Underground Cable Installation
Abstract. In Engineering Economy (BEE31902) course, we have been given a task to be carried out in group of 10 in running a new project that required capital financing of RM 1 million. For our group, the selected new project is UNDERGROUND FIBER OPTIC CABLE INSTALLATION in the distance between Kolej Kediaman Kelisa until Kolej Kediaman Taman Universiti. We chose this project due to the poor internet connection of the residential colleges of UTHM. After surveying the area, we can assume that the distance between Kolej Kediaman Kelisa and the Kolej Kediaman Taman Universiti is 6km. Given the information, we would like to establish a company that can install the underground fiber optic cable with high quality performance and lowest rate per day. This project needs to gain profit after the cost of utility and maintenance. To carry out this project, we are using engineering economy analysis procedure. This analysis will help to identify the suitable business and select the most profit and low starting cost. After that, we proceed on cost concept to analyze on selection of location, total cost, break even analysis and profit. With this analysis, we manage to plan our project.
1.0 IntroductionPoor performance of internet connection of the residential college of UTHM inspired us to install the new optical-fiber underground cable to replace the existing underground cable. In order to conduct the project, we carried out a survey to all of the residential college to get a better understanding of the area. Analysis shows that every college faces the low speed connection and very poor performance. Due to this demand, we agree to install the underground cable from Kolej Kediaman Kelisa to Kolej Kediaman Taman U. The project included the design and installation of underground optical-fiber cabling on a 10acre UTHM campus. We believe installing the new underground cable will reduce the risk of future problems of connections.
1.1 Objectives To identify the cost for installing underground cable To identify the most economic and suitable utility and cable to be used in our project To calculate the total cost for installation. To calculate expected profit by analyzing the entire variable factor.
1.2 Scope Our project is focused on cable installation between the distance of Kolej Kediaman Kelisa and Kolej Kediaman Taman Universiti.
2.0 Economy Engineering Analysis2.1 Problem DefinitionNowadays, internet is very important for all students. But, there are a lot of complains from the students about the terrible internet connection of UTHM that results in many inconveniences. Students always suffer from slow internet speed and sometimes cannot connect to the internet at all. Although the cause of the problems could be the routers, some students do not think that bad routers seem to be the issue due to the fact that everyone has different router under their respective internet providers. The company could be to blame rather than the routers.
2.2 Development of AlternativesWe will install the underground fiber optic cable to solve this problem. Fiber optics allows data to be transmitted at super high speed with virtually no loss in quality over a long distance eliminating problems such as high transmission loss and interference, typical of copper networks. Fiber optics provides massive performance and reliability improvements- creating a whole new world of possibilities where high-definition and real-time information transfers become a reality. The reason we use the fiber optics cable is due to its higher data rate and wider bandwidth up to Gigabit-per-second (Gbps). Lower signal attenuation and line loss eliminates intermittent connection issues associated with legacy network. Greater resistance to electrical noise, electromagnetic interference (EMI) and radio frequency interference (RFI) result in better quality over a longer distance. More secure communications, since it is impossible to tap into an optical fibre cable. Being lighter weight and more compact in size makes it easier to install and maintain. Optical fibre cables are non-flammable, and immune to lightning..
2.3 Development of Prospective Outcomes This alternative will solve students problem of poor internet connection yet they can fully use the advantages of high speed internet to do their assignments more efficiently.
2.4 Selection of a Decision Criterion As a beginner in this business, we have to consider the starting cost. So, from the listed alternative, we need to choose the most profitable starting cost and lowest maintenance cost.
2.5 Capital Expenditures & Working CapitalCapital expenditures are the expenditures used of creating for future benefits. It is incurred as a business or a company spends money either to buy fixed assets or to add to the value of the existing fixed asset with a useful life extending beyond the taxable year. Working capital is a financial metric which represents the operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is also considered as a part of operational capital.
