engineering economics project
DESCRIPTION
A Sample of an Engineering Economics Project, with some calculations, for Present Worth, Revenues and other things.TRANSCRIPT
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Contents List
Abstract and Introduction............................................................3
Initial Data....................................................................................4
Calculations..................................................................................6
Cash Flow.....................................................................................10
Present Worth Analysis................................................................11
Conclusion...................................................................................14
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ABSTRACT
We as economic analysts are evaluating thefeasibility of establishing a new company. B-Safe is a company focusing on the aviation safety belt industry. We are going to calculate if this business plan of ours can be accepted or not. We will use the Present Worth method to conduct our analysis.
B-SAFEIntroduction
B-Safe is a company aspiring to launch itself as an aircraft seatbelts manufacturer. They possess a unique ambition to be the first provider of seatbelt airbag systems and a range of other safety restraint products for the aerospace industry. They want to be one of the most advanced companies for aviation safety in the world.
They intend to manufacture products used in both commercial and general aviation, in civilian applications, and that can be found in automotive child seats too. Protecting passengers is a priority to B-Safe and hopefully their products should help move millions of people and countless tons of cargo safely and securely in the air and on the ground. These are some of their potential products:
Seatbelt Airbag System Cargo Containment Solutions Child Seat Restraints Aviation Passenger & Crew Restraints Aircraft Interior Safety
B-Safe is focused and committed to providing quality products and timely, cost-effective solutions to customers worldwide.
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Initial DataCost
Capital Investment = $80,000,000
Utilities
Name Unit Consumption/Hr Cost/ UnitElectricity KWh 300 $0.12Water Cm^3 1667 $0.001
Escalations = 5%
Operations
Name Unit Consumption/Hr Cost/ UnitScientist Hour 10 $150Worker Hour 12 $20Engineers Hour 12 $70Securities Hour 24 $15
Raw Materials
Names Unit Consumption/Month Cost/UnitAluminium Ton 10 $1800Steel Ton 10 $480Nylon Kg 5000 $3.5Nitrogen Lt 100000 $10Polyesters Ton 5 $470
Escalations: 1.5%
Miscellaneous
Names Unit Consumption/Year Cost/unitMaintenance Machine 5 $20000Fuel of Transportation $30000
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Revenues
Marginal Cost
Marginal Revenue Expected Revenue Product
Airframe Barrier Nets/net $700 $1,500 $1,200,000 800Seatbelt Airbags/seat $350 $800 $4,800,000 6000Child Aviation Restraints System-
CARES $250 $800 $1,800,000 2250Crew Restraints $200 $500 $2,000,000 4000Lightweight Seatbelt $300 $700 $2,800,000 4000Commercial Passenger Restraint $200 $600 $4,200,000 7000Business Jet Restraint $400 $800 $6,000,000 7500Rotorcraft Jet Restraint $300 $600 $2,400,000 4000Ground Vehicle Restraint $250 $500 $2,200,000 4400Interior Products Baby Bassinet $600 $1,000 $500,000 500Child Seats $700 $1,200 $1,200,000 1000
Calculations
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Cost
Utilities
Escalations = 5%
Electricity:
Consumption per hour = 300 kWh
Consumption per year = 300*24*265
=2,628,000 kWh
Cost per unit = $0.12
Total Cost per Year = $315,360
Water:
Consumption per hour = 1667 cm^3
Consumption per year = 1667*24*365
= 14602920 cm^3
Cost per unit = $0.001
Total Cost per Year = $14,602
Operations
Scientist (5 People):
Works per day = 10 Hours
1 Week = 5 Days of work = 50 Hours
1Year = 50* 52 = 2600 Hours
Cost per Person = $150
Total Cost per Year for 1 Scientist = $390,000
Total Cost per Year for 5 Scientist =$1,950,000
Workers (20 People):
7
Works per day = 12 Hours
1 Week = 6 Days of work = 72 Hours
1Year = 72* 52 = 3744 Hours
Cost per Person = $20
Total Cost per Year for 1 Worker = $74880
Total Cost per Year for 20 Worker =$1,497,600
Engineers (10 People):
Works per day = 12 Hours
