engineering economics (model paper)

8/13/2019 Engineering Economics (Model Paper)

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Engineering EconomicsFull marks: 70 Time: 3hrs

Group A

(Answer all question)

1. Tick the correct answeri. EMI stands fora. Easy monthly installments

b. Equal monthly installmentsc. Equivalent monthly installmentd. Easy money installment

ii. Life of a machine is either 6 years or 9 years. If probability of 6 years is double thatof 9 years. Find the probability of 9 years

a. 0.67b. 0.33c. 0.5d. 0.23

iii. Which of this assets dont depreciatea. Machineryb. Landc. Office Equipmentd. Factory Shed

iv. In inflation the value of moneya. Remains constantb. Increasesc. Decreasesd. None of the above

v. In breakeven pointa. Revenue > Costb. Revenue < Costc. Revenue = Costd. None of the above.

vi. A machine worth Rs100,000 is purchase by paying Rs20,000 down payment and 12monthly installments of Rs8000 each. The book cost at time of purchase is

a. Rs100,000b. Rs 8000c. Rs 80,000d. Rs12,000

vii. What is the relation between Marginal Cost (MC) and Average Cost (AC) curvesa. AC cuts the MC from belowb. MC cuts the AC from belowc. AC and MC dont cut each otherd. There is no fixe relationship


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viii. In a decision tree arrows coming out of which node have probabilitiesa. Decision Nodeb. Random Nodec. Bothd. None

ix.

In a balance sheet Capital isa. Assetb. Stockc. Liabilityd. None of the above

x. In a probability distribution sum of the probabilities is equal toa. 0b. Greater than 1c. Less than 1d. 1

Group B(Answer any 3 questions)

2. An aqueduct is needed t bring water into the city. It can be built at a reduced size now forRs3 lakhs and enlarged 25 years later at Rs 3.5 lakhs. The other option is to construct thefull size aqueduct for Rs 4 lakhs. Use Present Worth to find the better choice. [Given i =

6%][5]

3. Initial Cost = Rs 25,000, I = 10 %, Find E(PW)Profit (Rs) 5000 8000 10000

Probability 0.3 0.6 0.1

Life (Yrs) 6 9

Probability 0.67 0.33

[5]

4. Find the better choice by using Present Worth [Given I = 8 %]Machine Initial Cost Benefit / Year Salvage Value Life

A 2,000 450 100 6 years

B 3,000 600 700 6 years

[5]

5. Define break even point. A shopkeeper plans to sell electric switches. He buys theswitches for Rs10 / piece. And sells them at Rs15 / piece. If the rent of the shop isRs3000 / month. Find the break even quantity and sales.

[2 + 3 = 5]

6. Discuss the causes of inflation. Suppose a bank pays 5.5 % compounded annually. Ifinflation is 2 % per year find the real interest rate.

[2 + 3 = 5]


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Group C

(Answer any 3 questions)

7. a. Life of a dam is 50years. i = 5 %. What should be the optimum height of the dam. Height (Mts) Initial Cost P(Flood) Damage/year (if flood)0 0 0.25 800,000

20 700,000 0.05 500,000

30 800,000 0.01 300,000

40 900,000 0.002 200,000

b. Initial cost of a machine is Rs250,000. Maintanance cost is Rs120,000 / year for

the first five years and then increses by Rs20,000 every year. If rate of interest is

10 % compounded annually find the year in which the machine will be replaced.

[7 + 8 = 15]

8. a. Find the better choice by using Future Worth [Given i = 12 %]Machine Initial Cost Return / Year LifeA 40 Lakhs 8 Lakhs 4 Years

B 45 Lakhs 10 Lakhs 4 years

b. Find the Equal Annual Worth (EAW)

Initial Cost = Rs40,000

Salvage Value = Rs5,000

Revenue / year = Rs10,000

Life = 10 years

i = 15 %

c. A company wants to set up a reserve which will help it to have an annual amount

equivalent to Rs 100,000 for every year for the next 20 years towards its

employee welfare measure. Find the single payment that has to be made now.

[Given i = 15 %]

[5 + 5 + 5 = 15]

9. a. Switch from declining balance to straight line depriciation in MACRS. The valueof the asset is Rs10,000. The expected salvage value is 0. It is a seven year

property Determine the appropiate depriciation table.

b. A state government is planning a hydroelectric project for a river basin . Inaddition to the production of electric power, the project will provide flood control

, irregation and recreation fecilities. The estimated benefits and cost that are

expected to be derived from the project are as follows:

Initial Cost = Rs80,000,000

Annual Power sales = Rs6,000,000

Annual flood control savings = Rs3,000,000


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Annual irrigation benefit = Rs5,000,000

Annual recreation benefit = Rs2,000,000

Annual maintanace cost = Rs3,000,000

Life of projet = 50 years

[9 + 6 = 15]

10.a. What is Estimation; discuss the different types of estimates . What are thedifficulties in estimating?

b. Discuss the components of a balance sheet.

c. What is the role of Engineering Economics analysis?

[5 + 5 + 5 = 15]

11.Compare and contrast (any 3)a. Marginal Cost vs Average Costb. Book Cost vs Cash Costc. Present Worth vs Future Worthd. Straight line depreciation vs declining value depriciation

[5 X 3 = 15]

engineering economics (model paper)

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