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    Payback BC Method

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    Jam Larson
    This document contains an activity worksheet for an engineering economics class. It provides 4 multi-part problems analyzing investment projects using payback period and benefit-cost ratio methods. Problem 1 evaluates a retrofitted space heating system. Problem 2 analyzes a proposal to convert a downtown street into a pedestrian mall. Problem 3 calculates the discounted payback period of installing a natural gas furnace. Problem 4 examines a proposed solar sea power plant investment. Students are asked to show their work and solutions for each problem.

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    Payback BC Method

    Uploaded by

    Jam Larson
    13 views1 page
    This document contains an activity worksheet for an engineering economics class. It provides 4 multi-part problems analyzing investment projects using payback period and benefit-cost ratio methods. Problem 1 evaluates a retrofitted space heating system. Problem 2 analyzes a proposal to convert a downtown street into a pedestrian mall. Problem 3 calculates the discounted payback period of installing a natural gas furnace. Problem 4 examines a proposed solar sea power plant investment. Students are asked to show their work and solutions for each problem.

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    Payback_BC_Method

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    This document contains an activity worksheet for an engineering economics class. It provides 4 multi-part problems analyzing investment projects using payback period and benefit-cost ratio methods. Problem 1 evaluates a retrofitted space heating system. Problem 2 analyzes a proposal to convert a downtown street into a pedestrian mall. Problem 3 calculates the discounted payback period of installing a natural gas furnace. Problem 4 examines a proposed solar sea power plant investment. Students are asked to show their work and solutions for each problem.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views1 page

    Payback BC Method

    Uploaded by

    Jam Larson
    This document contains an activity worksheet for an engineering economics class. It provides 4 multi-part problems analyzing investment projects using payback period and benefit-cost ratio methods. Problem 1 evaluates a retrofitted space heating system. Problem 2 analyzes a proposal to convert a downtown street into a pedestrian mall. Problem 3 calculates the discounted payback period of installing a natural gas furnace. Problem 4 examines a proposed solar sea power plant investment. Students are asked to show their work and solutions for each problem.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Republic of the Philippines

    CAMARINES NORTE STATE COLLEGE


    F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines

    COLLEGE OF ENGINEERING

    BES 4 – ENGINEERING ECONOMICS


    Activity #5M: Payback Period Method and Benefit-Cost Ratio Method
    Name: __________________________________ Course/Yr/Block: __________

    Intended Learning Outcome: Apply the concepts of Payback Period Method and Benefit-Cost Ratio
    Method on evaluating a proposed projet.
    Content/Topics: Payback Period Method and Benefit-Cost Ratio Method
    Directions: Solve the following problems on a clean sheet of paper. Show a complete solution and write
    legibly. Use ballpens only.
    1. A retrofitted space-heating system is being considered for a small office building. The system can be
    purchased and installed for $120,000, and it will save an estimated 300,000 kilowatt-hours (kWh) of
    electric power each year over a six-year period. Akilowatt-hour of electricity costs $0.10, and the company
    uses a MARR of 15% per year in its economic evaluations of refurbished systems. The market value of
    the system will be $8,000 at the end of six years, and additional annual operating and maintenance
    expenses are negligible. Use the benefit–cost method to make a recommendation.
    2. A proposal has been made for improving the downtown area of a small town. The plan calls for banning
    vehicular traffic on the main street and turning this street into a pedestrian mall with tree plantings and
    other beautification features. This plan will involve actual costs of $6,000,000 and, according to its
    proponents, the plan will produce benefits and disbenefits to the town as follows:
    Benefits:
    Increased sales tax revenue $450,000 per year
    Increased real estate property taxes $325,000 per year
    Benefits due to decreased air pollution $80,000 per year
    Quality of life improvements to users $70,000 per year
    Disbenefits:
    Increased maintenance $175,000 per year
    a. Compute the B–C ratio of this plan based on a MARR of 10% per year and an infinite life for the project.
    b. How does the B–C ratio change for a 20-year project life?
    3. A 2,000 square foot house in New Jersey costs $1,725 each winter to heat with its existing oil-burning
    furnace. For an investment of $5,000, a natural gas furnace can be installed, and the winter heating bill is
    estimated to be $1,000. If the homeowner’s MARR is 6% per year, what is the discounted payback period
    of this proposed investment?
    4. A solar sea power plant (SSPP) is being considered in a North American location known for its high
    temperature ocean surface and its much lower ocean temperature 100 meters below the surface. Power can
    be produced based on this temperature differential. With high costs of fossil fuels, this particular SSPP
    may be economically attractive to investors. For an initial investment of $100 million, annual net revenues
    are estimated to be $15 million in years 1–5 and $20 million in years 6–20. Assume no residual market
    value for the SSPP.
    a. What is the simple payback period for the SSPP?
    b. What is the discounted payback period when the MARR is 6% per year?
    c. Would you recommend investing in this project?

    BES 4 – Engineering Economics Page 1 of 1

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