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Tutorial Sheet For Engineering Economics
Tutorial Sheet For Engineering Economics
Question 1
accumulate to $8730.
paying back if it has to pay back the loan on 02 July 2001 and SI of 21%
c) A miner needs to make the following payments against a loan on his lorry
as follows $20 000 after 6 months, $ 30 000 after 8 months $45 000 due
after 3 years. He fails to pay, then after 15 months he manages to pay $40
000. What single payment should he make 3 years from now to settle the
d) Suppose you deposit $1,000 in an account pays simple interest. What will
i. (a)the annual simple interest rate is 7% for the first 5 years, 10% for the
ii. (b) 5% for the first 10 years, 10% for the next 10 years, 15% for the last
10 years?
Question 2
per year. The firm has $ 15000 in earnings before depreciation and taxation
b) Dewbrack Mine has $ 4000 debt at 20% in its capital structure. The firm
has revenue expectations of $2500 earning before interest and tax. The
WACC, the overall capitalization rate for the firm is 25%.Dewbrack Mine
Question 3
that requires an initial outlay of $10,000. Over the course of three years, the
the returns are nearly double the investment. However, a dollar earned in three
Redwing Mine can invest $20m in equipment to open a new mine. Demand is
expected to be such that there is an even chance that the project will produce
either $2m or $20m in the first year. Cash flows are partially correlated over
time. If demand is low in the first year, there is a 75% chance that cash flows
in the 2nd year will be $2m and 25% chance that cash flows will be $10m. If
demand in the first year is high, there is a 35% chance that cash flows in the
2nd year will be $15m and 65% chance that cash flow will be $30m. Cost of
capital is 10%.
Question 5
increase in revenues over the next five years of $2m. The project will lead to an
increase in wage costs of $0.4m pa and will also require expenditure of $0.3m pa
The following forecasts are made of the rates of inflation each year for the next
five years: The real cost of capital of the company is 8%. All cash flows are in
real terms. Ignore tax. Find the free cash flows of the project and determine
whether it is worthwhile.
Question 6
Net Present Value – Campbell Industries has a project with the following
a. Using an 8% discount rate for this project and the NPV model should this
Question 7
A project requires an initial investment of $24,000 and will generate annual cas
h flows as follows:
1 7,800
2 6,000
3 4,200
4 7,400
5 9,200
Question 8
2. Net Present Value – Swanson Industries has four potential projects all with an
initial cost of $2,000,000. The capital budget for the year will only allow Swanson
industries to accept one of the four projects. Given the discount rates and the
future cash flows of each project, which project should they accept?
Rate
Question 9
Net Present Value – Campbell Industries has four potential projects all with an
initial cost of $1,500,000. The capital budget for the year will only allow Swanson
industries to accept one of the four projects. Given the discount rates and the
future cash flows of each project, which project should they accept?
Rate
Question 10
What are the IRRs of the four projects for Campbell Industries in problem #9?
Questions 11
and exhibit constant returns to scale. No project can be done more than once.
Project
There is only $3,000 of capital available at T0 and at T1, only $200 plus the cas
h inflows from the projects undertaken at T0. In each time period thereafter, ca
Question 12
Perth mining company operates two mines for the purpose of extracting gold and
silver. The Saddle Mine costs $14,000/day to operate, and yields 50 oz of gold
and 3000 oz of silver each day. The Horseshoe Mine costs $16,000/day to operate,
and yields 75 oz of gold and 1000 oz of silver each day. Company management
has set a target of at least 750 oz of gold and 24,000 oz of silver. How many days
should each mine be operated so that the target can be met at a minimum cost to
Gantt chart. Describe how Gantt charts are used in project planning and project
management.
Question 14
Your Project Manager, Alex Midway, has produced the following network
diagram for a programming project. Alex has specified the duration for each
activity in Table below, and has asked you to complete the table and network
(a)Using the Duration from Table I below, calculate the Earliest Event Time
(EET), the Latest Event Time (LET) and the float or slack associated with each
Question 15
Your Project Manager, Chas Mildwood, has produced the following network
diagram for a programming project. Chas has specified the duration for each
activity in Table I below, and has asked you to complete the table and network
a) Using the Duration from Table I below, calculate the Earliest Event Time
(EET), the Latest Event Time (LET) and the float or slack associated with
Marks)
Question 16
(a) Analyse the Discounted Cash Flow (DCF) technique for appraising large
investment decisions. (10 marks)
Question 17
(a) Compare and contrast the project evaluation and review technique (PERT)
with the critical path method (CPM). (15 marks)
(b) Using the information in Table 1, assuming that the project team will work a
standard working week (5 working days in 1 week) and that all tasks will start as
soon as possible
Discuss the tools and techniques that project managers can use to ensure
knowledge and lessons learned from previous projects are not lost, and can be
shared for the benefit of future projects. 20marks