CAPITAL EXPENDITURE
TYPE OF COSTRM/UNITQUANTITYDAYSTOTAL(RM)
Management
Engineer4,000.00/month110020,000.00
Site Engineer2,500.00/month110012,500.00
Contractor4,000.00/month19013,500.00
Supervisor2,000.00/month210020,000.00
Total Management Cost66,000.00
Utilities
Diesel1.95/litre50 litre454,387.50
Ron 95 Fuel2.15/litre100 litre10021,500.00
Authority Permit2,000.002,000.00
Total Utilities Cost27,887.50
Machine & Tools
Concrete Mixer200.00/day210040,000.00
Site Office33,000/Unit1-33,000.00
Tools2,500/Unit2-5,000.00
Total Machine & Tools Cost78,000.00
Total Capital Expenditure171,887.50
WORKING CAPITAL
TYPE OF COSTRM/UNITQUANTITYDAYSTOTAL(RM)
Logistic (rent)
Backhoe400.00/day21411,200.00
Lorry(L)850.00/days223,400.00
Total Logistic Cost14,600.00
Labor Used
Site Work65.00/days125240,560.00
Technician 65.00/days5268,450.00
Plumber70.00/days45214,560.00
Total Labor Cost63,570.00
Raw Material
Cement30/package100-3,000.00
Brick18/m320m3-360.00
Aggregate15/m330m3-450.00
Sand10/m360m3-600.00
Roof20.00/m240m2-600.00
Reinforcement 15/m100m
Ready mix concrete600/lorry10 lorry6,000.00
Total Raw Material Cost11,010.00
Installation Cost
Setup & Remove80,000.00--80,000.00
Total Installation Cost80,000.00
Working Capital Total Cost354,955.00
Total Cost514,955.00
Contingency 15%66,944.15
Operation and Maintenance100,000.00
Actual Cost681,899.15
Table above show the whole capital expenditures and working capital used by our company when conducting out project. To be informed that the total cost is for costing per project.
Underground Cable Installation1
Working Breakdown
WORKING BREAKDOWN
ElementManagement SalariesLabor SalariesElement PriceUtilitiesLogisticToolsTotal Cost
Installation Cost
Setup & Remove55,120.0080,000.00
Total 55,120.0080,000.00135,120.00
Cabling Underground
Multi Core Fibre Optic
8,450.00198,740.00
32,000.003,400.0065,000.00
450.001,016.0033,0001,640.005,000.00
Light Pipe cable with high temperature resistance50,000.00
Fibre Optic Connector SMA 905 POF 1mm378.00
Distribution Box 14Way680.00
Drop Wire650.00
Steel Pole 3,280.00
Total8,450.00253,728.00100,400.0041,106.00403,684.00
Utilities
Diesel3,600.00
Ron 95 Fuel18,900.00
Authority Permit2,000.00
Total24,500.0024,500.00
WORKING BREAKDOWN
ElementManagement SalariesLabor SalariesElement PriceUtilitiesLogisticToolsTotal Cost
Management
Site Engineer30,000.00
24,000.00
Lab Engineer13,500.00
Lab Assistance4,800.00
Supervisor 21,000.00
Total93,300.0093,300.00
Contingency 15% 98,490.60
Operation and Maintenance100,000.00
Overall Costing855,094.60
2.6 Life Cycle Cost.
Life Cycle Cost ( LCC) is a tool to determine the most cost-effective option among different alternatives to do a project, when each of them is equally appropriate and suitable to be implemented on technical grounds.Commitment costCumulative committed life-cycle costPotential for life-cycle cost savings
0001,000,000
110,00010,000990,000
218,30028,300971,700
350,00078,300921,700
4128,304206,604793,396
5450,000656,604343,396
6198,490.60855,094.60144,905.40
OPERATION PHASEACQUISITION PHASE
Graph above is the LCC for the project. From the graph, the plot/issues stated are the cumulative life-cycle cost, cumulative committed life-cycle cost and potential for life-cycle cost saving. These three issues is the most important one that a life-cycle cost graph should have.Commitment cost
Commitment cost
00
110,000
218,300
350,000
4128,304
5450,000
6198,490.60
Graph above shows the pattern of cumulative life-cycle cost.
Cumulative committed life-cycle cost
Cumulative committed life-cycle cost
00
110,000
228,300
378,300
4206,604
5656,604
6855,094.60
Graph above shows the pattern of cumulative committed life-cycle cost.
Potential for life-cycle cost savings
Potential for life-cycle cost savings
01,000,000
1990,000
2971,700
3921,700
4793,396
5343,396
6144,905.40
Graph above shows the pattern of potential for life-cycle cost savings.
2.7 Work Breakdown Structure.
A Work Breakdown Structure (WBS), in project management and system engineering represents as a deliverable oriented decomposition of a project into smaller components. A WBS may be a product, data service or any combination thereof. A WBS also provides the necessary framework for detailed cost estimating and along with providing guidance for schedule development and control.
2.8 Cash Flow Diagram.
Cash Flow Diagram (CFD) is the in and out movement of the money of a business, project or financial product. It is usually measured during a specified, limited period of time. Measurement of cash flow can be used to calculate other parameters that give information on a companys value and situation. For our project, we made two CFDs that is one is for our whole operation and the other one is about the machine (crane) that we bought for an extended period.
