BHU- Construction Technology & Management Construction Economics

Construction Economics (CENG-6108)

Assignment- 1
1. A person deposited Birr.50,000 in a bank for one year and got Birr.75,000 at the end
of one year. Find out the total amount of interest and the rate of interest per year on
the deposited money.
2. If a person borrowed Rs.1,50,000 for one year and returned back Rs.1,75,000 at the
end of one year. Find out the total amount of interest and the rate of interest per
year on the borrowed money.
3. A person has taken a loan of amount of Birr.4,700,000 from a bank for a period of 5
years. Estimate the amount of money, the person will repay to the bank at the end
of 5 years for the following cases;
a) Considering simple interest rate of 9.5% per year
b) Considering compound interest rate of 12.5% per year.

4. What are the equivalent amounts of Birr.125000 (today) at an interest rate of 6.5%
per year for the following cases?
a) 1 year from now (future)
b) 1 year before.
c) 2.5 year from now (future)
d) 2 year before.
5. A construction engineer who is planning his retirement has decided that he will have
to withdraw Birr. 6,000 from his savings account at the end of each year. How much
money must the engineer have in the bank at the start of his retirement, if his
money earns 8.5% per year, compounded annually, and he is planning a 20-year
retirement?
6. Suppose an engineer deposits Birr. 340000 in a savings account that pays interest at
the rate of 7.5% per year, compounded annually. If all of the money is allowed to
accumulate, how much money will the engineer have after 10 years?
7. Engineer deposits Birr. 7850 in a savings account at the end of each year, starting
now, for the next 25 years. If the bank pays 8.5% per year, compounded annually,
how much money will accumulate by the end of the 25-year period?
8. A certain sum of money will be deposited in a savings account that pays interest at
the rate of 7.5% per year, compounded annually. If all of the money is allowed to
accumulate, how much must be deposited initially so that Birr. 50000 will have
accumulated after 15 years?
9. An engineer who is about to retire has accumulated $150,000 in a savings account
that pays 6.65% per year, compounded annually. Suppose that the engineer wishes
to withdraw a fixed sum of money at the end of each year for 10 years. What is the
maximum amount that can be withdrawn?

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10. Suppose that a fixed sum of money, ‘A’, will be deposited in a savings account at the
end of each year for 15 years. If the bank pays 9% per year, compounded annually,
find ‘A’ such that a total of $550,000 will be accumulated at the end of the 15-year
period.
11. There are two alternatives for purchasing a concrete mixer. Both the alternatives
have same useful life. The cash flow details of alternatives are as follows;
Alternative-1: Initial purchase cost = birr.23,00,000, Annual operating and
maintenance cost = Birr.20,000, Expected salvage value = Birr.125,000, Useful
life = 5 years.
Alternative-2: Initial purchase cost = Birr.25,00,000, Annual operating and
maintenance cost = Birr.45,000, Expected salvage value = Birr.170,000, Useful
life = 5 years. Using present worth method, find out which alternative should
be selected, if the rate of interest is 7.5% per year.
The annual revenue to be generated from production of concrete (by concrete
mixer) from Alternative-1 and Alternative-2 are Rs.580000 and Rs..55000
respectively. Compute the equivalent present worth of the alternatives at the same
rate of interest i.e. 7.5% per year and find out the economical alternative.

12. There are two alternatives for purchasing an Aggregate Crusher Plant. Both the
alternatives have different useful life. The cash flow details of alternatives are as
follows;
Alternative-1: Initial purchase cost = birr.455,000, Annual operating and
maintenance cost = Birr.40,000, Expected salvage value = Birr.1,25,000,
Useful life = 5 years.
Alternative-2: Initial purchase cost = Birr.200,000, Annual operating and
maintenance cost = Birr.25,000, Expected salvage value = Birr.70,000, Useful
life = 10 years.
Using Future worth method, find out which alternative should be selected, if the
rate of interest is 10% per year.
13. There are two alternatives for purchasing a concrete mixer and following are the
cash flow details;
Alternative-1: Initial purchase cost = Birr.3500000, Annual operating and
maintenance cost = Rs.950000, Expected salvage value = Rs.225000, Useful life = 5
years.
Alternative-2: Initial purchase cost = Birr.2500000, Annual operating and
maintenance cost = Rs.85000, Expected salvage value = Rs.750000, Useful life = 10
years.
The annual revenue to be generated from production of Aggregate Crusher plant from
Alternative-1 and Alternative-2 are Rs.50000 and Rs.45000 respectively. Compute the

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equivalent uniform annual worth of the alternatives at the interest rate of 8% per year and
find out the economical alternative.
14. A equipment supply contractor has two options (i.e. from two different
manufacturing companies, Company-1 and Company-2) to purchase a Laboratory
compressive strength equipment for bule hora university. The details of cash flow of
the two options are given below;
Company-1 Equipment: Initial purchase cost = Rs.7000000, Annual operating
cost including labor and maintenance = Rs.85000, Cost of new set of
materials to be replaced at the end of year ‘4’ and year ‘8’ = Rs.150000 each,
Expected salvage value = Rs.750000, Useful life = 10 years.
Company-2 Equipment: Initial purchase cost = Rs.5500000, Annual operating
cost including labor and maintenance = Rs.40000, Cost of new set of tires to
be replaced at the end of year ‘3’ and year,’6’= Rs.100000 each, Expected
salvage value = Rs.700000, Useful life = 10 years.
Determine which company equipment should be selected on the basis of equivalent
uniform annual worth at the interest rate of 10% per year.

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