Engineering Economy Project
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Diploma in Business Process & Systems Engineering
Engineering Economy
Project
OCTOBER SEMESTER
Assignment: Economic Analysis of An Investment
1. Objective:
Students will perform economic analysis using net present value method and payback period. The project will enhance students’ understanding of process of doing engineering economic analysis of alternatives contributing to a business idea.
Students will apply concept of MARR, net present worth and payback period.
2. Instructions:
- This project work is worth 20% of the subject marks
- You are required to work ALONE on the project work
- You will submit the assignment according to date specified in the teaching schedule. Summit the softcopy of the files to the Project folder in BrightSpace
- All reports shall be typed. Hand-written work is not acceptable
- Report shall have your name (as per register), administration number, and class number
- Printed report is not required
- Put the ‘Declaration of Originality’ form as first page of the project report. Disciplinary action will be enforced on anyone if you are found to have committed or abetted the offence of plagiarism in relation to this submitted work
- You are encouraged to refer to Chapter 5 of your reference textbook when attempting this assignment
Late submissions: Penalty marks apply for late submissions
3. Description of Project
You plan to start a business with a stated capital. Your investment is limited to $200,000.
You will operate the business for 12 years.
After comprehensive market research, and assessment of the local and global economy, political situation and business risk, you shall propose a business idea. You will conduct a business analysis of the financial viability. State the results of your analysis based on NPW and Payback Period.
You will state your decision of starting the business using Net Present Worth criterion and payback period.
4. Requirements:
You are required to provide the following before carrying out analysis:
- Describe the nature of the proposed business
- You will evaluate and assess all the cash flows basing on theyearly returns
- Your investment is limited to $200,000
- Estimate the salvage value for the business, if any
- Determine your MARR and justify MARR
- Show detail cash flows (revenues and expenses) over a 12 -year period
- Examples of cash inflows are:
• sales revenue
• salvage value
• loan from bank
- Examples of cash outflows are:
. rental expenses
. salaries expenses
. interest expenses
. transportation expenses
. payments for bank loan
. insurance premium
- Determine the net monthly cash flow (receipts minus expenses)
- Do not include depreciations in expenses
- You need to estimate net yearly cash inflows and net yearly cash outflows
5. What needs to be submitted?
- Microsoft Word report with declaration page providing the description of the business
- EXCEL Spreadsheet of the business analysis
- For each of the alternatives leading to your business idea, list all items of receipts and expenses and net cash flows
Example of Year 1 for each month (Jan - Dec) net cash flows:
Example of Yearly net cash flows:
6. Assessment Criteria
The assessment criteria of the project include the following:
- Content page
- Description of each business
- Detailed estimations of yearly cash flows for the proposed business idea
- Cash flow diagrams for each alternative contributing to your business idea
- Selection of your MARR. Justify and explain how you decide your MARR
- Select and justify the best business option basing on Net Present Worth
- Determine Payback period of your business idea. Show details of the working
- State the decision of the business basing on Net Present Worth and payback period
. Explain which method is the best for evaluation of the project
- Application of EXCEL functions to improve productivity in the tabulation
2024-01-03