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CH #3 Numericals

This document contains 12 numerical engineering economics problems related to estimating costs, revenues, and savings related to various construction, manufacturing, and energy projects. The problems cover topics like estimating the costs and revenues of building a home, calculating annual heating and cooling costs for an office building, estimating the costs and markup of an oil change, and calculating the implicit cost per ton of reducing greenhouse gas emissions.

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Ms Noor ul Ain
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116 views3 pages

CH #3 Numericals

This document contains 12 numerical engineering economics problems related to estimating costs, revenues, and savings related to various construction, manufacturing, and energy projects. The problems cover topics like estimating the costs and revenues of building a home, calculating annual heating and cooling costs for an office building, estimating the costs and markup of an oil change, and calculating the implicit cost per ton of reducing greenhouse gas emissions.

Uploaded by

Ms Noor ul Ain
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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The University of Faisalabad

Department of Electrical Engineering


Numerical Engineering Economics

Chapter 3

1. You are planning to build a new home with approximately 2,000–2,500 gross square feet of
living space on one floor. In addition, you are planning an attached two-car garage (with
storage space) of approximately 450 gross square feet. Develop a cost and revenue structure
for designing and constructing, operating (occupying) for 10 years, and then selling the home
at the end of the 10th year.
2. A “green” (environmentally friendly) office building costs as average of $3.50 per square foot
each year to heat and cool. What is the total annual heating and cooling cost of an office
building that has 10,000 square meters of space?
3. Estimate the cost of an oil change (5 quarts of oil) and a new oil filter for your automobile at a
local service station. It takes a technician 20 minutes to do this job. Compare your estimate
with the actual cost of an oil change at the service station. What percent markup is being made
by the service station?
4. A large electric utility company releases 62 million tons of greenhouse gases (mostly carbon
dioxide) into the environment each year. This company has committed to spending $1.2 billion
in capital over the next five years to reduce its annual emissions by 5%. More will be spent
after five years to reduce greenhouse gases further.
a) What is the implicit cost of a ton of greenhouse gas?
b) If the United States produces 3 billion tons of greenhouse gases per year, how much
capital must be spent to reduce total emissions by 3% over the next five years based on
your answer in Part (a)?
5. An electric power distributor charges residential customers $0.10 per kilowatt-hour (kWh).
The company advertises that “green power” is available in 150 kWh blocks for an additional
$4 per month. (Green power is generated from solar, wind power, and methane sources.
a) If a certain customer uses an average of 400 kWh per month and commits to one
monthly 150 kWh block of green power, what is her annual power bill?
b) What is the average cost per kWh with green power during the year? c. Why does green
power cost more than conventional power?
6. Suppose that your brother-in-law has decided to start a company that produces synthetic lawns
for senior homeowners. He anticipates starting production in 18 months. In estimating future
cash flows of the company, which of the following items would be relatively easy versus
relatively difficult to obtain? Also, suggest how each might be estimated with reasonable
accuracy.
a) Cost of land for a 10,000-square-foot building.
b) Cost of the building (cinder block construction).
c) Initial working capital.
d) Total capital investment cost.
e) First year’s labor and material costs.
f) First year’s sales revenues.
7. A water filtration system in an industrial process was purchased in 2014 for $250,000. It will
be replaced at the end of year 2019. What is the estimated cost of the replacement, based on
the following equipment cost index?
8. The purchase price of a natural gas-fired commercial boiler (capacity X) was $181,000 eight
years ago. Another boiler of the same basic design, except with capacity 1.42X, is currently
being considered for purchase. If it is purchased, some optional features presently costing
$28,000 would be added for your application. If the cost index was 162 for this type of
equipment when the capacity X boiler was purchased and is 221 now, and the applicable cost
capacity factor is 0.8, what is your estimate of the purchase price for the new boiler?
9. A producer of synthetic motor oil for automobiles and light trucks has made the following
statement: “One quart of Dynolube added to your next oil change will increase fuel mileage
by one percent. This one-time additive will improve your fuel mileage over 50,000 miles of
driving.”
10. The Betterbilt Construction Company designs and builds residential mobile homes. The
company is ready to construct, in sequence, 16 new homes of 2,400 square feet each. The
successful bid for the construction materials in the first home is $64,800, or $27 per square
foot. The purchasing manager believes that several actions can be taken to reduce material
costs by 8% each time the number of homes constructed doubles. Based on this information,
a) What is the estimated cumulative average material cost per square foot for the first five
homes?
b) What is the estimated material cost per square foot for the last (16th) home?
11. What is the projected impact on the per unit demanufacturing cost of a 50% increase in training
costs coupled with a 90% increase in transportation costs? What is the revised cost reduction
percentage?
12. An automatic process controller will eliminate the current manual control operation. Annual
cost of the current method is $4,000. If the controller has a service life of 13 years and an
expected market value of 11% of the first cost, what is the maximum economical price for the
controller? Ignore interest. (a) $28,869 (b) $58,426 (c) $26,358 (d) $25,694 (e) $53,344

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