2.9 Minimum Attractive Rate of Return (MARR).
Minimum Attractive Rate of Return (MARR) is the minimum rate of return on a project that a manager or a company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other projects.So, for our project, we had assigned the MARR to be about 10%. So that by using the formula, we can predict the future worth that we will received once the projects settle.WORK BREAKDOWN STRUCTURECraneUNDERGROUND FIBRE OPTIC CONSTRUCTIONWorking CapitalCapital ExpenditureDigital Measure WheelTest EquipmentToolsSetup &Remove Distribution BoxDrop WireSteel PoleFibre OpticConnectorLight PipeFire OpticFlag ManCablingLorryCraneBackhoe15% from total costCutterAuthorityPermit
Ron 95DiselLab TestSalariesTenderManagementLogisticLabor UsedRaw MaterialContingencyMachine & ToolsUtilities
CASH FLOW DIAGRAM (CFD)n = 5 month0
Present Value = 681,899.155
*Diagram below shows the CFD for the whole operation of our project.Cash In Flowi = 11%
Cash Out FlowFuture Value = 1,149,039.72Given Present Value Find Future WorthF/P, 11%, 5681,899.15= 1, 149, 039.72
4
3
2
1
*While this is the CFD for the machine that we bought for a long time use (crane)Future Value = +10,000
Cash In Flow
Present Value = -65,000054321
n = 5 years
i = 11%A = -15,509.00
Cash Out Flow
Fixed Depreciation 10%Book Value
1st65,0006,500 58,500
2nd58,5006,50052,500
3rd52,5006,50045,500
4th45,5006,50039,000
5th39,0006,50032,500
Total 32,500
Annual worth = 10,000(A/F,10%,5)-65,000(A/P,10%,5) = 10,000(0.1638)-65,000(0.2638) = -15,509.00
Book Cost = 32,500Sunk Cost = 22,500Opportunity Cost = 10,000MINIMUM ATTRACTIVE RATE of RETURN (MARR)n = 3 month0
3
2
1
Net Cash Flow = Cash In Flow Cash Out Flow = 1,138,130.91-855,094.60-150,000 = 133,036.31Present Value = -855,094.60i = 10%A= 150,000Cash Out FlowCash In FlowFuture Value = +1,138,130.91If MARR is 10%Given Present Value Find Future WorthF/P,10%,3855,094.60= 1,138,130.91
3.0 Conclusion Throughout this project, we can conclude that we have achieved our objectives. We learnt to apply Engineering Economy Concepts in our project. We have identified the cost for installing underground cable and identified the most economic and suitable utility and cable to be used in our project. Then, we calculate the total cost for installation and the expected profit by analyzing the entire variable factor.
In the procedure to setup our project, we have considered the lowest cost involve. We have also learned to use the proper method to calculate the profit and loss of our project. This project is very important to exposed student especially engineering student to a new field of study which can vary their financial skills and business planning.
1Fixed Cost
Site Engineer5,000.00/month x2x3=30,000.00
Contractor4,000.00/month x2x3=24,000.00
Lab Engineer4,500.00/month x3x3=13,500.00
Lab Assistance2,400.00/month x2x3= 4,800.00
Supervisor 3,500/month x2x3=21,000.00
Diesel2.00/litre x40 litre x45= 3,600.00
Ron 95 Fuel2.10/litre x100 litre x90=18,900.00
Authority Permit2,000.00
8ton Mobile Crane65,000.00
Calculated Industries 6425 DigiRoller Plus II Digital Measuring Wheel450.00
Heavy Duty 4-Wheel Pipe-Cutter1,016.00
Site Office33,000.00
Setup & Remove80,000.00
Test Equipment (Fibre Optic Test Set)820.00/Unit x2=1,640.00
Tools2,500/Unit x2=5,000.00
John Deere 310K Extendable Backhoe8,000.00/month x2=32,000.00
Lorry(L)850.00/days x2=3,400.00
Site Work65.00/days x12x52=40,560.00
Cabling65.00/days x5x26=8,450.00
Flag Man65.00/days x4x52=14,560.00
Contingency 15%98,490.60
Operation and Maintenance100,000.00
Total Fixed Cost601,366.60
Variable Cost
Multi Core Fibre Optic9937.00/500 Meter =198,740.00
Light Pipe cable with high temperature resistance2500/500 Meter x20=50,000.00
Fibre Optic Connector SMA 905 POF 1mm18.00/Unit x21=378.00
Distribution Box 14Way340.00/Unit x2=680.00
Drop Wire65.00/Meter x10=650.00
Steel Pole1640.00/Unit x2=3,280.00
Total Variable Cost253,728.00
2Total Cost601,366.60+253,728.00= 855,094.60
Profit1000 meter/km x 10km x 140.00= 1,400,000.001,400,000.00-855,094.60=544,905.40
Selling Price140.00
Cable Planning Expense25.37
Break Even PointX=601,366.60/(140-25.37)X=5246 meter
By calculation, we received RM 544,905.40 per project. So, after 3 projects: RM 544,905.40 x 3= RM1,634,716.20.
