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Assignment 1

This document is an assessment cover sheet for ENEE 300: Engineering Economics, detailing Assignment 1 due on March 23, 2025. It outlines the course learning outcomes and includes four questions related to economic analysis, retirement savings, maintenance fund calculations, and investment for future expenses. Each question has specific marks allocated, totaling 7.5 marks for the assignment.

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Tilahun Eirku
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25 views2 pages

Assignment 1

This document is an assessment cover sheet for ENEE 300: Engineering Economics, detailing Assignment 1 due on March 23, 2025. It outlines the course learning outcomes and includes four questions related to economic analysis, retirement savings, maintenance fund calculations, and investment for future expenses. Each question has specific marks allocated, totaling 7.5 marks for the assignment.

Uploaded by

Tilahun Eirku
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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Assessment Instrument Cover Sheet

Course Code: ENEE 300 Course Title: Engineering Economics


Semester: Spring Academic Year: 2024/2025
Assessment Instrument: Assignment 1 Due Date: 23rd March 2025
Course Instructor: Dr. Amjad Hussain College/Department: College of Engineering
and Information Technology (CEIT)

This assessment instrument assesses the following Course Learning Outcomes (CLO):

Question Total Student


Q. No. CLO # CLO Description
Mark Marks
Apply economics analysis methods such as
1, 2 CLO 1 cost, RoR, payback, benefit-cost ratio, break- 3.75
even on engineering projects or problems.
Compute the depreciation of an asset to
3, 4 CLO 4 3.75
evaluate its present or future impact.
Total Mark 7.5

Student Name: ........................................................................................

Student ID: ........................................................................................


Q.1 (1.75 marks) Suppose you are presented with two options:

• Option A: receiving $35,000 at the end of four years.


• Option B: receiving Q dollars today.
What value of Q would make you indifferent to your choice between Q dollars today and the
promise of $35,000 at the end of four years? Assuming that if you select Option B, you would
invest the money in an account that pays 8% interest, given that you don't require the money
right now. Additionally, it is guaranteed that the $35,000 will be paid without any risk.

Q.2 (2.0 marks) Procrastination can have significant financial implications, especially when it
comes to saving for retirement. Consider this scenario: Imagine you begin making $3,000
annual contributions to your retirement fund starting at age 25 and earn an 7% return on
investment. If you plan to retire by age 60, by the time you retire, you'll have accumulated a
substantial sum F.
1) Calculate the accumulated amount F.
2) Now, if you have the goal of saving the same amount by the time of retirement, how
much would be the required annual contributions if you start saving:
a. At age 30 and retire at age 60?
b. At age 35 and retire at age 60?
c. At age 40 and retire at age 60?

Q.3 (2.5 marks) A paper manufacturing company has recently acquired a new machine with a
useful life of six years. The operations team anticipates that maintenance costs for the machine
during the first year will be $2,000. With the machine aging, maintenance costs are projected
to increase by $300 each year for the rest of its life. Maintenance costs will be incurred at the
end of every year. The company wants to establish a maintenance fund that will yield a 10%
annual return. All future maintenance expenses will be sourced from this fund. What initial
amount should the company deposit into the fund today?

Q.4 (1.75 marks) Wilson Technology, a growing machine shop, wishes to set aside money now
to invest over the next four years in automating its customer service department. The company
can earn 8% on a lump sum deposited now, and it wishes to withdraw the money in the
following increments:
• Year 1: $20,000, to purchase a computer and database software designed for customer
service use;
• Year 2: $3,000, to purchase additional hardware to accommodate anticipated growth in
use of the system;
• Year 3: No expenses; and
• Year 4: $5,000, to purchase software upgrades.

How much money must be deposited now to cover the anticipated payments over the next 4
years?

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