ECO 1192 FALL 2023 ASSIGNMENT 2
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ENGINEERING ECONOMICS
ECO 1192
FALL 2023
ASSIGNMENT 2
DEADLINE: November 27, 11:30PM
All electronic files (PDF and Excel) to be returned on Brightspace in the assignment 2 space
Please start this assignment early in case you have questions. If you wait until the last minute, we might not have time to get to your questions by the deadline. Please ask your assignment-related questions in the forum.
Instructions: Please respect to avoid serious penalties This is an individual assignment. You can however consult your classmates about the assignment, but you must return your own individual copy. Under no circumstances can you submit your assignment by email; you must submit it on Brightspace. Tardiness will be penalized at the rate of a 10% deduction per day up to a maximum of 2 days after which time no assignments will be accepted. Reasons such as a
bad Internet connection or problems accessing Brightspace will not be accepted as reasons for
lateness. I suggest that you turn in your assignment a day or more before the deadline so that
any glitches you may have can be ironed out. Include with your working document a typed
cover page that is produced with a word processing software such as MS Word or Pages; do not submit a handwritten cover page. Your last name (family name) should be in caps (capital
letters) so that we can best identify you (do not capitalize your given name.) A sample title
(cover) page can be found in this document on page 18: https://socialsciences.uottawa.ca/public- international-affairs/sites/socialsciences.uottawa.ca.public-international-affairs/files/guidelines- 20110217/WritingandStyleGuide2010-2011_001.pdf
I would also like to emphasize that a subset of the exercises will be corrected and not the entire assignment due to lack of resources. However, you must attempt all the exercises, otherwise
points will be deducted for incomplete work. A full set of solutions will be made available soon which you can consult in preparation for the exam.
Note for some targeted exercises (to be identified in the question if any exist), the graphs and
tables that you produce in MS Excel will need to be included in your working document (this is your Word processing document in MS Word or other similar software). There are several ways
to go about transferring charts and tables from an Excel file to the working document. Here's an
example (the same basic approach is used if you are using other similar word processing software such as Pages by Apple):
https://support.microsoft.com/en-us/office/insert-a-chart-from-an-excel-spreadsheet-into-word- 0b4d40a5-3544-4dcd-b28f-ba82a9b9f1e1
This is not the only source of information on how to transfer graphs. If you need more help start with Google.
You can also resize your graphs and tables so that they can fit on the page of your document. Always include labels on your charts labels to identify axes, the name of the series and a title. Tables should always include a title.
With every assignment you will be asked to submit in Brightspace the following:
1. A copy of your working document, which is typically produced in MS Word (or Pages) and then saved as a PDF file. You MUST submit the PDF file, otherwise we might not be
able to read your file and grade it.
2. Your MS Excel file.
3. This is a total of 2 files maximum.
Additional guidelines for submitting the assignment:
1. Please observe the following advice/instructions to avoid point deductions (note there is some repetition from above for emphasis):
2. Work submitted by email will not be graded.
3. Do not return your documents in a ZIP file.
4. When you are asked to do calculations in the Excel file, you must use the formulas in MS Excel to perform them. You should never just write a number in a cell when a
calculation is required. You need to calculate the result using the Excel formula.
5. When you apply an Excel formula, you must use the cell addresses in the formula and not use the numbers taken directly from a cell in the table.
6. You have a grace period of two days after the deadline to return the assignment but
with penalty. Delays will be penalized at the rate of 10% per day (maximum tolerated of 2 days). After this date, the window for returning the work will be closed and it will be impossible to submit the TP regardless of the motivation.
7. Backup your files to one of the many services that exist in the cloud since there are no exceptions to deadlines in case you have technical problems that prevent you from
submitting the work on time.
7. If you have any questions, please ask them in the forum for a timelier response. Please do not communicate by email any questions about the assignment. Note that your
question was perhaps already asked in the forum and has been answered. Therefore, please peruse the forum before asking your question.
8. Also be clear in the subject heading of the Forum posting when submitting a question, e.g., Problem 2 B: How to calculate such and such a result. Just writing “Ihave a
question” does not work.
9. It is advised to start the assignment earlier than later. That way, if you have any
questions, they have a better chance of being addressed in the forum before the
deadline. This will also avoid penalties for late submissions in case of ill health. Recall that there are no extensions past the 2-day grace period in case you are sick during this time or for any other reason.
10. In addition to saving your graphs in your working document (unless otherwise
specified), all graphs constructed in Excel should be saved on a separate sheet within your Excel file as per this method: https://www.youtube.com/watch?v=mD28breAR2g
(this is explained about 1 minute into the video)
11. In the MS Excel template, do not move or change the parameters (the way the page is set up) that appear in this file. Simply fill in the blanks without moving or changing the set up or layouts of these various sheets. Include your answers in the cells that have been
reserved for this purpose (look for the yellow highlighted cells).
