16 GCB3173 GBB3173 ENGINEERING ECONOMICS %26 ENTREPRENEURSHIP (1).pdf

8/13/2019 16 GCB3173 GBB3173 ENGINEERING ECONOMICS %26 ENTREPRENEURSHIP (1).pdf

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UNIVERSITITEKNOLOGIP ETRONAS

FINAL EXAMINATIONSEPTEM BER 2012 SEM ESTERCOURSE : cCB3173 / GBB3173 - ENG|NEER|NG ECONOMTCS& ENTREPRENEURSHIPDATE : osth JRNUARY 2013 (SATURDAY)TIME : 9.00 AM - 12.00 NOON (3 hours)

INSTRUCTIONS TO CANDIDATES1. Answer ALL questions in the Answer Booklet.2. Begin EACH answer on a new page.3. lndicate clearly answers that are cancelled, f any.4. Where applicable, show clearly steps taken in arriving at the solutions andindicate ALL assumptions, if any.5. Do not open this Question Booklet until instructed.

6. Discrete Compounding Table is available in the Engineering Data &Formulae Booklet.Note : i. There are SIX (6) pages in this Question Booklet including

the cover page.ii. Graph Paper & Engineering Data & Formulae Booklet will beprovided.

Universiti Teknologi pETRONAS


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2.GBB 3173

An old asset was purchased five years ago for 75,000. lt can be sold today for 15,000.The operating expenses n the past have been 10,000 per year.However, it is estimated to increase in the future by 1,500 every year over thenext five years. lt is estimated that the market value of the asset will decrease by 1,000every year over the next five years. The company uses a minimumattractive rate of return (MARR) of 10% per year. Determine the total marginalcost of ownership of this old asset for each of the next five years. Use,the formatshown in TABLE Q2 for your analysis.

[15 marks]

TABLE Q2: Format for the Calculation of Total (marginal) Gost (TC,)End ofYear, k MV,End ofYear, k

( )

Loss inMarket Value(MV) duringyear k( )

Cost ofCapital = 10o/oof Beginningof Year MV( )

AnnualOperatingExpenses( )

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3.

cB,B 3173

A frm is evaluating the cash flows of two alternatives as illustrated in TABLE Q3.The firm's minimum attractive rate of return (MARR) is 10% per year.

TABLE Q3: Cash Flows of Two AlternativesEnd ofYear

0 -901 25 02 25 103 254 25 405 25 706 25 90

a. Which of the above two alternatives is preferred based on discountedpayback period? Show your calculation.

[10 marks]b. Which is the preferred alternative using future worth analysis? Explain.

[12 marks]c. ls there any difference in your answer between Q3a and Q3b? Provide

TWO (2) reasons for your justification.

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4GBB 3173

Zeon Berhad, a large profitable corporation, is considering adding someautomatlc equipment to its production facilities. An investment of 500,000 willproduce annual net revenue of 120,000 for a useful life of 10 years. lt isexpected that the salvage value of the automatic equipment at the end of thetenth year is 80,000. The company uses a minimum attractive rate of return(MARR) of 20% per year and the rate of income tax is 30% per year.a. Calculate and tabulate the yearly after-tax cash flows for the above

investment proposal. The company uses straight-line deprecation methodin estimating the depreciation allowance of its assets.

[10 marks]b. Compute the after-tax MARR of the company?

[2 marks]c. Determine the external rate of return (ERR) of the above investment

based on the after-tax cash flows, given the rate of external reinvestment(e) is 15% per year. Show your calculation.[10 marks]

d. Provide your recommendation on the feasibility of the above investment.Explain.

[3 marks]

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5.GBB 3173

A capital investment of 2 million is made now. lt is expected to generate netannual revenue of 0.75 million over a six year planning horizon. The salvagevalue of the investment is estimated at 0.2S million at the end of tf:e sixth year.The minimum attractive rate of return (MARR) is 10% per year.

a. Determine the equivalent annual worth (AW) of the above proposal.

b. Graphically plot an nvestment-balance diagram for the above investment.

Provide THREE (3) valuable points relating to the capital investment thatean be obtained from the investment-balance diagram in Q5b..

-END OF PAPER-

c.

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16 GCB3173 GBB3173 ENGINEERING ECONOMICS %26 ENTREPRENEURSHIP (1).pdf