UNIVERSITY OF ENGINEERING AND TECHNOLOGY TAXILA

DEPARTMENT OF COMPUTER ENGINEERING

ENGINEERING ECONOMICS
7th SEMESTER – 2017 ENTRY
END SEMESTER EXAM

Total Marks: 60 Time Allowed: 2.5 Hr

Note: Attempt all questions in a sequence as given on the paper.

Q. No.01 a) If $500 were deposited in a bank savings account, How much

would be in the account three years hence if the bank paid 6%
interest compounded annually?

b) A person is planning for his retired life. He has 8 more years

of service. He would like to deposit Rs. 8,500 at the end of the
first year and thereafter he wishes to deposit the amount with an
annual decrease of Rs. 500 for the next 7 years with an interest Marks(5+5+1
rate of 15%. Find the total amount at the end of the 8th year of 0)
the above series.

c) A company is having 10,00,000 for next 20 years for

employees welfare measures. The reserve value is assumed to
grow at the rate of 15% annually. Find the single-payment that
must be made now as the reserve amount.
Q. No.02 a) A firm is trying to decide which of two weighing scales it
should install to check a package-filling operation in the plant. Marks(10+10)
The ideal scale would allow better control of the filling operation
and result in less overfilling. If both scales have lives equal to the
6-year analysis period, which on~ should be selected? Assume an
8% interest rate.

Alternatives Cost Annual Salvage

Benefit Value
Atlas Scale 2000 450 100
Tom Thumb 3000 600 700
Scale

b) Cash flows for the two alternatives is as follows:

Alterna Proposal End of Years

tives 0 1 2 3 4
A -10,000 3000 3000 7000 6000
B -10,000 6000 6000 3000 3000
Compare the present worth of A with that of B at i = 18%. Which
proposal
should be selected?
Q.NO.03 a) A company invests in one of the two mutually exclusive

1
alternatives. The life of both alternatives is estimated to be 5
years with the following investments, annual returns and salvage
values.

Marks(10+10)

Determine the best alternative using annual equivalent method by

assuming i= 20%
b) A firm has identified three mutually exclusive investment
proposals whose details are given below. The life of all the three
alternatives is estimated to be five years with negligible salvage
value. The minimum attractive rate of return for the firm is 12%.

Find the best alternative based on rate of return method of

comparison.