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The document outlines various engineering economy problems related to equipment and machinery cost analysis, including package tracking upgrades, standby generators, vehicle ownership decisions, bleaching process evaluations, and machine outsourcing considerations. Each scenario requires calculations of economic service life, annual worth, and cost comparisons using specified interest rates. The document serves as a practical exercise for students in the Communication Systems Engineering program at Benha National University.

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Mohamed Alaa
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51 views2 pages

Sheet 6-2

The document outlines various engineering economy problems related to equipment and machinery cost analysis, including package tracking upgrades, standby generators, vehicle ownership decisions, bleaching process evaluations, and machine outsourcing considerations. Each scenario requires calculations of economic service life, annual worth, and cost comparisons using specified interest rates. The document serves as a practical exercise for students in the Communication Systems Engineering program at Benha National University.

Uploaded by

Mohamed Alaa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Communication Systems Engineering (CSE)Program

ENG201 Engineering Economy and Accounting


Benha National University
Sheet 6 Second Semester 2024/2025

1. To improve package tracking at a UPS transfer facility, conveyor equipment was


upgraded with RFID sensors at a cost of $345,000. The operating cost is expected to be
$148,000 per year for the first 3 years and $210,000 for the next 3 years. The salvage
value of the equipment is expected to be $140,000 for the first 3 years, but due to
obsolescence, it won’t have a significant value after that. At an interest rate of 10% per
year, determine
(a) The economic service life of the equipment and associated annual worth
(b) The percentage increase in the AW of cost if the equipment is retained 2 years longer
than the ESL

2. A large, standby electricity generator in a hospital operating room has a first cost of
$70,000 and may be used for a maximum of 6 years. Its salvage value, which decreases
by 15% per year, is described by the equation S =70,000(1 – 0.15)n , where n is the
number of years after purchase. The operating cost of the generator will be constant at
$75,000 per year. At an interest rate of 12% per year, what are the economic service life
and the associated AW value?

3. A recent environmental engineering graduate is trying to decide whether he should keep


his presently owned car or purchase a more environmentally friendly hybrid. A new car
will cost $26,000 and have annual operation and maintenance costs of $1200 per year
with an $8000 salvage value in 5 years (which is its estimated economic service life).
The presently owned car has a resale value now of $5000; one year from now it will be
$3000, two years from now $2500, and 3 years from now $2200. Its operating cost is
expected to be $1900 this year, with costs increasing by $200 per year. The presently
owned car will definitely not be kept longer than 3 more years. Assuming used cars like
the one presently owned will always be available, should the presently owned car be
sold now, 1 year from now, 2 years from now, or 3 years from now? Use annual worth
calculations at i =10% per year and show your work.

4. A pulp and paper company is evaluating whether it should retain the current bleaching
process that uses chlorine dioxide or replace it with a proprietary “oxypure” process. The
relevant information for each process is shown. Use an interest rate of 15% per year to
perform the replacement study.

ENG201 Engineering Economy and Accounting Page 1 of 2


Communication Systems Engineering (CSE)Program
ENG201 Engineering Economy and Accounting
Benha National University
Sheet 6 Second Semester 2024/2025

5. A crushing machine that is a basic component of a metal recycling operation is wearing


out faster than expected. The machine was purchased 2 years ago for $400,000. At that
time, the buyer thought the machine would serve its needs for at least 5 years, at which
time the machine would be sold to a smaller independent recycler for $80,000. Now,
however, the company thinks the market value of the diminished machine is only
$50,000. If it is kept, the machine’s operating cost will be $37,000 per year for the next
2 years, after which it will be scrapped for $1000. If it is kept for only 1 year, the market
value is estimated to be $10,000. Alternatively, the company can outsource the process
now for a fixed cost of $56,000 per year. At an interest rate of 10% per year, should the
company continue with the current machine or outsource the process?

6. The projected market value and M&O costs associated with a presently owned machine
are shown (next page). An outside vendor of services has offered to provide the service
of the existing machine at a fixed price per year. If the presently owned machine is
replaced now, the cost of the fixed-price contract will be $33,000 for each of the next
3 years. If the presently owned machine is replaced next year or the year after that, the
contract price will be $35,000 per year. Determine if and when the defender should be
replaced with the outside vendor using an interest rate of 10% per year. Assume used
equipment similar to the defender will always be available.

Best Wishes Dr. Maha Raouf

ENG201 Engineering Economy and Accounting Page 2 of 2

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