POKHARA UNIVERSITY

Level: Bachelor Semester – Spring Year : 2009

Programme: BE Full Marks : 100
Pass Mark : 45
Course: Engineering Economics Time : 3 hrs
Candidates are required to give their answers in their own words as far
as practicable.
The figures in the margin indicate full marks.
Attempt all the questions.

1. a. What is Engineering Economics? Why do you think studying this 8

course is important for engineering students?
b. Define the term marginal utility. Explain the diminishing marginal 7
utility with example.
2. a. You deposited Rs. 20000 in your bank account at 31 December, 8
2006. If the bank pays 7 percent simple interest, how much will
you accumulate in your account at 31 December, 2016? What will
be this amounts if the bank pays compound interest?
b. What is breakeven analysis? Explain why a manufacturing
company needs to determine the breakeven point quantity? 7

3. a. A company purchased an equipment whose first cost is Rs. 8

100,000 with an estimated life of eight years. The estimated
salvage of the equipment at the end of its life time is Rs. 20,000.
Determine the depreciation charge and book value at the 4 and 5
years using the Double decline method of deprecation.
b. Explain the types of business organization. 7

4. a. Using IRR method, determine whether the project is acceptable or 8

not?
Initial investment Rs. 50,000
Annual revenue Rs. 14,000
Annual expenditure Rs. 10,000
Useful life 6 years
Salvage value Rs. 5,000
MARR 12%
b. Explain ho do you asses the financial strengths and weakness of a 7
company?
5. a. A mobile company is taking quotations for purchase, installation 8
and operation of microwave towers for long period. If MARR is
15%, determine the best alternative project using repeatability
assumption and pw method.
Quotations Project A Project B
Equipment cost (Rs) 6500000 5800000
Installation (Rs) 1500000 2000000
Annual maintenance (Rs) 100000 125000
Annual extra charge (Rs) 0 50000
Salvage value (Rs) 0 0
Life (yrs) 40 35
b. Discuss in detail the elements of cost. 7
6. a. Discuss in detail the taxation system in Nepal in reference to 8
Nepalese law and policies.
b. How many hour/yr would motors have to operated at the full loads 7
so that the annual cost will be equal?
Items Motor A Motor B
Initial investment Rs. 185000 Rs. 160000
Efficiency 74% 92%
Annual tax 1.5% of investment …………. ………….
Power 100Hp 100Hp
Useful life 10yrs 10yrs
MARR 15% 15%
Electricity cost Rs. 6/kwh Rs.6kwh
7. Write short notes on (Any Two): 2×5
a. Time value of money
b. Gross profit
c. Relation between journal and ledger