EMSE 6410 Finance and Engineering Economics

Students will work individually on this assignment. The deliverable is expected to be a technical report of no more than 3 pages, plus any spreadsheets, graphics, and any other needed information. It should contain a realistic engineering economic analysis that includes the effects of taxes and depreciation, inflation, and uncertainty. The report should contain the following sections: Introduction.  Briefly provide a description of a plant for pre-mixed concrete, potential customers, and the potential investment opportunity. Describe the methods you used and how you completed your engineering economics analysis.   Cash Flow Model.  Complete (and modify, if needed) the spreadsheet template provided, including all preliminary calculations for depreciation and loan amortization. Make sure that your spreadsheet model is constructed to facilitate the analyses described below. You may modify the spreadsheet template as needed. Note that the after-tax cash flow must be calculated in actual dollars, including inflation and depreciation effects. In addition to depreciation deductions, loan interest expenses must be deducted to determine the taxable income.   Base Case Analysis. Calculate the Present Worth for the ATCF. Financial Risk Analysis.  There are at least three factors of great importance in the project with considerable uncertainty in their estimations: capacity utilization, selling price of the product, and raw material costs. Determine the break-even points for the three factors.   Develop sensitivity tables and a “spider plot” for the NPV with respect to these factors. Uncertainty ranges should be at least ±30 percent for each factor.   Conclusions.  Conclude with your recommendation about whether or not to proceed with the proposed technology investment. Use the results of your analysis to support your recommendations, particularly related to the break-even and sensitivity analyses.   The Final Deliverable is a soft copy of your report, including the Sections listed above as well as any additional information you feel is necessary. The report will be uploaded into Blackboard.