Engineering Economics

Project Report
Engineering Economics Projects related to Computer

Submitted To:
Dr. Shafiq sb.
Submitted By:

Waqas Ahmad (15-CP-87)

Muhammad Rizwan (15-CP-33)
Muhammad Amir (15-CP-31)
Muhammad Aqeel (15-CP-29)

Submission Date:
27-11-2018

COMPUTER ENGINEERING DEPARMENT

UET TAXILA.
Contents
INTRODUCTION: ............................................................................................................................................................3
MAKE OR BUY DECISION:...............................................................................................................................................3
EXPLANATION: ...............................................................................................................................................................4
ASSETS .....................................................................................................................................................................4
LIABILITIES ............................................................................................................................................................4
EQUITY ....................................................................................................................................................................4
PROFIT AND LOSS ..........................................................................................................................................................5
CASH FLOW DIAGRAMS .................................................................................................................................................5
Conclusion ...................................................................................................................................................................16
INTRODUCTION:
Project management is the practice of initiating, planning, executing, controlling, and closing
the work of a team to achieve specific goals and meet specific success criteria at the specified
time. A project is temporary in that it has a defined beginning and end in time, and therefore
defined scope and resources. And a project is unique in that it is not a routine operation, but a
specific set of operations designed to accomplish a singular goal. So, a project team often
includes people who don’t usually work together – sometimes from different organizations and
across multiple geographies. The development of software for an improved business process, the
construction of a building or bridge, the relief effort after a natural disaster, the expansion of
sales into a new geographic market — all are projects. And all must be expertly managed to
deliver the on-time, on-budget results, learning and integration that organizations need.

Our project was to make a survey or entrepreneurships for the economics analysis. We took some
survey, but we didn’t get too much information to make analysis economically. Therefore, we
planned to continue our previous work of entrepreneurships for economic analysis parameters.

We started our projects by hiring some clients of designing electronic hardware. Our clients are
of Mechanical students because they have an electronic course and related projects. They have
not enough knowledge of circuit designing. So, we took responsibility to design their projects by
making a good deal.

Project, we design are the following

• Soil moisture control system

• Bluetooth control Car

• Line follower robot

• Obstacle detector Car

• Wireless Network

MAKE OR BUY DECISION:

The make-or-buy decision is the action of deciding between manufacturing an item internally (or
in-house) or buying it from an external supplier (also known as outsourcing). Such decisions are
typically taken when a firm that has manufactured a part or product, or else considerably
modified it, is having issues with current suppliers, or has reducing capacity or varying demand.

In our projects, we make calculation of making and buying projects. So, we concluded that we
will be in profit if we make the projects. Calculations are following

Project Title Make Buy

Soil moisture control Rs.5000 Rs.7000
Bluetooth Control Car Rs.4000 Rs.5500
Line follower robot Rs.4500 Rs.6000
Obstacle detector Car Rs.2500 Rs.5000
Total Rs.16000 Rs.23500

EXPLANATION:
BALANCE SHEET
A balance sheet reports a company's assets, liabilities and shareholders' equity at a specific point
in time, and provides a basis for computing rates of return and evaluating its capital structure. It
is a financial statement that provides a snapshot of what a company owns and owes, as well as
the amount invested by shareholders.

ASSETS

Broadly speaking, assets are anything that has value. For a company, assets on the balance sheet
will consist of things such as land, buildings, desks, lamps, computers, signage, and patents.
Some businesses require far more assets to operate than others, which influences return on
capital employed calculations.

LIABILITIES

Broadly speaking, liabilities are debts and obligations owed by the company; the opposite of
assets. Liabilities include monthly lease payments on real estate, bills to keep the lights turned on
and the water running, corporate credit card debt, bonds issued to investors, and other outflows.

EQUITY

The equivalent of accounting net worth, shareholder equity is what remains when you subtract
all of the liabilities from all of the assets. It is also referred to as "book value." For some
businesses, book value is highly informative of the economic condition of the firm. For others,
book value on the balance sheet is all but meaningless. Learning to distinguish between the two
involves understanding how the profitability and business models differ between firms,
industries, and sectors.
PROFIT AND LOSS
The profit and loss statement is a financial statement that summarizes the revenues, costs and
expenses incurred during a specified period, usually a fiscal quarter or year. P&L statement is
synonymous with the income statement.
These records provide information about a company's ability or inability to generate profit by
increasing revenue, reducing costs or both. Some refer to the P&L statement as a statement of
profit and loss, income statement, statement of operations, statement of financial results or
income, earnings statement and expense statement.

