00

will be deposited at the ends of next year into an account for the repair old and safety

questionable bridges through out the area. Further they estimate the deposit will increase by

N100,000 per year for only 10 years thereafter, then ceases. Determine the equivalent:Present worth

(i) cash flow diagram and Present worth

(ii)annual series amounts, if the public funds earn at a rate at a rate of 5% per year

QUESTION THREE

a Define the following terms used in engineering economics:

(I)Effective interest rate

(ii)Nominal interest rate

(iii) Compounding period and

(iv)Compounding frequency

b. You have just decided to invest N 100,000 in one booming business of rice production in Edo

State. What will be the future value of this amount when invested for;

(i) 5 years at 5% compounded annually

(ii) 5 years 7 months at 6% compounded monthly

Question Four

a) An industrial firm uses an economic analysis to determine which of two different machines to

purchase. Each machine is capable of performing the same task in a given amount of time. Assume the

minimum attractive rate of return is 8%

Using the following data in the analysis

Machine X Machine Y

Initial cost $5000 $10,000

Estimated life. 7 years. 13 years

Salvage value none $4000

Ann. maintenance cost $150 $175

a ) What is the approximate equivalent uniform annual cost of machine X and Y?

(b)Which, if either, of the two machines should the firm choose?

(ii) The initial cost of a proposed project is N40M, the capitalized perpetual annual cost is N12M, the

capitalized benefit is N49M, and the residual value is NO. What is the benefit cost ratio for the proposed project

Question FIVE

(I)There are two alternatives for purchasing a concrete mixer. Both the alternatives have same useful life. The cash flow details of alternatives are as follows; Alternative 1: Initial purchase cost N350,000, Annual operating and maintenance cost N20,000, Expected salvage value= N125,000, Useful life=5 years. Alternative 2: Initial purchase cost= N250,000, Annual operating and maintenance cost N35,000, Expected salvage value= N70,000, Useful life ,5 years. If the rate of interest is 101% per year. Using present worth method, find out which alternative should be selected?

(ii)Suppose you will retire in exactly one year and want an account that will pay you N30, 000 a year for thenext 15 y cars. (The fund will be depleted at the end of the fifteenth year.) Assuming a 6% annual effect interest rate, what is the amount you would need deposit now?

Question Six

(I) What do you understand by the term "Cash Flow"2

(ii) . To draw a standard cash flow diagram, it requires the use of conventions. List the conventions.

(b) Fremallen ventures Nigeria limited requested a loan of N1 million for 3 years at 10 % simple interest per year from First City Monument Bank. Determine the interest earned and the accumulated

amount.

(C) What is arithmetic gradient series? Support your response with cash flow diagram