1 Week = 5 Days of work = 60 Hours
1Year = 60* 52 = 3120 Hours
Cost per Person = $70
Total Cost per Year for 1 Engineers = $218,400
Total Cost per Year for 10 Engineers =$2,184,000
Securities (5 People):
Works per day = 24 Hours
1 Week = 7 Days of work = 168 Hours
1Year = 168* 52 = 8736 Hours
Cost per Person = $15
Total Cost per Year for 1 Security Guard = $131,040
Total Cost per Year for 5 Security Guards =$655,200
Raw Materials
Aluminium:
Consumption per Month = 40 Ton
Consumption per year = 120 Ton
Cost per unit = $1800
Total Cost per Year = $864,000
Steel:
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Consumption per Month = 100 Ton
Consumption per year = 120 Ton
Cost per unit = $480
Total Cost per Year = $576,000
Nylons:
Consumption per Month = 5000 kg
Consumption per year = 60000 kg
Cost per unit = $3.5
Total Cost per Year = $210,000
Nitrogen:
Consumption per Month = 4000 Lt
Consumption per year = 48000 Lt
Cost per unit = $10
Total Cost per Year = $480,000
Polyesters:
Consumption per Month = 5 Ton
Consumption per year = 60 Ton
Cost per unit = $470
Total Cost per Year = $28,200
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Miscellaneous
Maintenance:
Consumption per year = 5 machine
Cost per unit = $20000
Total Cost per Year = $100000
Fuel of Transportations:
Total Cost per Year =$30000
Escalations =1.5%
Annual Cost per Year = $8,904,962
Revenue
Marginal Cost
Marginal Revenue
Expected Revenue Product
Airframe Barrier Nets/net $700 $1,500 $1,200,000 800Seatbelt Airbags/seat $350 $800 $4,800,000 6000Child Aviation Restraints
System- CARES $250 $800 $1,800,000 2250Crew Restraints $200 $500 $2,000,000 4000Lightweight Seatbelt $300 $700 $2,800,000 4000Commercial Passenger
Restraint $200 $600 $4,200,000 7000Business Jet Restraint $400 $800 $6,000,000 7500Rotorcraft Jet Restraint $300 $600 $2,400,000 4000Ground Vehicle Restraint $250 $500 $2,200,000 4400Interior Products Baby Bassinet $600 $1,000 $500,000 500Child Seats $700 $1,200 $1,200,000 1000
Total Revenue per Year: $29,700,000
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Cash flow
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Present Worth of CostsAnnual Cost of Raw materials = Annual cost of [Aluminium + Steel + Nylon + Nitrogen + Polyesters]
= $864,000 + $576,000 + $210,000 + $480,000 + $28,200
= $2,158,200
MARR = 20%
Inflation = 1.5%
MARR f =i +f +if
= 20 + 1.5 + .3
= 21.8%
Present worth of Raw materials = $2,158,200 (P/A, 21.8%, 20)
= $2,158,200(4.4983)
= $9,708,231.06
Annual Cost of Utilities = Annual cost of [Electricity + Water]
= $315,360 + $14,602
= $329,962
MARR = 20%
Inflation = 5%
MARR f = i +f +if
= 20 + 5 + 1
= 26%
Present worth of Utilities = $329,962 (P/A, 26%, 20)
= $329,962(3.8083)
= $1,256,608.49
Annual Operational Costs = Annual cost of [Scientists, Engineers, Workers, Security]
= $1,950,000 + $2,184,000 + $1,497,600 + $655,200
= $6,286,800
MARR = 20%
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Inflation = 0.5%
MARR f = i +f +if
= 20 + 0.5 +0.1
= 20.6%
Present worth of Operational Costs = $6,286,800 (P/A, 20.6%, 20)
= $6,286,800(4.8544)
= $30,518,641.92
Annual Miscellaneous Costs = Annual cost of [Machine maintenance, Transportation]
= $100,000 + $30,000
= $130,000
MARR = 20%
Inflation = 1.5%
MARR f = i +f +if
= 20 + 1.5 +0.3
= 21.8%
Present worth of Miscellaneous Costs = $130,000 (P/A, 21.8%, 20)
= $130,000(4.4983)
= $584,779
Present Worth of Total Costs = $80,000,000+ $9,708,231.06 + $1,256,608.49 + $30,518,641.92 + $584,779
= $122,068,260.50
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Present Worth of RevenuesAnnual Revenue from all the products = $29,700,000
MARR = 20%
Inflation = 1.5%
MARR f = i +f +if
= 20 + 1.5 +0.3
= 21.8%
Present worth of Revenues = $29,700,000 (P/A, 21.8%, 20)
= $29,700,000(4.4983)
= $133,599,510
Net Present worthNet Present Worth = Present Worth of Revenues - Present Worth of Costs
= $133,599,510 - $122,068,260.50
= $11,531,249.50
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ConclusionSo, after doing the analysis, we come to a conclusion that they should do this investment on making a new company. This statement also being strongly supported by the positive result of the net present worth. This positive result means that the project is acceptable and if they do this project, hopefully they will success and get good profits.