t-

f' \.l~)'(0 ~ «~..,.y)~

,,)"" "\..
f(~ \ ('h" +<1.~I J--. - 7

CEL 464 Construction Economics and Contract Management MINOR II

Venue WS 207 and 213 Time: 1:00- 2:00 17.10.2008

ANSWER ALL QUESTIONS. ASSUME MISSING DATA IN CASE REQUIRED.

t
Q.l Pla\1s are underway to introduce a new machine to increase output. There are
two alternatives, machine A and B. Acquisition cost of the fonner is Rs.30,000 and
for the latter is Rs. 50,000. Operating costs are paid at the end of each month in
proportion to the number of units produced. Fixed costs are paid at the end of each
half-year. Assume that fixed costs are not required for zero units of production, the
useful life of either machine is 4 years~and the cost of capital is 1% compounded,
monthly. Sp~cii1.£S°sts for ea_ch Il}.§lchineare shown below. ~- ~1.). t '/.lAY'-
'---'-"'-'--"""""" ... M.~t::h!p:~..A M?~h~!~~!?. ~
Operating cost (per unit) Rs. 0.70 0.50
Fixed cost (every 6 months) Rs. 800 1300
Find the break-even production level at which machines
attractive.
A and B are equally
(7marks) F- -r - ,_0'\\
~. Consider the following two alternatives
Alternative 1 Alternative 2 F
( ~ 0 .0\' \ -
First cost 1000,000 800,000
2. &~1) fr~I.(,\)b
Annual expense 250,000 150,000 A
1-7'1.
A- Alillual income 575.000 575,000 A
~- 0.7..1.\ (, ~

.1.>1.-Q
'\
Salvage value 200,000 0 , ?- '-'~
J.-.(Q
F

J(S
1\,'\C61>
Economic life 8 years 4 years
Suppose that the salvage value of alternative 2 is known with certainty. By how much ,~
~
f' would the estimate of salvage value for alternative 1 have to vary so that the initial
decision based on the data above would be reversed? The minimum acceptable rate of
return is 15 percent. (7marks)

Q 3. The cost of a 20 HP pump is Rs. 50,000. It is desired to estimate the cost of 30 HP

pump. Using six tenth rule what would be the estimated cost? (2marks)

/Q. 4 The estimation team of construction company has estimated the cost of an.
. upcoming project to be Rs. 9 crores. If the mark up is 10% on the bid price what is the
bid price? (2 marks)

2 Estimate the average number of staff required in a month for a project of Rs. 50
Crores to be completed in 10 months time if the company expects the productivity of
staff to be Rs. 10 Lakhs every month. (2 marks)

Q 6. An equipment which has a book value of 5 Lakhs has been mobilized at site. lfthe
annual depreciation rate works out to be 24% and the equipment is needed for 10 months
what would be the book value of equipment at the time of demobilization and what is the
amount of depreciation during 10 months period. Assume no salvage value. (2 marks)
VQ 7 Expand the following:
(l)V AT (2)WCT (3)CAR Policy (4)BG (5)POA (6) RFQ (3 marks)

C tlM-l)c...
~ {\