EGN3613: Engineering Economics Analysis

Assignment 1

What are the steps used in a decision making process? Provide an example of the process in bank replacing their old ATM machines with new state of the art ones.

Define the role of engineers in the Business Decision Making Process.

Explain the difference between large and small scale Engineering Projects.

Explain in details that factors that might affect Engineering Economic Decisions

What does the Economic Principle “Marginal revenue must exceed marginal cost” means? Provide at least two references to support your explanation.

"A firm is considering purchasing a computer system. The following data has been collected.
- Cost of the system: $125,000
- Project life: 6 years
- Salvage value at the end of year 6: $18,000
- Depreciation method: five-year MACRS
- Tax rate: 33%
- Annual revenue from project: $109,000
- Annual expenses (not including depreciation): $88,000
The firm will borrow the entire $125,000 at 5.3% interest to be repaid in 2 annual payments.
The firm's MARR is 15%. Determine the IRR for the computer system. Enter your answer as a percentage between 0 and 100."

"A firm is considering purchasing a computer system. The following data has been collected.
- Cost of the system: $159,000
- Project life: 6 years
- Salvage value at the end of year 6: $18,000
- Depreciation method: five-year MACRS
- Tax rate: 32%
- Annual revenue from project: $105,000
- Annual expenses (not including depreciation): $66,000
The firm will borrow the entire $159,000 at 7.4% interest to be repaid in 2 annual payments.
The firm's MARR is 12%. Determine the IRR for the computer system. Enter your answer as a percentage between 0 and 100."

Some people argue that government-owned enterprises do not perform as well as private enterprises. Specifically, government-owned enterprises cannot efficiently allocate resources used in the production process. Do you agree with this view? Please use economic theories to explain in detail why you think this is correct or why this statement is not reliable. In your explanation, please make a comparison between a government-owned company and a private company in the same industry to support your argument. You may compare the operating revenue, costs, etc. of the two companies.

If the government follows an income tax system in which personal income up to and including
K2500 is not taxed, income of K2501 to K5000 is taxed at 10%, and income over K5000 is
taxed at 25%.
a) What is the marginal tax rate for a family earning income equal to K6000?
b) What is the average tax rate for a family earning income equal to K6000?
c) How much revenue will the government raise from an individual earning K6000?

d) What type of tax system prevails in this economy? Explain.
e) Distinguish between tax elasticity and tax buoyancy.

Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $560,000 and with an expected useful life of 4 years and no residual value. For tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $660,000, which includes interest revenue of $13,000 from municipal bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 30%.
   
Prepare the journal entry to record income taxes.

Shannon Polymers uses straight-line depreciation for financial reporting purposes for equipment costing $780,000 and with an expected useful life of four years and no residual value. Assume that, for tax purposes, the deduction is 40%, 30%, 20%, and 10% in those years. Pretax accounting income the first year the equipment was used was $880,000, which includes interest revenue of $25,000 from municipal governmental bonds. Other than the two described, there are no differences between accounting income and taxable income. The enacted tax rate is 25%.
   
Prepare the journal entry to record income taxes.

A dollar today is worth more than a dollar to be received in the future. The difference between the present value of cash flows and their future value represents the time value of money. Interest is the rent paid for the use of money over time. The Stridewell Wholesale Shoe Company recently sold a large order of shoes to Harmon Sporting Goods. Terms of the sale require Harmon to sign a noninterest-bearing note of $60,500 with payment due in two years. How should Stridewell and Harmon value the note receivable/payable and corresponding sales revenue/inventory? Justify your answer.

Southern Corporation began operations in January 2019 and purchased a machine for $120,000 at that time. Southern uses straight-line depreciation over a four-year period for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2019, 30% in 2020, and 20% in 2021. Pretax accounting income for 2020 – which is the SECOND year of using this machine – is $150,000, which includes interest revenue of $20,000 from municipal bonds. The enacted tax rate is 30% for all years. There are no other differences between accounting and taxable income.

Prepare the JE for 2020

Annual revenues are used to predict the value of a baseball franchise. A sample of 32 franchises was used. An analysis of variance of these data showed that b1= 5.0785 and Sb1 = 0.2357.

a. At the 0.05 level of​ significance, is there evidence of a linear relationship between annual revenue and franchise​ value?

b. Construct a​ 95% confidence interval estimate of the population​ slope, β1.

a: Compute the test statistic. tSTAT= ​(Round to four decimal places as​ needed.)

The critical​ value(s) is(are) ​(Round to four decimal places as​ needed.)

b: The​ 95% confidence interval is ____ ≤ β1 ≤ ____ ​(Round to four decimal places as​ needed.)