Chapter 1

W.R. Economy & Management

Tutorial
Chapter 4: Project Scheduling and Resources Allocation

Example (1):

An irrigation lined canal is to be constructed that will increase the net annual
revenue by 4,415,000ID in the agricultural area. The canal’s economical life is
15 years and i = 18%, what is the net present worth for the revenue summation
along the project life?

Example (2):

Recalibration of sensitive water-level measuring device costs $800 per year. If

the device will be recalibrated for each of 6 years starting 3 years after purchase,
calculate the 8-year equivalent uniform series at 15% per year.

Example (3):

A contractor bought a construction machine for 25 million ID and paid 15

million ID in advance and the rest as 10 uniform annual payments started after 3
years from now with i = 20%. What is the amount of uniform annual payment?

Example (4):

The maintenance cost for a machine in the first year is $200, in the second year
is $250, in the third year is $300, in the fourth year is $350, and in the fifth year
is $400. What is the uniform annual maintenance cost when i = 5%?

Example (5):

A particular water resources project produces benefits of $12,000 in year 1 and

increase on a uniform gradient to $120,000 in year 10. Thereafter, they increase
on another uniform gradient of $5,000 per year to $200,000 in year 26, at which
point they remain constant at $200,000 each year until the end of project life in
year 50. What is the present worth of these benefits at a 4% discount rate?
Chapter 4: Project Scheduling and Resources Allocation

Example (6):

One million dollars are invested in a project at a return rate of 8% per year.
Calculate the total amount at the end of 10 years if the return is compounded at:
A) The end of each year.
B) The end of 6 months.
C) The end of 3 months.
D) The end of each month.

Example (7):

Company C is planning to undertake a project requiring initial investment of

$105 million. The project is expected to generate $25 million per year for 7
years. Calculate the payback period of the project.

Example (8):

Company C is planning to undertake another project requiring initial investment

of $50 million and is expected to generate $10 million in Year 1, $13 million in
Year 2, $16 million in year 3, $19 million in Year 4 and $22 million in Year 5.
Calculate the payback value of the project.

Example (9):

An initial investment of $2,324,000 is expected to generate $600,000 per year

for 6 years. Calculate the discounted payback period of the investment if the
discount rate is 11%.