CASH FLOW DIAGRAMS

A cash-flow diagram is a tool used by accountants and engineers, to represent the transactions of
cash which will take place over the course of a given project.
In this project we analyze the project of how we earned profit from. Following tables are given
below;
➢
Balance sheet
➢
Profit and loss

Cash flow diagram

Project 1

Soil Moisture control

ENGINEERING PROJECT DESIGN

BALANCE SHEET

Assets Price
Current Assets:
Wires 200/-
PCB Sheet 300/-
Designing 200/-
Sensors 1000/-
LCD 500/-
Controllers 700/-
Driver 500/-
Batteries 500/-
Bread Board 250/-
Others 250/-
Total Current Assets 5000/-
Fixed Assets:
 Land N/A
Electricity Bill N/A
Machinery N/A
Total Fixed Assets N/A
Total Assets = Fixed Assets + Current Assets 5000/-
Liabilities
Loan 1000/-
Total liabilities 1000/-
Owner Equity
Owner 4000/-
Total Owner Equity 4000/-
Total =Liabilities + Equity 5000/-

Liabilities + Equity = Assets

ENGINEERING PROJECT DESIGN

PROFIT AND LOSE

Sales 8000/-
Expense 5000/-
Proftit 3000/-

Project 1 has a profit of 3000.

Project 2

Bluetooth control car

ENGINEERING PROJECT DESIGN

BALANCE SHEET

Assets Price
Current Assets:
Wires 150/-
Designing 200/-
Sensors 1300/-
Controllers 300/-
Driver 250/-
Robotic Chasis 1000/-
Batteries 500/-
Bread Board 250/-
Others 250/-
Total Current Assets 4000/-
Fixed Assets:
Land N/A
Electricity Bill N/A
Machinery N/A
Total Fixed Assets N/A
Total Assets = Fixed Assets + Current Assets 4000/-
Liabilities
Loan 1000/-
Total liabilities 1000/-
Owner Equity
Owner 3000/-
Total Owner Equity 4000/-
Total =Liabilities + Equity 4000/-

Liabilities + Equity = Assets

ENGINEERING PROJECT DESIGN

PROFIT AND LOSE

Sales 7000/-
Expense 4000/-
Profit 3000/-

Project 2 has a profit of 3000.

 Project 3

Line Follower
ENGINEERING PROJECT DESIGN

BALANCE SHEET

Assets Price
Current Assets:
Wires 100/-
Designing 200/-
Sensors 1300/-
Controllers 300/-
Driver 250/-
Robotic Chasis 1500/-
Batteries 500/-
Bread Board 250/-
Others 250/-
Total Current Assets 4500/-
Fixed Assets:
Land N/A
Electricity Bill N/A
Machinery N/A
Total Fixed Assets N/A
Total Assets = Fixed Assets + Current Assets 4500/-
Liabilities
Loan 1000/-
Total liabilities 1000/-
Owner Equity
Owner 3500/-
Total Owner Equity 4500/-
Total =Liabilities + Equity 4500/-

Liabilities + Equity = Assets

 ENGINEERING PROJECT DESIGN

PROFIT AND LOSE

Sales 7500/-
Expense 4500/-
Profit 3000/-

Project 3 has a profit of 3000.

Project 4

Obstacle Detector

ENGINEERING PROJECT DESIGN

BALANCE SHEET

Assets Price
Current Assets:
Wires 150/-
Sensors 500/-
Controllers 300/-
Driver 250/-
Robotic Chasis 700/-
Batteries 500/-
Bread Board 250/-
Others 250/-
Total Current Assets 2500/-
Fixed Assets:
Land N/A
Electricity Bill N/A
Machinery N/A
Total Fixed Assets N/A
Total Assets = Fixed Assets + Current Assets 2500/-
Liabilities
 Loan 1000/-
Total liabilities 1000/-
Owner Equity
Owner 1500/-
Total Owner Equity 1500/-
Total =Liabilities + Equity 2500/-

Liabilities + Equity = Assets

ENGINEERING PROJECT DESIGN

PROFIT AND LOSE

Sales 5500/-
Expense 2500/-
Profit 3000/-

Project 4 has a profit of 3000.

