PROJECT IA
1. GEOCON SEALANTS AND SHEA-JONES MANUFACTURE SPECIALIZED EQUIPMENT FOR SEALING TUNNELS. THE WASHINGTON METRO SYSTEM HAS A PROBLEM WITH GROUNDWATER CAUSING ELECTRI-CAL PROBLEMS IN THE VENTILLATION SYSTEM. THE TWO COM-PETING COMPANIES HAVE SUBMITTED THE FOLLOWING COST PROPOSALS TO THE TRANSIT AUTHORITIES.
ALTERNATE A ALTERNATE B
GEOCON SHEA-JONES
INITIAL $100,000 $150,000
COST
OPERATION & $2200/YR $1200/YR
MAINTENANCE
TECHNICAL $1500 $1200
SUPPORT/ YEARS 2 AND 4 YEARS 3 AND 6
EQUIPMENT $1000/YR $1500/YR
UPGRADE YEARS 2 AND 4 YEARS 3 AND 6
SALVAGE $40000 $60000
SAVINGS $35000/YR $35000/YR
ON TRANSIT
SHUTDOWNS
SAVINGS $10000/YR 11%/YEAR
INCREASE START YEAR 2 START YEAR 3
INTEREST
COST 6% CP QUARTERLY 2% CP MONTHLY
SAVINGS 1.5%/YR 1.5%/YR
USEFUL 4 YRS 6 YRS
LIFE
-2-
CE 3361 NAME:____________________
PROJECT IA
DUE: 8 OCTOBER 2015
SHOW ALL WORK AND CALCULATIONS
1. WHAT ARE THE EFFECTIVE ANNUAL INTEREST RATES ON COST?
(5) ALTERNATE A
(5) ALTERNATE B
2. WHAT IS THE PAYMENT PERIOD?
(5) ALTERNATE A
(5) ALTERNATE B
3 CONSTRUCT THE CASH FLOW DIAGRAM OF EITHER ALTERNATE A
(GEOCON) OR ALTERNATE B (SHEA) TO MAKE AN ECONOMIC
ANALYSIS COMPARISON OF THE TWO ALTERNATIVES