PROJECT IA

PROJECT IA 1.    GEOCON SEALANTS AND SHEA-JONES MANUFACTURE SPECIALIZED EQUIPMENT FOR SEALING TUNNELS.  THE WASHINGTON METRO SYSTEM HAS A PROBLEM WITH GROUNDWATER CAUSING ELECTRI-CAL PROBLEMS IN THE VENTILLATION SYSTEM.    THE TWO COM-PETING COMPANIES HAVE SUBMITTED THE FOLLOWING COST PROPOSALS TO THE TRANSIT AUTHORITIES. ALTERNATE A               ALTERNATE B GEOCON                                     SHEA-JONES INITIAL          $100,000                       $150,000 COST OPERATION &      $2200/YR                                        $1200/YR MAINTENANCE TECHNICAL            $1500                       $1200 SUPPORT/       YEARS 2 AND 4            YEARS  3 AND 6 EQUIPMENT           $1000/YR                         $1500/YR UPGRADE           YEARS 2 AND 4                    YEARS 3 AND  6 SALVAGE        $40000                                       $60000 SAVINGS           $35000/YR                       $35000/YR ON TRANSIT SHUTDOWNS SAVINGS               $10000/YR                                         11%/YEAR INCREASE         START YEAR 2                  START YEAR 3 INTEREST COST          6% CP QUARTERLY            2% CP MONTHLY SAVINGS        1.5%/YR                   1.5%/YR USEFUL                    4 YRS                  6 YRS LIFE -2- CE 3361                        NAME:____________________ PROJECT IA DUE: 8 OCTOBER 2015 SHOW ALL WORK AND CALCULATIONS 1. WHAT ARE THE EFFECTIVE ANNUAL INTEREST RATES ON COST? (5)       ALTERNATE A (5)       ALTERNATE B 2. WHAT IS THE PAYMENT PERIOD? (5)       ALTERNATE A (5)       ALTERNATE B 3  CONSTRUCT THE CASH FLOW DIAGRAM OF EITHER ALTERNATE A (GEOCON) OR ALTERNATE B (SHEA) TO MAKE AN ECONOMIC ANALYSIS COMPARISON OF THE TWO ALTERNATIVES