Upon completion of this case study report, you should be able to: 1. apply engineering economic decision-making

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Question:

Upon completion of this case study report, you should be able to: 1. apply engineering economic decision-making process, 2. prepare a detailed financial analysis report, and 3. provide a professional recommendation on the finding of the study.
Current Business Report Emergency Power Sdn. Bhd. (EPSB) supplies back-up power to commercial sector, when the commercial companies, municipals and private functions require back up power for their activities. The company is equipped with 300 kW generator which is connected to a trailer which enable the diesel generator to be moved to the locations where it is required The company has been on the business for the last two years. The diesel is manned by two electricians and one driver. Monthly, the company received request for power back-up for about 20 days with each service range between 8 to 12 hours. On the average, the total of 6,000 kWh provides to clients monthly. The investment cost for the trailer and accessories is RM600,000. The investment cost is sourced from bank loan to be recovered within 3 years with interest rate of 1 0% per annum. The demand for the back-up power has been on an increase. It is estimated that the direct cost from diesel 50 % of the revenues. The annual revenues for the company are shown in TABLE 1 , where FY2018/2019 are actual values while FY2020 is a projection.
TABLE 1: Emergency Power Supply Original Business Revenues (annual
statement of income)

	fyp2018	fyp2019	fyp2020
Revenue (RM) Power sales	780,000	780,000	820,000
Direct Cost (RM) Diesel	390,000	390,000	410,000
Gross Profit (RM)	390,000	390,000	410,000
Gross Margin (%)	50	50	50

Preparation of Business Expansion Brief The company needs your assistance in preparing a business brief to highlight the health of the business and the merit to expand business venture. For the case study provided, you are expected to study and prepare a project brief that must include (but not limited to) the following steps of economic analysis: 1. Summary of project design requirement and constraints.

2. List and discuss project completion alternatives and cost impact.

3. State assumptions and project constraints.

4. Tabulate all costs and benefits expected.

5. Report on comparative analysis of potential options available

6. Identify critical factors that can influence decision through sensitivity analysis

7. Provide recommendation of the most attractive options and indicate potential areas of concern.

More info:

Business Expansion Plan EPSB plans to expand the company business. The plan is to procure another set of diesel generator and a trailer. The estimated investment required is RM650,000. The investment cost as bank loan to be recovered within 3 years with interest rate of 1 0% per annum. Here, EPSB needs to know how good business is (effective rate of return) how much the business is worth (if the company MARR is 15%). The projected annual revenues and operation costs are shown in TABLE 3.

TABLE 3: Projected EPSB New Business Revenues (annual statement of income)

	FY2021	FY2022	FY2023
Revenue (RM) Power sales	1,170,000	1,236,000	1,300,000
Direct Cost (RM) Diesel	585,000	618,000	650,000
Gross Profit (RM)	585,000	618,000	650,000
Gross Margin (%)	50	50	50