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MEM670 Assignment 1 Mac July 2023

This document is a group assignment prepared by Aiman Asyraaf Bin Roslan for the course MEM670 Engineering Economics at Universiti Teknologi MARA Cawangan Pulau Pinang. It contains 7 questions related to engineering economics calculations involving concepts like present worth, future worth, uniform annual costs, interest rates, etc. The questions provide estimates for various industrial processes and ask to calculate costs, savings, investment amounts, and identify the most economical option based on present and future worth analyses.

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AIMAN ASYRAAF BIN ROSLAN
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312 views9 pages

MEM670 Assignment 1 Mac July 2023

This document is a group assignment prepared by Aiman Asyraaf Bin Roslan for the course MEM670 Engineering Economics at Universiti Teknologi MARA Cawangan Pulau Pinang. It contains 7 questions related to engineering economics calculations involving concepts like present worth, future worth, uniform annual costs, interest rates, etc. The questions provide estimates for various industrial processes and ask to calculate costs, savings, investment amounts, and identify the most economical option based on present and future worth analyses.

Uploaded by

AIMAN ASYRAAF BIN ROSLAN
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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MEM670

GROUP ASSIGNMENT

Prepared for

ABDUL RAHMAN BIN HEMDI

MEM670 - ENGINEERING ECONOMICS

Universiti Teknologi MARA Cawangan Pulau Pinang

Name Student ID

AIMAN ASYRAAF BIN ROSLAN 2021492486

PEM2456B

FACULTY OF MECHANICAL ENGINEERING


QUESTION 01

Syringe pumps often fail because reagents adhere to the ceramic piston and deteriorate the seal.
Trident Chemical developed an integrated polymer dynamic seal that provides a higher sealing
force on the sealing lip, resulting in extended seal life. One of Trident’s customers expects to
reduce downtime by 40% as a result of the new seal design. If lost production would have cost
the company $100,000 per year for the next 4 years, how much could the company afford to
spend now on the new seals, if it uses an interest rate of 12% per year? (PO11: 4 marks: 2%)
QUESTION 02
Daeho Electric, which manufactures brush dc servomotors, budgeted $75,000 per year to pay for
certain components over the next 5 years. If the company expects to spend $15,000 in year 1,
how much of a uniform (arithmetic) increase each year is the company expecting in the cost of
this part? Assume the company uses an interest rate of 10% per year. (PO11: 4 marks: 2%)
QUESTION 3

Standby power for water utility pumps and other electrical devices is provided by diesel-powered
generators. As an alternative, the utility can use natural gas to power the generators, but it will be
a few years before the gas is available at remote sites. The utility estimates that by switching to
gas, it will save $20,000 per year, starting 3 years from now. At an interest rate of 10% per year,
determine the present worth in year 0 of the projected savings that will occur in years 3 through
10. (PO11: 4 marks: 2%)
QUESTION 4

A small oil company is planning to replace its Coriolis flowmeters with Emerson Hastelloy
flowmeters. The replacement process will cost the company $50,000 three years from now. How
much money must the company set aside each year beginning now (year 0) in order to have the
total amount available immediately after making the last deposit at the end of year 3? Assume
the company can invest its funds at 15% per year. (PO11: 4 marks: 2%)
QUESTION 5

In ‘N Out Payday Loans advertises that for a fee of only $12, you can immediately borrow up to
$300 for one month. If a person accepts the offer, what are ( a ) the nominal interest rate per year
and ( b ) the effective rate per year? (PO11: 4 marks: 2%)
QUESTIONS 6

A chemical processing corporation is considering three methods to dispose of a nonhazardous


chemical sludge: land application, fluidized-bed incineration, and private disposal contract. The
estimates for each method are shown. Determine which has the least cost on the basis of a
present worth comparison at 10% per year for the following scenarios: (PO12: 18 marks: 5%) (a)
The estimates as shown (10 marks: 3%) (b) The contract award cost increases by 25% every
2-year renewal (8 marks: 2%)

Land Application Incineration Contract

First cost, $ -130000 -900000 0

Annual operating cost -95000 -60000 -120000


per year, $

Salvage value $ 25000 300000 0

Life, Years 3 6 2
QUESTIONS 7

Two processes can be used for producing a polymer that reduces friction loss in engines. Process
T will have a first cost of $750,000, an operating cost of $60,000 per year, and a salvage value of
$80,000 after its 2-year life. Process W will have a first cost of $1,350,000, an operating cost of
$25,000 per year, and a $120,000 salvage value after its 4-year life. Process W will also require
updating at the end of year 2 at a cost of $90,000. Which process should be selected on the basis
of a future worth analysis at an interest rate of 12% per year? (PO12: 18 marks: 5%)

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