Q1 (a) (b)

What do you understand on engineering economy? Engineering economy analysis is important to choose preferred alternative. Explain briefly on the engineering economy analysis procedures. Cost is one of criteria need to be considered in engineering economy analysis. Brief any four (4) of the following type of cost: (i) Book Cost (ii) Maintenance Cost (iii) Recurring Cost (iv) Investment Cost (v) Disposal Cost (vi) Fixed Cost (vii) Indirect Cost (viii) Incremental Cost

(c)

Q2 (a)

Compound interest is most commonly used type of interest nowadays. Explain the differences between compound interest and simple interest. Suppose you borrow money of RM 150,000 from a bank in order to start a business. Assume the loan interest is at 12% per annum. Calculate the amount of your debt at the end of the fifth year according to the calculation of both types of simple interest and compound interest

(b)

Q3 (a)

Determine how much would you need to invest in an investment fund that paying 5% interest if you needed RM10,000 seven (7) years from today. Assume that you are an engineer in a factory making electronic components and are required to manage purchasing of a new machine that cost RM100,000. If financing for the purchase was from a bank with an interest rate of 6% per year and a repayment period of 20 years, calculate the total repayment to be paid by the factory. Syarikat MEKAR Sdn. Bhd. applies for a RM150,000 loan to build a new factory. Interest on the loan is 9% per annum compounded monthly. If the company can afford to pay RM2500 a month, calculate how long it takes to pay off the loan.

(b)

(c)

Q4 (a)

Ali has RM12,000 for investment purposes. His bank has offered the following three choices: 1. A special saving certificate that will pay RM100 each month for 5 years and a lump sum payment at the end of 5 years of RM13,000 2. Buy a share that will be worth RM20,000 in 5 years 3. Put the money in a savings account that will have an interest rate of 12% per year compounded monthly Make a recommendation to Ali using present worth analysis.

Q5 (a)

Classify each of the following each cash flows as a benefit, disbenefit, or cost. 1. RM800,000 per year maintenance by highway construction company. 2. RM600,000 per year loss of revenue by fruit traders because of highway construction. 3. RM1,000,000 per year increase of revenue by small company because of saving in moving time of using new highway.

(b)

Two routes are under consideration for a new highway segment. The long route would be 25 km with initial cost of RM21 million. The short trans-mountain route would span 10 km with an initial cost of RM45 million. Maintenance cost are estimated at RM40,000 and RM15,000 per year for the long route and the short route, respectively. Additionally, a major overhaul and resurfacing will be required every 10 years at a cost of 10% of the first cost of each route. The volume of traffic is expected to be 400,000 vehicles per year, regardless of which route is selected. If the vehicle operating expense is assumed to be 35 cent/km and the value of reduced travel time for the short route is estimated at RM900,000 per year, determine which route should be selected, using a conventional B/C analysis. Assume an infinite life for each road, an interest rate of 6% per year, and that one of the roads will be built.

Q6

(a)

The increase in R&R in the north-south highway has a positive impact on the demand for cakes like pau inti. Thus, a SME company plans to upgrade their food processing system based on two moderate term option. The first option is to upgrade to a fully automated system with an initial cost of RM 80,000, life cycle of 5 years with residual value of RM 15,000. System operating cost is RM 7,000 per annum. The second option is to upgrade to a semi-automated system with an initial cost of RM 40,000, life cycle of 5 years without any residual value. The system operating with higher costs, that is, RM 12,000 per annum. i. Calculate the present value (PW) investment for the two systems considered based on the expected MARR of 20% per year.

ii. Determine the most economic operating system for investment purposes.

Q7

You are appointed as a contractor for a Highway project. One of your tasks is to set up the asphalt-mixing plant equipment which has a choice of three sites. Three sites available are A, B and C. You estimate that it will cost RM 3.50 per cubic metre mile (m3-mile) to haul the asphalt-paving material from the mixing plant to the job location. Refer to the table below for the factors relating to these three sites. Table : Cost Factors of alpha-mixing plant equipment Cost Factor Average hauling distance Monthly rental of site Cost to set up & remove Equipment Hauling expense Flag person Authority Permit A 8 miles B 4.5miles C 2 miles

RM 5000 RM 57000 RM 3.50/m3-mile Not required RM 500

RM 10000 RM 90000 RM 3.50/m3-mile RM 110/day RM 500

RM 8000 RM 73000 RM 3.50/m3-mile Not Required RM 1000

The job requires 150000 m3 of mixed-asphalt-paving material. You are given by your client to complete in five months (20 weeks of 6 working days per week). The delivered of paving material is paid for RM 50 per m3.

a) b)

List fixed cost and variable cost from the cost factor listed in the table. i) ii) iii) Compute all fixed costs and variable cost for all three sites - A, B and C. Identify the site you will choose. Justify why do you choose the site in b)(ii).

c)

List Total Cost (TC) equation correspond to the site of A, B and Cby using linear equation y = mx + c Assume that Total Revenue (TR) is equal to Total Cost (TC). Calculate how much cubic metre you have to deliver before you start making a profit for the site you already chose in (b)(ii).

d)

Q8 (a)

As a member of an engineering project team, your task is to design new processing facility at Western Digital (WD). The design project involves the portion of the catalytic system that requires pumping heavy metal slurry that is corrosive and contains abrasive particles. In this case, you have three lined slurry pump units as the details in the table below. Those pumps have equal output capacity, however they are different in terms of manufacturers, lives and costs. (The MARR is 20% per year)

Table: manufacturers, lives and costs of three lined slurry pump Pump Model Grundfos ST12 Ebara TU25 Shoufu HM11 Capital Investment RM 42500 RM 37000 RM 32000 Annual Expenses: Electrical Energy RM 1500 RM 2800 RM 4200 Maintenance RM 900 in year 1, RM 1500 in year 1, RM 1900 in year 1, and increasing RM and increasing RM and increasing RM 400/yr thereafter 350/yr thereafter 750/yr thereafter Useful life (years) 10 8 6 Market Value RM 7500 RM 3500 RM 1000 (Disposal Cost) a) Draw cash-flow diagrams for all three types of pumps (Grundfos ST12, Ebara TU25 and Shoufu HM11). Calculate Annual Worth (AW) for all pumps according to MARR = 20%. Identify which slurry pump should you select with reasons.

b) c)