FAHAD BIN SULTAN UNIVERSITY
COLLEGE OF ENGINEERING
ENGINEERING ECONOMY (COEN 300)
SUMMER 2022/2023
CASE STUDY EVALUATION
SUBMISSION TO MOODLE BEFORE OR ON 9th AUGUST 2023 (11:59 PM)
CASE STUDY BACKGROUND
Make-to-Specs is a software system under development by ABC Corporation. It will be able
to translate digital versions of three-dimensional computer models, containing a wide variety
of part shapes with machined and highly finished (ultrasmooth) surfaces. The product of the
system is the numerically controlled (NC) machine code for the part's manufacturing.
Additionally, Make-to-Specs will build the code for superfine finishing of surfaces with
continuous control of the finishing machines.
Information
There are two alternative computers that can provide the server function for the software
interfaces and shared database updates on the manufacturing floor while Make-toSpecs is
operating in parallel mode. The server’s first cost and estimated contribution to annual net
cash flow are summarized below.
Server 1
Server 2
100,000
200,000
Net cash flow, $/year
35,000
50,000 year 1, plus 5000 per
year for years 2, 3, and 4
(gradient)
70,000 maximum for years
5 on, even if the server is
replaced
Life, years
3 or 4
5 or 8
First cost, $
Instructor: Dr. Ammar Alkahtani
SUMMER 22/23
FAHAD BIN SULTAN UNIVERSITY
COLLEGE OF ENGINEERING
The life estimates were developed by two different individuals: a design engineer and a
manufacturing manager. They have asked that, at this stage of the project, all analyses be
performed using both life estimates for each system.
Case Study Exercises
Use spreadsheet analysis to determine the following:
1
If the MARR = 12%, which server should be selected? Use the PW or AW method to
make the selection.
2
Use incremental ROR analysis to decide between the servers at MARR = 12%.
3
Use any method of economic analysis to display on the spreadsheet the value of the
incremental ROR between server 2 with a life estimate of 5 years and a life estimate
of 8 years.
Instructor: Dr. Ammar Alkahtani
SUMMER 22/23