Civil and Environmental Engineering Answers

The Parks and Recreation Department of Burkett County estimates that the initial cost of a “barebones” permanent river park will be $2.3 million. Annual upkeep costs are estimated at $120,000. Benefits of $340,000 per year and disbenefits of $40,000 per year have also been identified. Using a discount rate
of 6% per year, calculate (a) the conventional B/C ratio and (b) the modified B/C ratio.

A firm is trying to decide which of two devices to install to reduce costs. Both devices have useful
lives of 5 years and no salvage value. Device A costs $1000 and can be expected to result in $300
savings annually. Device B costs $1350 and will provide cost savings of $300 the first year, but
savings will increase by $50 annually, making the second-year savings $350, the third-year savings
$400, and so forth. With interest at 7%, which device should the firm purchase?

A new solar-cell unit is to be installed in an office complex at an initial cost of $200,000. It is expected
that the system will generate annual cost savings of $25,000 on the electricity bill. The solar cell unit
will need to be overhauled every 5 years at a cost of $7,000 per overhaul. If the annual interest rate is
12%, find the discounted payback period for the solar-cell unit considering the time value of money.
The costs of overhaul are to be considered in calculating the discounted payback period.

A large automobile manufacturer is considering the installation of a high-tech material handling system
for $30,000,000. This system will save $7,500,000 per year in manual labor, and it will incur $2,750,000
in annual operating and maintenance expenditures. The salvage value at the end of the system’s 10-
year life is negligible. If the company’s hurdle rate (MARR) is 10% per year, should the system be
recommended for implementation?

The world’s largest carpet maker has just completed a feasibility study of what to do with the 16,000
tons of overruns, rejects, and remnants it produces every year. The company’s CEO launched the
feasibility study by asking, why pay someone to dig coal out of the ground and then pay someone else
to put our waste into a landfill? Why not just burn our own waste? The company is proposing to build a
$10-million power plant to burn its waste as fuel, thereby saving $2.8 million a year in coal purchases.
Company engineers have determined that the waste burning plant will be environmentally sound, and
after its four-year study period the plant can be sold to a local electric utility for $5 million.
a. What is the IRR of this proposed power plant?
b. If the firm’s MARR is 15% per year, should this project be undertaken?

A 50-kilowatt gas turbine has an investment cost of $40,000. It costs another $14,000 for shipping,
insurance, site preparation, fuel lines, and fuel storage tanks. The operation and maintenance expense for this turbine is $450 per year. Additionally, the hourly fuel expense for running the turbine is $7.50 per hour, and the turbine is expected to operate 3,000 hours each year. The cost of dismantling and disposing of the turbine at the end of its 8-year life is $8,000.
a. If the MARR is 15% per year, what is the annual equivalent life-cycle cost of the gas turbine?
b. What percent of annual life-cycle cost is related to fuel?

A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $600,000, the equipment costs $250,000, and $100,000 additional working capital is required. It is expected that the product will result in sales of $750,000 per year for 10 years,

Refer to the following table of cash flows:
End of year 0 4 8 12 16
Cash flow $5,000 $5,000 $5,000 $5,000 $5,000
What is the annual worth of these cash flows over 16 years when i = 5% per year?

After graduation, you have been offered an engineering job with a large company that has offices in Tennessee and Pennsylvania. The salary is $55,000 per year at either location. Tennessee’s tax burden (state and local taxes) is 6% and Pennsylvania’s is 3.07%. If you accept the position in Pennsylvania and stay with the company for 10 years, what is the FW of the tax savings? Your personal MARR is
10% per year.

The price of a 10-year bond can decline by approximately 9% if interest rates rise by 1% point. To illustrate this, suppose you own a 10-year U.S. Treasury bond that has a bond rate of 2% per year. How much money will you lose if the value of the bond today is $10,000 (face value of the bond) and the yield increases to 3% within the next few months?