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UNIVERSITY OF PUERTO RICO
MAYAGÜEZ CAMPUS
COLLEGE OF ENGINEERING
DEPARTMENT OF INDUSTRIAL ENGINEERING
ININ 4015: ENGINEERING ECONOMIC ANALYSIS
ASSIGNMENT # 1
Prof. Jesús R. Pérez Cardona
Posted on February 11th, 2025
Deadline by February 27th, 2025 (date of Midterm I)
PROBLEM #1: LIFECYCLE COST OF AN ELECTRIC VEHICLE
A client is interested in acquiring a BoriCar electric vehicle (EV). This EV is available in
three types: a) Standard, b) Luxury, and c) Special Edition. The client would like to identify
which one is the least expensive across the life cycle. For doing this, you are asked to
realize a detailed economic analysis for each EV type and make a final recommendation.
After interviewing the client, the following information has been gathered:
ü The client has a $6,000 down payment.
ü The client plans to sell the EV after 15 years by 10% of its original price.
ü The client’s budget is constraint to pay up to $900 per month for repaying loan.
The following table includes the prices and “fuel” economies for each EV type:
Type
Standard
Luxury
Special Edition
Price ($)
50,000
55,000
60,000
Economía (kWh/100mi)
30
20
10
Instructions:
Interest Paid ($)
Principal Paid ($)
Balance ($)
…
…
…
Period (month)
1. Loan Amortization Table (10 pts)
ü Calculate the balance amount after the down payment (in year 0).
ü Assume that the loan will be repaid in 66 months with an annual percentage rate
(APR) of 5%, compounded monthly. Calculate the uniform monthly payments.
ü Include in amortization table the following: period, interest, principal, and balance.
…
0
1
66
2. Driving Costs (5 pts)
ü Calculate the driving costs at end of first year for each EV type.
ü Use the given “fuel” economy (kWh/100 millas).
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ü Assume an annual distance driven of 15,000 miles and electricity rate of
$0.30/kWh.
ü Electricity rate is expected to increase 1% per year.
3. Battery Pack Replacement Cost (5 pts)
ü Determine the current cost of a battery pack, given that the cost was $84,000 about
9 years ago and the cost index has reduced from 196 to 28.
ü Calculate the replacement cost at the end of year 10 by considering that the current
cost is expected to increase 2% per year.
ü There is no salvage value.
Down Payment ($)
Loan Repayment
Plan ($)
Driving Cost ($)
Maintenance Cost
($)
Battery Pack
Replacement Cost
($)
Salvage Value ($)
Sum of Cash Flows
($)
…
…
…
…
…
…
…
Year
4. Net Cash Flow Table and Graph (30 pts)
ü Elaborate a table with the following column headers: Year, Down Payment, Loan
Repayment Plan, Driving Cost, Maintenance Cost, Battery Pack Replacement
Cost, Salvage Value, y Sum of Cash Flows.
ü Calculate the cash flows of the loan repayment plan based on the amortization
table.
ü Include driving and maintenance cost. Assume that maintenance cost increases
$25 per year. First year maintenance cost is about $800.
ü Calculate the salvage value at the end of the useful life defined by the client.
ü Calculate the sum of cash flows for each year.
ü Plot a cash flow diagram with a legend to distinguish each cash flow category.
(Hint: bar plot, stacked column)
…
0
1
15
5. Present Worth Analysis (10 pts)
ü Calculate the net present value (NPV) of each alternative based on a real discount
rate of 3%.
ü Make a recommendation to the client about which alternative is the most
economical on the long run and explain.
*Upload an Excel file using the attached template of this assignment.
Academic Integrity: The University of Puerto Rico promotes the highest standards of academic and scientific integrity.
Article 6.2 of the UPR Student General Bylaws (Board of Trustees Certification 13, 2009-2010) states that academic
dishonesty includes, but is not limited to: fraudulent actions; obtaining grades or academic degrees by false or
fraudulent simulations; copying the whole or part of the academic work of another person; plagiarizing totally or partially
the work of another person; copying all or part of another person’s answers to the questions of an oral or written exam
by taking or having someone else take the exam on his/her behalf; as well as enabling and facilitating another person
to perform the aforementioned behavior. Any of these behaviors will be subject to disciplinary action in accordance with
the disciplinary procedure established by the UPR Student General Bylaws.─.
Name: _______________________________ Date: ________________________
Section: _____
UPR id: _____________________________
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