GEORGE MASON UNIVERSITY CEIE 301 – Engineering and Economic models in civil engineering Spring 2023 HOMEWORK # 7 Due by 04/08/2023 Textbook, Chapter 6 Problems (Use Spreadsheet and paste the spreadsheet in your homework to demonstrate your work) 6.16 Techstreet.com is a small web design business that provides services for two main types of websites: brochure sites and e-commerce sites. One package involves an up-front payment of $90,000 and monthly payments of 1.4¢ per “hit.” Kathy Cutler has a new eBay franchise and is considering the e-commerce package. She expects to have at least 6000 hits per month, and hopes that 1.5% of the hits will result in a sale. If the average income from sales (after fees and expenses) is $150, what rate of return per month will Kathy realize if she uses the website for 2 years?(5 Points) 6.17 On the advice of your uncle, you purchased 10 shares of a well-established U.S.based corporate stock for $20.50 per share. After 1 quarter, you received $0.25 per share dividends each quarter for 2 years. At that point, the stock price had gone down in a short-term recession, so you purchased 10 more shares at $14.00 per share. The stock continued to pay 25¢ per share on all 20 shares. After 3 years (12 quarters) you decided to sell the stock since it had increased in market value to $22.00 per share. Make the following assumptions: (a) no commissions for the purchase or sale of the stock, (b) no government taxes on the dividends, and (c) quarterly compounding of the rate of return. Did you realize the anticipated 7% per year that the stock market historically returns? (5 Points) 6.35 A metal plating company on government contract is considering four different methods for recovering by-product heavy metals from a processing site’s liquid waste. The investment costs and annual net incomes associated with each method have been estimated. All methods have an 8-year life; the MARR is 11% per year; and an AWbased ROR analysis is required by the government agency prior to final selection. (a) If the methods are independent, because they can be implemented at different plants, which ones are acceptable? (b) If the methods are mutually exclusive, select the economically best one. (10 Points) Method FirstCost, $ SalvageValue$ Annual Net Income, $/year A −30,000 +1,000 +4,000 B −36,000 +2,000 +5,000 C −41,000 +500 +8,000 D −53,000 −2,000 +10,500 6.37 Terry, an engineering technology graduate who is very entrepreneurial, wants to start an excavation and foundation business in Orlando by investing his own savings to fund part of the start-up. A primary decision is the size of a used dump truck to purchase. He knows that as the bed size increases, the net income increases, but he is uncertain whether the incremental expenditures for the larger sizes are justified. The estimated cash flows are listed below; all trucks have a 5-year useful life. Terry expects a return of at least 18% per year on this investment. (a) Determine which size truck he should purchase. (b) If two trucks are to be purchased, select the size of the second truck. (c) Make both selections using a spreadsheet. (Using single-cell functions for each incremental analysis is acceptable.) Truck Bed Size, m3 Initial Cost, $ M&O, $/year Annual Revenue, $/year Salvage Value, $ 8 −30,000 −14,000 26,500 2,000 10 −34,000 −15,500 30,000 2,500 15 −38,000 −18,000 33,500 3,000 20 −48,000 −21,000 40,500 3,500 25 −57,000 −26,000 49,000 4,600 (10 Points) 6.41 Spectrum Imaging Systems is considering the purchase of a new printer based on recent contracts it received for printing weekly magazines and mail-out advertising materials. The operating costs and revenues generated are related to a large extent to the speed and other capabilities of the printer. Spectrum uses a 3-year planning period and a MARR of 15% per year. Which of the four printers detailed below should the company acquire on the basis of an incremental ROR analysis? Printer First Cost, $ AOC, $ per year Revenue, $ per year Salvage Value, $ Nx-1 −500,000 −350,000 450,000 70,000 Nx-2 −600,000 −300,000 460,000 85,000 Nx-3 −650,000 −275,000 480,000 95,000 Nx-4 −750,000 −200,000 510,000 120,000 (10 Points) ------------------------------------------------------------------------------------------------------------
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