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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