umdwan Pp olytechmic Noume— > Ronsit Mahato Subjeck> Engmeering economies omd Project Moyo ge : pept. > Mechomic. Engineering . Reg. NO >D20210 2209 Roll,NO +> BSS DEDPMESG, 100023 24 Sem estet> 6th Internal > 2nol3 Page no-t Be Oo 45) -| what i$ the Law of Labor cmsts: domomd 9 what factors hold consiont ‘n the law of damon’: i= gtates that &S aa Laud of demand stal . tiombityp OF oh good or gepvice increase the 4 d lmonded decrease, amd vice versa, In other word WhEN the price goes up, people tend to buy eas OF thott product. omd when the price goes down, they tena +o luo MORE . 2 the price PThe Law of demand assumes that other factors remo coNstontt, Such as the Meme of CONSUMERS, the Price of elated goods consumer prerences ond the owvailadility of substtutes, By holding these facts constant re loud focuses Specificowly oy the PELAHN Ship Letosem Price Cnn quomhing demnovne What 18 variable cost) Gtve two exomPles of VONNOLIE cost > re omtigble cost 3-vormable Costs OMe €x pense SY eaoCaeS pec iaO OG UIT tte) levet og produced ee The QuOMHIY oP Jocds or sep vice. Nol of outper ead et ue based on the ' Cain ford +0 inem : Mereases “op decrease as production deca dveusion : S Exommples of vorelable costs! D pirect material cost tris mctudes the Cost Rag materials or coempoments Used to y UreLeture a product Ac the Producten volume imeneases, the mount of ; eh oF Paw makerias mequered ose ine reaces, reesutting iy nighe VOYMALLE Coss S a rid Direct Lelooull COSt {- This Melude The wIge or “Soule Pies paid 10 wonKers ee ieee ane production process. 4S the production Conve spises -rA TE WOPKETS TRAY be nadded leading 49 Waren ———peor Lgrar cs diagram shouting ‘relationship between ye Fal oAroral var iabie amd Toial cos! A a * 4 qe Tot Cost He aye = Total vorniable COS | In economtces RVio we un “MOLE ta ki , Perviad of time during cWnich at foast One Factor © Production is Axed, whtle the long un Pi aaseat es a timeframe where au Factors of Produetion Spe, oii adjusted. ty the long pum ,piems have the Flex! if to adjust atl inputs +o there production process ab whatis the tow of variable proparnon ? > The 1a” of vorriabie io petal ouso “mew as the taw of diminishing pettens, states that as A lem vyorries dhe qeeorntit of one input While Keeping other ‘puts fed , the moamgmat product of tke vdneia#e in Pak will onmentt dsuch as labor, 12 added to aa Mixed onownt- of othen ‘mputs, the addifonak atiutput produced wll evemtevally decrease , 2) who is Fixed Cost) tive tO Cxomplar of Axed! cost in skort omd simple woredy 1 P7_fixed cost: cixed costs ome expenses es Son very with chomges mn the level of Production 8 solds Mose costs pomaly constomnt Pe gardto} oman somdity pyeduced, tone ame tso exonmpPeo4 of Fixed costs: > Romt op lease Payments) tre C Ost teasin ‘di SOME vegomdlese “of the generated boy a bUsIMEeSS > Snsumonce premium. the expense of CSO Gr UG) Wali cren cers msumromnce, ‘surom TY MSuUPOMee ow Licbli r “Say Temains FkKed OVER q Specht period -regorpale a¢ of Production (evels. aD| The capital investment of a projet =Rs.1 0% 000. _|me estimated cash Flow forthe next 4 Yes RS 27/500 Rg 27500 Rg B2SOO RS BFS Couleurtore the (RR of the firm. Fr SteP1 cash plows s_ Initial invesment Cyeat O)3- RS 100, c00 cash fle at the emd of yewl 1:RS 27500 99 99 99 95 95 95 22 QQ QF500 ey 3; RS. 32 500 eee re 55 a2 RS. BFSOO SteP22)- present yalue of cach ecish Flow wsing the discount rate (®) . Assuming a des y ewtation aaa ee ee pate of (0%; the cate s YEON O! Rsiooo00/ (+016) = Rs 100000 CEmitiel rnuesime yeartt? RS 24500/(i+0.Gl0)'= pg 25000 yeal2:Rs a¢s00/ (i+ 0 90)2— RS 20,459.55 yet 22 RS 32500/ (ItolO3 = RS 29)29.92 yea 4 RS B7500/ (14014 = Rsee,1 32-08 geP 3) sum updthe presemvauues OF the cash Plot sum of present values =Rs lO0cC00 +RS 25000 RS ARS 20454-5544 RS 23122:93 4 RS 25) 32.08 = RS 24) HT 56 SHR 4\- Adjust the discount spate 4© find the discur reake a a Ra MSRIMES the au op Precon vat age g/0-OF pegapaz 10-05 wets try ot higher discount sake, ot ssurming (27, Yel 0 +p4 (00000 /CItO1 Dee ee 006 Chellis nome yet 1 + R& 2>ego0/LIt O12! = RS 24, 553-57 yoo! 2) R$ QPS ItO1D2=RS 21,920'09 yeor 2° RS 39 B00/(1+0:12)3> RS 22690 Ce yeor4' 24 379500/ ((ro12d1= R$ 29, 376 D7 sm of present yours = Rg {oooes 42S 24 553:5F + RS 21990-0989 + RS 2267067 + 2$29956-99 > R699) 5°25 SEP 8 !- Continue adjusting ee. discount oe Oa Me Somme SUM of present values is close te zero Oseuming Low 1] discount rate ©&y. YEO O! —RS 100800/ (}+.0-09)0 =—RS 100°? Nunes eo 1; RS 24500 /(It O08) | = RS25462:96 Es [+ 0:08)* =B2SE2):76 ot 2! RS 2>500/ pes ) Se Cito .08 ) 2=RS 25 289-95 RS 26 LF9 4G ttiok i year 3) RS 22 500/ So re S00! 4umm of present Voluey = _— RS Loo + RE 2546.9 ARS 2362) FEOTRS25 267.95 + RS 26 692: 44 = RB 100 94 step. Ce Continueing the adjust the discount pate until tre Sur of Present values is VERY Close te 2076. In Exel we com coleutate the iRR directly . we impuk cashflo® (100000) 27.500, 2F 500, 32 50097.500) in cells “Al to #5, we com use the pormuld “2 IRR (ALN) +0 caleulale the IRR: which 9 )'s opp roxianate (it 0:0 2)4 = Way, 1, the [RR of the Project 18 approxi mately Ihogy,