ENGINEERING PROJECT DESIGN

BALANCE SHEET

Assets Price
Current Assets:
Investment 12000/-
Fair 1000/-
Sensors 4000/-
Robotic Chasis 5000/-
Cables 500/-
Motor Driver 1000/-
 Batteries 2000/-
Bread Board 1000/-
Cash 1500/-
Total Current Assets 16000/-
Fixed Assets:
Land N/A
Electricity Bill N/A
Machinery N/A
Total Fixed Assets N/A
Total Assets = Fixed Assets + Current Assets 16000/-
Liabilities
Loan 4000/-
Total liabilities 4000/-
Owner Equity
Owner 12000/-
Total Owner Equity
12000/-
Total =Liabilities + Equity 16000/-

Liabilities + Equity = Assets

ENGINEERING PROJECT DESIGN

NET PROFIT AND LOSE

Sales 28000/-
Expense 16000/-
Profit 12000/-

Net profit of all projects is 12000.

 Project 5
Wireless Network

ENGINEERING PROJECT DESIGN

Alternative A Wireless Network Alternative B Wired Network

Design 1,000 Design 2,000

Equipment 1,000 Equipment 2,000

Installation 500 Installation 2,000

Upgrades 500 per year Upgrades 0

M & O* 500 per year M & O* 100 per year

Salvage 200 Salvage 100

Service Life 6 years Service Life 9 years

* Maintenance and Operation

Using PW analysis and interest rate is 10%.

Solution:
The least common multiple of the service lives is 18 years. This requires three complete cycles
of the Alternative A costs, and two cycles of the Alternative B costs

Alternative A Alternative B

Acquisition Phase -2,500 -6,000

Operational Phase -1,000 -100

Salvage Value 200 100

Service Years 6 9
Alternative A:

PWA = – 2500 – 2500 (P/F, 10%, 6yrs) – 2500 (P/F, 10%, 12yrs) + 200 (P/F, 10%, 6yrs) +
200 (P/F, 10%, 12yrs) + 200 (P/F, 10%, 18yrs) – 1000 (P/A, 10%, 18yrs)

Combining similar terms yields:

PWA = – 2500 – 2300 (P/F, 10%, 6yrs) – 2300 (P/F, 10%, 12yrs) + 200 (P/F, 10%, 18yrs) –
1000 (P/A, 10%, 18yrs)

PWA = – 2500 – 1298.5 – 732.8 + 36.0 – 8201 = -12,696

Alternative B:

PWB = – 6000 – 6000 (P/F, 10%, 9yrs) + 100 (P/F, 10%, 9yrs) + 100 (P/F, 10%, 18yrs) – 100
(P/A, 10%, 18yrs)

PWB = – 6000 – 2544 + 42.4 + 18.0 – 820.1 = – 9,303

The least cost alternative is B. Choose Alternative B.

Solution Steps for the five-year study period

Using Eq. (1) and (2) leads to the following analysis.

Alternative A:

PWA = – 2500 – 1000 (P/A, 10%, 5yrs) + 200 (P/F, 10%, 5yrs)

PWA = – 2500 – 3791 + 124.2 = -6,167

Alternative B:

PWB = – 6000 - 100 (P/A, 10%, 5yrs) + 100 (P/F, 10%, 5yrs)

PWB = – 6000 – 379.1 + 62.09 = – 6,317

The least cost alternative is A. Choose Alternative A.

CASH FLOW DIAGRAM

ENGINEERING PROJECT DESIGN

CASH FLOW

PROJECT 1:
3000 (sale)

5000 (expense)

PROJECT 2:
7000 (sale)

4000 (expense)
 PROJECT 3:
7500 (sale)

4500 (expense)

PROJECT 4:
5500 (sale)

2500 (expense)
 ENGINEERING PROJECT DESIGN
NET CASH FLOW

8000 7500 7000 5500 (sale)

5000 4500 4000 2500 (expense)

Conclusion
These projects took almost more or less three to four weeks. These were our ongoing projects,
we picked these up as a case study for economics project. We covered almost all of the financial
aspects and applied engineering economics to evaluate different costs involved. Balance sheets
were charted out for each of the projects listing assets, current or fixed, liabilities and owner
equity. Sales and expenses were also mentioned through which profit or loss margins were
calculated. Cash flow diagrams given in the end made it easy to judge the financial activity
ongoing in each of the projects. It is worth to mention that there were no fixed assets in any of
the projects as all of them were carried out in department labs saving electricity or any work
space bills. Last but not least net profit was calculated and illustrated (cash flow diagram). Total
profit gained was twelve thousand rupees which was divided equally among the group mates.
This project shows the great prospects regarding the entrepreneurial ambitions.