SPRING 2016

ENGINEERING ECONOMY (MS291)

Instructor: Dr. M Sabir
ASSIGNMENT# 1
INSTRUCTIONS:
This assignment is for both sections (A & B) students.
Plagiarized (copied) assignments will not be accepted and will be marked zero.
Submission date is 12th February 2016(Tuesday) during class timings. No assignment will be
accepted after deadline.
Assignment should be on A4 size pages; assignments on pages tear out from note books will
not be accepted.
Clearly mention your Name, Reg. No and Section on the title page.
Answer all questions.

1. Below table presents the different level of output produced by ABC incorporate. The table
contain some missing values.
(a) Fill in the missing values in the following Table.
(b) If the optimum production level is units of output where Marginal Cost is equal to
Marginal Revenue, how much units of output is the optimum level of production for
the firm ABC Incorporate. (Hint: Total Revenue is defined as follows: Total Revene =
Units of Output prodcued X Price Per Unit)
Units of
Output
produced
0

Total
Cost

Total
Fixed
Costs

Total
Variable
Costs

Marginal Price
Costs
Per Unit

10

12

14

18

25

36

56

Total
Revenue

Marginal
Revenue

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(2) University tuition and fees can be paid by using one of two plans. Early-bird: Pay total
amount due 1 year in advance and get a 10% discount. On-time: Pay total amount due
when classes start. The cost of tuition and fees is $10,000 per year.
(a) How much is paid in the early-bird plan?
(b) What is the equivalent amount of the savings compared to the on-time payment at
the time that the on-time payment is made?
(3) Iselt Welding has extra funds to invest for future capital expansion. If the selected
investment pays simple interest, what interest rate would be required for the amount to
grow from $60,000 to $90,000 in 5 years?

(4) You have just purchased 100 shares of General Electric stock at $30 per share.You will
sell the stock when its market price doubles. If you expect the stock price to increase 12%
per year, how long do you expect to wait before selling the stock.
(5) Metso Automation, which manufactures addressable quarter-turn electric actuators, is
planning to set aside $100,000 now and $150,000 one year from now for possible
replacement of the heating and cooling systems in three of its larger manufacturing plants.
(a) Do draw the cash flow diagram for Metso Automation.
(b) If the replacement wont be needed for 4 years, how much will the company have in
the account, if it earns interest at a rate of 8% per year?

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