Homework Solutions For Engineering Economic Analysis 11th Ed

341 Homework Solutions For Engineering Economic Analysis 11tb Edit

Based on the provided excerpt from the engineering economic analysis homework, the core assignment involves analyzing decision-making scenarios using net present worth (NPW) values, interest rates, and incremental analysis to determine the preferred alternative among various construction options—namely 3-story, 4-story, and 5-story buildings, as well as the option to sell the parking lot.

The tasks focus on interpreting NPW tables at different interest rates, making decisions based on whether the minimum acceptable rate of return (MARR) exceeds certain thresholds, and performing incremental analysis at a specific MARR of 10%. The analysis hinges on comparing NPW values and understanding the economic implications of each alternative over the lifespan of the project.

Paper For Above instruction

Economic decision-making in engineering projects necessitates a comprehensive understanding of the financial viability of alternative options through tools such as Net Present Worth (NPW) analysis and incremental analysis. The provided data and tasks illustrate how engineers and decision-makers evaluate multiple alternatives—specifically different building structures and sale options—by analyzing their NPW values across varying interest rates, thereby guiding investment and operational choices under economic constraints.

NPW analysis is a crucial methodology in engineering economics, allowing decision-makers to compare the present value of cash inflows and outflows associated with each alternative. In the context of the provided data, several building options are assessed at different interest rates, which influence the NPW calculations. For each interest rate—ranging from 0% to 23%—the NPWs of the 3-Story, 4-Story, 5-Story buildings, and the selling option are presented. These NPW values serve as indicators of the economic attractiveness of each alternative at the specific rate. When the NPW is positive, it suggests profitability or net benefit, whereas negative NPW indicates a potential loss or non-viability.

The analysis involves determining the preferred alternative based on the MARR, which signifies the minimum rate of return deemed acceptable for investment. The decision table provided correlates specific interest rate thresholds with the choice of building or sale. For example, at interest rates below 7.7%, the 5-Story building is preferred; between 7.7% and 11.4%, the 3-Story building is favored; between 11.4% and 15.0%, the 5-Story remains preferred; and above 15%, selling the property becomes the optimal decision. This approach ensures that the selected alternative maximizes economic return based on the firm's required rate of return.

Incremental analysis at a MARR of 10% further refines decision-making by comparing the incremental costs and benefits between alternatives. When two options are compared, the comparison focuses on whether the incremental NPW is positive or negative at the specified MARR. If the incremental NPW is positive, the higher-cost alternative or the more extensive investment is justified; if negative, the less costly alternative is preferred.

In this specific case, the analysis suggests constructing a 3-story building is optimal at a 10% MARR, based on the equivalence of the resale value and the initial investment or through a careful calculation of EUAC (Equivalent Uniform Annual Cost). The decision to build or sell ultimately hinges on these financial comparisons, emphasizing the importance of systematic economic evaluation in project planning and management.

Overall, the combination of NPW analyses at varying interest rates, decision tables aligned with MARR thresholds, and incremental analysis provides a robust framework for making sound engineering-economic decisions. These tools enable engineers and managers to balance initial investments, potential returns, and risk factors effectively, ensuring optimal resource allocation and financial performance of engineering projects.

References

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