Name: Sanjeev Nehru Jawahar Nehru

ID: 16001174

Assignment 1:

GDB3023: Engineering Economics and Entrepreneurship

Introduction to Engineering Economy- Chapter 1

1. Stan Moneymaker needs 15 gallons of gasoline to top off his automobile’s gas tank. If he drives
an extra eight miles (round trip) to a gas station on the outskirts of town, Stan can save $0.10
per gallon on the price of gasoline. Suppose gasoline costs $3.90 per gallon and Stan’s car gets
25 mpg for in-town driving. Should Stan make the trip to get less expensive gasoline? Each mile
that Stan drives creates one pound of carbon dioxide. Each pound of CO2 has a cost impact of
$0.02 on the environment. What other factors (cost and otherwise) should Stan consider in his
decision making? (1.2)

Solutions:

Since

Gas Required by Car= 15 gallons,

Gas price in Town= $3.90 per Gallon

Gas price if he drives 8 extra miles: $3.80 per Gallon

Saving amount between two gas locations; $0.10 per Gallon

Car mileage: 25 miles per gallon

Gallons of Gas Consumed for 8 miles ride:

Gallonsof Gas 1 1 1
= X miles¿ X 8 miles
8 miles Car Mileage ( mpg ) 8 25 mpg

gallons
¿ 0.32
8 miles

Saving Considering Mileage for 8 Miles Ride:

$ 3. 80
¿ ¿) X 15 gallons) – (¿) X ( ¿¿
Gallons

= $ 0.284

Real Saving considering carbon dioxide cost impact:

Final Saving s=Saving OutskirtsTopup− ( Pound CO2 Created Cost Impact

(Outskirts Topup )
1 Pound $ 0.02
¿ $ 0.284−( X X 8)
Miles Pound
= $ 0.124

Yes, If he was to choose of obtaining the gasoline on the outskirt, the amount he will save is $ 0.124 in
which considering the fact of Carbon dioxide contribution and the Gas consumption price for the 8 miles
travel. Thus, if he were to have a trip outskirt, the amount he saved would be $0.124 which is not a
good value in return for 8 mile drive out of town.

He would consider the following factor in which the certainty would be high and may be time and cos
consuming and proceed for in town top up:

a) Time Consuming leading to NPT (Non-Productive Time)

3. A typical discounted price of a AAA battery is $0.75. It is designed to provide 1.5 volts and 1.0
amps for about an hour. Now we multiply volts and amps to obtain power of 1.5 watts from the
battery. Thus, it costs $0.75 for 1.5 Watt-hours of energy. How much would it cost to deliver one
 kilo Watt-hour? How does this compare with the cost of energy from your local electric utility at
$0.10 per kilo Watt-hour? (1.2/1.3)

Solution

Price of AAA Battery: $0.75

Energy Generated by Battery, Watt /hour = (Work/ Time)

(Voltage X Current)/ hr

(1.5 X 1.0) = 1.5 Watt/hr

So, the usage of AAA battery would cost $0.75 for a 1.5 Watt/hr

1
( )
Cost Consumption for 1 Watt/hr = ( Cost for 1.5 Watt/hr) X Energy Cons
umption
1 $ 0.5 0
= $0.75 X ( ¿=
1.5Watt /hr kw/ hr

kW 1
Cost of Energy by local electric utility for 1Watt/hr = (Cost of Energy for 1( hr ) X )
hr 1000
$ 0.10 1
=( X )
kw /hr 1000
$ 0.00 0 1
=
kw/hr
The local electric utility only cost $0.0001 per kilo Watt-hour but as for the battery the cost consumption
is $0.50 per kilo Watt-hour. Thus, to look at an option of one time use for the first hour, most probably
using the local current utility would be a better option as it is 5000 times cheaper. But as for the battery,
the consumption is based on the battery price. So, it is a one-time purchase for the battery and will not
have any on-going charges but as for local utility, the cost will tend to be on going.

In conclusion, if the usage of battery contributes to the cost of energy exceeds that of 5000 times
compared to local utility cost, then I could say battery is a better option. And if the consumption is less
than that 5000 times margin in cost, then local utility would be the best option. Here the judgement is
based on the amount of usage time which contributes to either battery option or the local utility
power consumption.
5. Henry Ford’s Model T was originally designed and built to run on ethanol. Today, ethanol (190-
proof alcohol) can be produced with domestic stills for about $0.85 per gallon. When blended
with gasoline costing $4.00 per gallon, a 20% ethanol and 80% gasoline mixture costs $3.37 per
gallon. Assume fuel consumption at 25 mpg and engine performance in general are not
adversely affected with this 20–80 blend (called E20). (1.3)

a. How much money can be saved for 15,000 miles of driving per year?
b. How much gasoline per year is being converted if one million people use the E20 fuel?(1.3)
 12. During your first month as an employee at Greenfield Industries (a large drill-bit manufacturer),
you are asked to evaluate alternatives for producing a newly designed drill bit on a turning
machine. Your boss’ memorandum to you has practically no information about what the
alternatives are and what criteria should be used. The same task was posed to a previous
employee who could not finish the analysis, but she has given you the following information: An
old turning machine valued at $350,000 exists (in the warehouse) that can be modified for the
new drill bit. The in-house technicians have given an estimate of $40,000 to modify this
machine, and they assure you that they will have the machine ready before the projected start
date (although they have never done any modifications of this type). It is hoped that the old
turning machine will be able to meet production requirements at full capacity. An outside
company, McDonald Inc., made the machine seven years ago and can easily do the same
modifications for $60,000. The cooling system used for this machine is not environmentally safe
and would require some disposal costs. McDonald Inc. has offered to build a new turning
machine with more environmental safeguards and higher capacity for a price of $450,000.
McDonald Inc. has promised this machine before the startup date and is willing to pay any late
costs. Your company has $100,000 set aside for the start-up of the new product line of drill bits.
For this situation,
a. Define the problem.
b. List key assumptions.
c. List alternatives facing Greenfield Industries.
d. Select a criterion for evaluation of alternatives

20. A deep-water oil rig has just collapsed into the Gulf of Mexico. Its blowout-preventer system has
failed, so thousands of barrels of crude oil each day are gushing into the ocean. List some alternatives
for stopping the unchecked flow of oil into the Gulf.(1.3)