Fall 2015CMGT 547Managerial Engineering Economics

1. What are the common types of Engineering Economic Decisions? Give an example of each. Briefly describe the fundamental principles of Engineering Economics.

2. What report is used to describe a company’s financial position at the end of a reporting period? Briefly describe its contents.

3. You have just purchased 1000 shares of stock at $70 per share. Your analysis indicates that the stock price will increase 10% per year. How much will your investment be worth in 5 years? When will the market price have doubled? Assume no dividend payments for this calculation.

4. Suppose you make an annual contribution of $5000 to your investment account at the end of each year for 5 years. If the account earns 10% annually, how much can be withdrawn early in the 11th year.

5. You are the CEO of Blue and Gold Furniture Company (a small household goods manufacturing firm) and have just been briefed on some promising new production machinery which will enable 3D printing of numerous types of personalized furniture. Projected cash flows detailed below. The 3D printer has a 5 year life cycle, with no scrap value. Discuss your assessment of this project’s viability and profitability. Calculate net cash flow for each year, payback period, total return on investment, internal rate of return, and net present worth. State any assumptions (i.e. Minimal attractive rate of return). Explain your reasoning behind those assumptions.

Year Revenue Capital Expenditures
Initial Investment $10,000,000
2016 $4,250,000 $250,000
2017 $5,100,000 $100,000
2018 $10,100,000 $100,000
2019 $11,500,000 $500,000
2020 $11,000,000

Fall 2015CMGT 547Managerial Engineering Economics

1. What are the common types of Engineering Economic Decisions? Give an example of each. Briefly describe the fundamental principles of Engineering Economics.

2. What report is used to describe a company’s financial position at the end of a reporting period? Briefly describe its contents.

3. You have just purchased 1000 shares of stock at $70 per share. Your analysis indicates that the stock price will increase 10% per year. How much will your investment be worth in 5 years? When will the market price have doubled? Assume no dividend payments for this calculation.

4. Suppose you make an annual contribution of $5000 to your investment account at the end of each year for 5 years. If the account earns 10% annually, how much can be withdrawn early in the 11th year.

5. You are the CEO of Blue and Gold Furniture Company (a small household goods manufacturing firm) and have just been briefed on some promising new production machinery which will enable 3D printing of numerous types of personalized furniture. Projected cash flows detailed below. The 3D printer has a 5 year life cycle, with no scrap value. Discuss your assessment of this project’s viability and profitability. Calculate net cash flow for each year, payback period, total return on investment, internal rate of return, and net present worth. State any assumptions (i.e. Minimal attractive rate of return). Explain your reasoning behind those assumptions.

Year Revenue Capital Expenditures
Initial Investment $10,000,000
2016 $4,250,000 $250,000
2017 $5,100,000 $100,000
2018 $10,100,000 $100,000
2019 $11,500,000 $500,000
2020 $11,000,000

Fall 2015CMGT 547Managerial Engineering Economics

1. What are the common types of Engineering Economic Decisions? Give an example of each. Briefly describe the fundamental principles of Engineering Economics.

2. What report is used to describe a company’s financial position at the end of a reporting period? Briefly describe its contents.

3. You have just purchased 1000 shares of stock at $70 per share. Your analysis indicates that the stock price will increase 10% per year. How much will your investment be worth in 5 years? When will the market price have doubled? Assume no dividend payments for this calculation.

4. Suppose you make an annual contribution of $5000 to your investment account at the end of each year for 5 years. If the account earns 10% annually, how much can be withdrawn early in the 11th year.

5. You are the CEO of Blue and Gold Furniture Company (a small household goods manufacturing firm) and have just been briefed on some promising new production machinery which will enable 3D printing of numerous types of personalized furniture. Projected cash flows detailed below. The 3D printer has a 5 year life cycle, with no scrap value. Discuss your assessment of this project’s viability and profitability. Calculate net cash flow for each year, payback period, total return on investment, internal rate of return, and net present worth. State any assumptions (i.e. Minimal attractive rate of return). Explain your reasoning behind those assumptions.

Year Revenue Capital Expenditures
Initial Investment $10,000,000
2016 $4,250,000 $250,000
2017 $5,100,000 $100,000
2018 $10,100,000 $100,000
2019 $11,500,000 $500,000
2020 $11,000,000