Question

this is gor engineering economics

(20) 1. (a) (10) What is an intangible factor in an engineering economic analysis? (b) (10) Draw the cash flow diagram for a loan of $1000 to be repaid at the end of three months with interest if the simple interest rate is 8% per year. Include all amounts on the cash flow diagram.

Answer 1

1.

A

Intangible factor is that factor that may not be economic, but affects the outcome of the engineering economic analysis. Once such intangible factor is convenience. It makes people or decision makers to opt for those ways that are convenient to them. It affects the final outcome. On a similar note, the other intangible factors are goodwill and friendship that can affect the rationality of decision and engineering economic analysis can produce some different outcomes.

======

B.

Loan amount = $1000

Loan is repaid in 3 years time with simple interest rate of 8%.

So,

Amount to be repaid in 3 years time = 1000 + 3*8%*1000

Amount to be repaid in 3 years time = $1240

Now, the cash flow diagram is as follows:

Cash Flow Diagram S1240 Year $1000