Engineering Economy - Jun 2015
Mechanical Engg. (Semester 7)
TOTAL MARKS: 100
TOTAL TIME: 3 HOURS (1) Question 1 is compulsory.
(2) Attempt any four from the remaining questions.
(3) Assume data wherever required.
(4) Figures to the right indicate full marks. 1 (a) Explain the role of an Engineering and challenges with respect to Econonics.(6 marks) 1 (b) Explain the concept of law of demand and supply.(4 marks) 1 (c) List the six compound interest factors and their relationship.(6 marks) 1 (d) A person takes a loan of Rs. 12,000 from a bank at an interest rate of 18% per annum. Find the amount if the interest is compounded.
i) Annually ii) Half yearly iii) Quarterly iv) Monthly.(4 marks) 2 (a) What is the significance of cash flow diagram? Sketch CFD for i) Borrower's viewpoint ii) Lender's viewpoint.(6 marks) 2 (b) The following alternatives are available to accomplish an objective of 12 years duration:
Compare the present worth of the alternatives using an interest rate of 7%.
|Plan A||Plan B||Plan C|
| Life Cycle |
| 6 years |
| 3 years |
| 4 years |
i) Service life
ii) Accounting life
iii) Economic life.(6 marks) 3 (b) Two models of small machines perform the same function. Type I machine has a low initial cost of Rs. 9,500, relatively high operating costs of Rs. 1,900 per year more than those of the type II machine, and a short life of 4 years. The more expensive Type II machine costs Rs. 25,100 and can be kept in service economically for 8 years. The scarp value from either machine at the end of its life will barely cover its removal cost. Which is preferred when the minimum attractive rate of return is 8 percent?(6 marks) 3 (c) A person wants to buy a home theatre system. He estimates that it will last at least for 10 year at the end of which it will not have any salvage value. Show room offers him two alternative ways to pay for the system.
i) Pay Rs 1,00,000 immediately and Rs. 50,000 at the end of one year.
ii) Pay nothing until the end of three years and make single payment of Rs. 2,00,000.
If the buyer believes 12% is a suitable rate of interest which alternative is best?(8 marks) 4 (a) A company is in the process of selecting the best alternative among the following three mutually exclusive alternatives. Find the best alternatives based on rate of return (calculation) comparisons.
|Alternative||Initial Investment||Anual Revenue||Life in years|
| A1 |
| Rs. 50,00,00 |
| Rs. 10,00,000 |
| 10 years |
ii) Balance sheet.(6 marks) 6 (c) Prepare a Balance sheet for the given data:
|Dividend payable||Rs. 72,000||Debtors||Rs. 1,60,000|
|Bank balance||Rs. 10,000||Bill payable||Rs. 20,000|
|Equity shares||Rs. 2,00,000||Plant & Equipment||Rs. 80,000|
|Provision for taxes||Rs. 40,000||Bills receivable||Rs. 20,000|
|Stock||Rs. 77,000||Creditors||Rs. 55,000|
|8% preference shear||Rs. 1,35,000||General reserves||Rs. 40,000|
|Land & building||Rs. 2,00,000||Cash in hand||Rs. 15,000|
Determine the overhead rate at 70%, 80% and 90% plant capacity.
|Particulars||Plant capacity (80%)|
| Variable overheads |
Semi Variable overheads
Power (50% fixed)
Repairs and maintenance (60% fixed)
Estimated labour hours