12. In your calculations, limit the number of digits for your answers after the decimal to one (e.g., 12.1 and not 12.1234) unless otherwise specified.
13. Note that you are new to MS Excel, there are several YouTube videos on how to use this tool.
14. Use the following naming conventions for all your files: Family name_student number.pdf. For example: Prudhomme_11111111.xls
15. Failure to respect these instructions will result in a penalty.
1. Two alternative courses of action have the following schedules of disbursements. If the MARR is 6% which alternative should be selected? Use present worth analysis. Show
your calculations in your working document. Also note that in periods 4 and 5, the
values for option B should be – 400 and – 500 respectively.
2. In order to improve evacuation routes out of New Orleans in the event of another major
disaster such as Hurricane Katrina, the Louisiana Department of Transportation is
planning to construct an additional bridge across the Mississippi River. Two alternatives
are being considered: a suspension bridge and cantilever bridge. The department uses
an interest rate of 8% and plans for 50-year life for either bridge. Which design has the
better PW? Show your calculations in your working document.
3. Telephono Mexico is expanding its facilities to serve a new manufacturing plant. The
new plant will require 2000 telephone lines this year, and another 2000 lines after
expansion in 10 years. The plant will operate for 30 years.
The telephone cables will last at least 30 years, when the cost of removing the cables is
offset by their salvage value. Use PW analysis.
a) Which alternative should be chosen assuming a MARR = 10%. Do your calculation on sheet Q3a in the MS Excel template.
b) Will your answer to a) change if the demand for additional lines occurs in five years instead of 10 years? Do your calculation on sheet Q3b in the MS Excel template.
4. The following costs are associated with 3 tomato peeling machines being considered for
use in canning plant. If the canning company uses an interest rate of 12% which is the
best alternative? Use net present value to make your decision. (Note: consider the least
common multiple as the study period). Show your calculations in your working document.
5. Which car has the lower AW if the owner can earn 5% in her best investment? Show
your calculations in your working document.
6. Consider the following three mutually exclusive alternatives. Assuming that alternative
B and C are replaced with identical replacements at the end of their useful lives. The
MARR is 8%. Which alternative should be selected using annual cash flow analysis.
Show your calculations in your working document. Replace the $150 000 for project B by $15 000.
7. A diesel generator for electrical power can be purchased (it is now buying the power
from an external source) by a remote community for $480,000 and used for 10 years,
when its salvage value is $50,000. Or it can be leased for $70,000 a year. (Remember that lease payments occur at the start of the year). The community’s interest rate is 8%. Show your calculations in your working document. You can however create your table in MS
Excel, but you will need to copy and paste it in your working document.
a. Using the IRR method, choose the best option.
b. The community will spend $80,000 less each year for fuel and maintenance than
it currently spends from buying the power from a third party. What is would be
the IRR from buying the generator assuming it was an independent project?
c. Repeat b) but now do the same for leasing the generator.
8. Consider the following three mutually exclusive alternatives. Each alternative has a 10- year useful life and no salvage value. Using present worth analysis, draw a graph in the MS Excel template on sheet Q8 showing these three alternatives for various interest
rates (save this graph as a separate sheet in MS Excel and name this sheet Graph Q8). Also construct a choice table for interest rates from 0% to 100%. Show your choice table in your working document.
9. At the end of last month, Paarl Manufacturing had $45 954 in the bank. It owed the bank $224 000 for their mortgage. It also had a working capital loan of $30 000. Its customers
owed $22 943, and it owed its suppliers $12 992. The company owned property worth
$250 000. It had $123 000 in inventoried finished goods, $102 000 in raw materials, and $40 000 in work in progress. Its production equipment was worth $450 000 when new (partially paid for by a large government loan due to be paid back in three years) but
had accumulated a total of $240 000 in depreciation —$34 000 worth last month.
The company has investors who put up $100 000 for their ownership. It has been
reasonably profitable; this month the gross income from sales was $220 000, and the
costs associated with sales was only $40 000. Expenses were also relatively low; salaries
were $45 000 last month, while the other expenses were depreciation, maintenance at
$1500, advertising at $3400, and insurance at $300. Despite $32 909 in accrued taxes
(Paarl pays taxes at 55 percent), the company had retained earnings of $135 000.
Construct a balance sheet (as of the end of this month) and income statement (for this
month) for Paarl Manufacturing. Do this on Sheet Q9 in the MS Excel template.
2023-11-28