Engineering Economics Assignment

-Ajit Kumar M(1MS11ME018) - Ashrith A (1MS11ME008) - Abhishek Amar (1MS11ME008)

BUSINESS PLAN ONLINE TUTORIALS FOR STUDENTS

The idea was chosen keeping in mind the following aspects of modern educational systems A large number of undergraduates (almost 2,00,000) study at various engineering colleges across Karnataka. There has been an increase in the demand for quality professors at institutes. There has also been an increase in the demand for concept based learning and integration of technology into studying methods.

INTRODUCTION TO THE BUSINESS PLAN

The plan intends to develop academic course for students of a particular university (VTU, in this case). The plan also includes developing content for 6 main branches of engineering Mechanical, Chemical, Civil, Computer Science, Electronics and Telecommunication and Electrical Engineering. A hypothetical survey has been carried out to determine the 15 subjects, per stream, which generate maximum demand for improved or increased teaching. We intend approaching the very best professors for these lessons. Therefore, the assumed monthly salary for a professor of this calibre has been set at INR 80,000 (paid by their college).

YEAR 1 Costs
Money borrowed from bank INR 2,00,00,000 (This money is assumed to be borrowed with no interest. The money is repaid as and when possible). Cost of initial survey INR 2,00,000 10 subjects are taught per stream for the first year Money paid per teacher per subject INR 40,000 Number of subjects in the first year 60 Total amount paid INR 24,00,000 Investments on servers, electronics INR 10,00,000 Employees 10 employees at INR 40,000 per month Salaries INR 48,00,000 Miscellaneous INR 11,00,000
TOTAL COSTS INR 95,00,000

YEAR 1 REVENUES
Expected number of students per branch per batch 1000 Number of branches 6 Number of batches 3 Total number of students expected 18000 Cost per subject per student INR 1000 Total revenue from students INR 1,80,00,000

Revenue And Expenditures for Future Years

Instructor Fees Employee Salaries Miscellaneo us Number of Students Student Tuition Fees (Total Income) Total Expenditur e

Year 2

36,00,000

54,00,000

10,00,000

22500

2,25,00,000 1,00,00,000

Year 3

45,00,000

81,00,000

12,00,000

27000

2,70,00,000 1,38,00,000

Year 4

45,00,000

90,00,000

14,00,000

31500

3,15,00,000 1,49,00,000

Year 5

49,50,000

1,32,00,000

15,00,000

36000

3,60,00,000 2,00,00,000

CASH FLOW DIAGRAMS

All figures in crores (INR) i = 10% 0 2 1 0.95 0.85 1 1.25 2 3 1.38 1.32 4 1.49 1.66 2 1.6 5 1.8 2.25 2.7 3.15 3.6

0 2

PRESENT WORTH ANALYSIS

Present Worth = Present Worth (All revenues) Present Worth (All costs) PW = PW { (0.85, 10%, 1 year) + (1.25, 10%, 2 years) + (1.32, 10%, 3 years) + (1.66, 10%, 4 years) + (1.6, 10%, 5 years) } PW { 2, 10%, 0 years} Substituting the values using the corresponding formulae, Present worth = INR 2,92,00,000

FUTURE WORTH ANALYSIS

Future Worth = Future Worth (All revenues) Future Worth (All costs)
FW = FW { (0.85, 10%, 4 years) + (1.25, 10%, 3 years) + (1.32, 10%, 2 years) + (1.66, 10%, 1 year) + (1.6, 10%, 0 years) } FW { 2, 10%, 5 years} Substituting the values using the corresponding formulae, Future worth = INR 4,71,00,000

RATE OF RETURN
Assume a rate of return of 60% : PW (i=0.6) = PW (revenues at i=0.6) PW (costs at i=0.6) Substituting these values, PW = INR 59,00,000

Assume a rate of return of 80% :

PW (i=0.8) = PW (revenues at i=0.8) PW (costs at i=0.8) Substituting these values, PW = - INR 14,00,000 IRR = Positive IRR + [(Positive PW 0)/(Positive PW Negative PW)]*(IRR increment) Substituting these values, IRR = 0.76 or 76%