23-CS-1 Engineering Economics · December 2017
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
National Exams — December 2017 — 11-CS-1 Engineering Economics. Open book; non-communicating calculator permitted. Any four of the five questions constitute a complete paper; all questions are of equal value. Fully worked solutions to all five questions follow; standard compound-interest factors are used and minor rounding is immaterial.
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
The defender's first cost is its current market value, $49,000. For each candidate holding period $n$ the capital-recovery term is $49{,}000(A/P,10\%,n) - S_n(A/F,10\%,n)$, and the O&M costs — which differ year to year — are first brought to $t=0$ and then spread over the same $n$ years:
Worked for $n=2$: capital $= 49{,}000(0.576190)-19{,}875(0.476190) = 28{,}233 - 9{,}464 = \$18{,}769$; O&M $= [17{,}000(0.909091)+21{,}320(0.826446)](0.576190) = 33{,}074(0.576190) = \$19{,}057$. Repeating for each $n$:
| n (yr) | Capital cost | O&M equiv. | EAC(n) |
|---|---|---|---|
| 1 | $22,400 | $17,000 | $39,400 |
| 2 | $18,769 | $19,057 | $37,826 |
| 3 | $14,974 | $21,398 | $36,372 |
| 4 | $14,005 | $24,065 | $38,070 |
EAC is minimized at n = 3 years (≈$36,372), so the old press's remaining economic life is 3 years.
The new press's EAC ($35,000) is below the old press's minimum EAC ($36,372) and below its next-year marginal cost ($39,400). Since owning the new press is cheaper than keeping the old one, yes—replace the old press now.
The original $130,000 purchase price (7 years ago) is the sunk cost—unrecoverable and irrelevant. Only the current market value ($49,000) and future costs matter.
