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

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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

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