ECOR 3800 Assignment 4

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School

Carleton University *

*We aren’t endorsed by this school

Course

3800

Subject

Civil Engineering

Date

Apr 3, 2024

Type

pdf

Pages

Uploaded by BarristerFerretMaster23

ECOR3800/Winter 2023 Assignment #4 Page 1/2 Carleton University Department of Civil and Environmental Engineering ECOR 3800 A: Engineering Economics Assignment #4 Due on: March 30 th , 2023 INSTRUCTIONS: 1. Clearly put a square around your final answers. 2. Unless otherwise stated, answer all questions by hand (not typed) and submit. 3. To submit, scan your assignment and upload it as a pdf to the Brightspace submission form. 4. Show all of your work. No marks will be given without intermediate steps. 5. Make sure your work is neat and that the scans are legible. Marks will be deducted for neatness 6. Late assignments submitted within 24 hours of the deadline will be deducted 25%, assignments submitted past 24 hours will not be accepted 1. (10 Marks) You are given the following Consumer price index for the past 6 years. Year CPI ($) 0 140.6 1 142.8 2 145.0 3 146.1 4 149.3 5 150.6 a) Calculate the year over year inflation for each year b) Calculate an average inflation rate that you can use to perform an economical analysis for a project in this 5-year period 2. (5 Marks) An engineering project requires $58,000 as first cost and has a planning horizon of seven years. Operating costs are $3,900 per year, and expected annual revenue is $12,800 (both real cashflow). Calculate the project's present worth if the interest rate is 13% (current), the expected annual inflation is 5% and the salvage value is $27,000 (Real). 3. (7 Marks) RNO Ltd. just invested $107,000 into a new local network. Services provided by the network will bring $21,000 per year in the next 6 years. The following information is given: - Current MARR = 18%

ECOR3800/Winter 2023 Assignment #4 Page 2/2 - expected annual inflation = 5.2% - the network will be sold for salvage after 6 years; its depreciation rate is 20% (Declining Balance) - All Cashflow values, including salvage, are in real dollars Is this a good investment measured by the internal rate of return? 4. (8 Marks) Canada's government savings account pays 1.75% annual real rate of return compounded daily. Professor Sara invests $300 weekly as a part of her university payroll program. If the inflation rate is assumed to be 3% per year over the next 25 years, what is the purchasing power of the professor's savings 25 years from now? 5. (25 Marks) Draw and complete a Critical Path Method (CPM) network for the following project. Compute and indicate the early start (ES), early finish (EF), late start (LS), and late finish (LF) dates for each activity and identify the critical path(s). Activity Predecessor activity Duration A - 5 B - 4 C A & B 7 D C 8 E B & C 3 F D 7 G B 3 H G & F 4 I H & E 3 6. (25 Marks) A new shoe production line is being designed at a cost of $230,000 and operating costs are expected to be $75,000 per year. Planned annual production is 3700 pairs and the price of a pair of shoes is $90. The line's service life is 7 years, the depreciation rate is 30%. Assuming a 14% annual interest rate for the base case, perform a sensitivity analysis with respect to the interest rate in the interval [-20%, -10%, +10%, +20%] in terms of present worth. Comment on your results briefly, are there any conditions under which this would not be a good investment.

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ECOR 3800 Assignment 4

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