Engineering Economic Analysis

. .... .... . ... ..d.

Investment Opportunities 477

TABLE15-1 A Firm1sAvailable Investment Opportunities

,Project

Number Project Cost (x103)

Estimated

Rate of Return

1

2

3

InvestmentRelated to Current Operations

New equipment to reduce labor costs $150

Other new equipmentto reduce labor costs 50

Overhaulparticular machine to reduce 50

material costs

New test equipment to reduce defective 100

products produced

30%

45

38

4 40

40 38 35 30 28 25 20 18 15

Rate of Return (%)

FIGURE 15-1 Rate of return versus project investment.

o 45 10 8

iir"

....

New Operations

(^5) Manufacture parts that previously had 200 35
been purchased
(^6) Further processing of products 100 28
previously sold in semifinished form
(^7) Further processing of other products 200 18
New Production Facilities
(^8) Relocate production to new plant 250 25
External Investments
(^9) Investment in a different industry 300 20
(^10) Other investment in a different industry 300 10
11 Overseas investment 400 15
(^12) Purchase of Treasury bills Unlimited 8
Unlimited
$500
....,,....
0
X'-' $400
....c:
Q)
Q) $300
;>c:
........
0
.21 $200 0
$100