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Engineering economy 7th Edition Leland Blank, Anthony Tarquin - Solutions

Aeration and sludge recirculation have been practiced for many years at municipal and industrial water treatment plants. Aeration is used primarily for the physical removal of gases or volatile compounds, while sludge recirculation can be beneficial for turbidity removal and hardness reduction.
What is the difference between today's dollars and constant-value dollars?(a) When using today as the reference point in time(b) When using 2 years ago as the reference point?
State the conditions under which the market interest rate is (a) Higher than(b) Lower than(c) The same as the real interest rate.
What annual inflation rate is implied from an inflation-adjusted interest rate of 10% per year, when the real interest rate is 4% per year?
Determine the inflation-adjusted interest rate for a growth company that wants to earn a real rate of return of 20% per year when the inflation rate is 5% per year.
For a high-growth company that wants to make a real rate of return of 30% per year, compounded monthly, determine the inflation-adjusted nominal interest rate per year. Assume the inflation rate is 1.5% per month.
A high-tech company whose stock trades on the NASDAQ stock exchange uses a MARR of 35% per year. If the chief financial officer (CFO) said the company expects to make a real rate of return of 25% per year on its investments over the next 3-year period, what is the company expecting the inflation
Calculate the inflation-adjusted interest rate per quarter when the real interest rate is 4% per quarter and the inflation rate is 1% per quarter.
Calculate the real interest rate per month if the nominal inflation-adjusted interest rate per year, compounded monthly, is 18% and the inflation rate per month is 0.5%.
A southwestern city has a contract with Firestone Vehicle Fleet Maintenance to provide maintenance services on its fleet of city-owned vehicles such as street sweepers, garbage trucks, backhoes, and carpool vehicles. The contract price is fixed at $45,000 per year for 4 years. If you were asked to
If the inflation rate is 7% per year, how many years will it take for the cost of something to double when prices increase at exactly the same rate as inflation?
The inflation rate in a Central American country is 6% per year. What real rate of return will an investor make on a $100,000 investment in a copper mine stock that yields an overall internal rate of return of 28% per year?
During periods of hyperinflation, prices increase rapidly over short periods of time. In 1993, the Consumer Price Index (CPI) in Brazil was 113.6 billion. In 1994, the CPI was 2472.4 billion.(a) What was the inflation rate per year between 1993 and 1994?(b) Assuming the inflation rate calculated in
Assume the inflation rate is 4% per year and the market interest rate is 5% above the inflation rate. Determine(a) The number of constant-value dollars 5 years in the future that is equivalent to $30,000 now(b) The number of future dollars that will be equivalent to $30,000 now.
The Pell Grant program of the federal government provides financial aid to needy college students. If the average grant is slated to increase from $4050 to $5400 over the next 5 years "to keep up with inflation," what is the average inflation rate per year expected to be?
Ford Motor Company announced that the price of its F-150 pickup trucks is going to increase by only the inflation rate for the next 3 years. If the current price of a well-equipped truck is $28,000 and the inflation rate averages 2.1% per year, what is the expected price of a comparably equipped
In an effort to reduce pipe breakage, water hammer, and product agitation, a chemical company plans to install several chemically resistant pulsation dampeners. The cost of the dampeners today is $120,000, but the company has to wait until a permit is approved for its bidirectional port-to-plant
A machine currently under consideration by Holzmann Industries has a cost of $45,000. When the purchasing manager complained that a similar machine the company purchased 5 years ago was much cheaper, the salesman responded that the cost of the machine has increased solely in accordance with the
A report by the National Center for Public Policy and Higher Education stated that tuition and fees (T&F) at public colleges and universities increased by 439% over the last 25 years. During this same time period, the median family income (MFI) rose 147%. When the report was written, T&F at
The headline on a Chronicle of Higher Education article reads "College Costs Rise Faster than Inflation." The article states that tuition at public colleges and universities increased by 58% over the past 5 years.(a) What was the average annual percentage increase over that period of time?(b) If
Stadium Capital Financing Group helps cash strapped sports programs through the marketing of its "sports mortgage." At the University of Kansas, Jayhawks fans can sign up to pay $105,000 over 10 years for the right to buy top seats for football during the next 30 years. In return, the season
There are two ways to account for inflation in present worth calculations. What are they?
An environmental testing company needs to purchase equipment 2 years from now and expects to pay $50,000 at that time. At a real interest rate of 10% per year and inflation rate of 4% per year, what is the present worth of the cost of the equipment?
Carlsbad Gas and Electric is planning to purchase a degassing tower for removing CO 2 from acidified saltwater. The supplier quoted a price of $125,000 if the unit is purchased within the next 3 years. Your supervisor has asked you to calculate the present worth of the tower when considering
How much can the manufacturer of superconducting magnetic energy storage systems afford to spend now on new equipment in lieu of spending $75,000 four years from now? The company's real MARR is 12% per year, and the inflation rate is 3% per year.
Find the present worth of the cash flows shown. Some are expressed as constant-value (CV) dollars, and others are inflated dollars. Assume a real interest rate of 8% per year and an inflation rate of 6% peryear.
A doctor is on contract to a medium-sized oil company to provide medical services at remotely located, widely separated refineries. The doctor is considering the purchase of a private plane to reduce the total travel time between refineries. The doctor can buy a used Lear jet now or wait for a new
A regional infrastructure building and maintenance contractor is trying to decide whether to buy a new compact horizontal directional drilling (HDD) machine now or wait to buy it 2 years from now (when a large pipeline contract will require the new equipment). The HDD machine will include an
An engineer must recommend one of two rapid prototyping machines for integration into an upgraded manufacturing line. She obtained estimates from salespeople from two companies. Salesman A gave her the estimates in constant-value (today's) dollars, while saleswoman B provided the estimates in
A salesman from Industrial Water Services (IWS), who is trying to get his foot in the door for a large account in Fremont, offered water chlorination equipment for $2.1 million. This is $400,000 more than the price offered by a competing saleswoman from AG Enterprises. However, IWS said the company
A chemical engineer is considering two sizes of pipes, small (S) and large (L), for moving distillate from a refinery to the tank farm. A small pipeline will cost less to purchase (including valves and other appurtenances) but will have a high head loss and, therefore, a higher pumping cost. In
As an innovative way to pay for various software packages, a new high-tech service company has offered to pay your company, Custom Computer Services (CCS), in one of three ways: (1) pay $480,000 now, (2) pay $1.1 million 5 years from now, or (3) pay an amount of money 5 years from now that will
If the inflation rate is 6% per year and a person wants to earn a true (real) interest rate of 10% per year, determine the number of future dollars she has to receive 10 years from now if the present investment is $10,000.
How many future dollars would you need 5 years from now just to have the same buying power as $50,000 now, if the deflation rate is 3% per year?
If a company deposits $100,000 into an account that earns a market interest rate of 10% per year at a time when the deflation rate is 1% per year, what will be the purchasing power of the accumulated amount (with respect to today's dollars) at the end of 15 years?
Harmony Corporation plans to set aside $60,000 per year beginning 1 year from now for replacing equipment 5 years from now. What will be the purchasing power (in terms of current-value dollars) of the amount accumulated, if the investment grows by 10% per year, but inflation averages 4% per year?
The strategic plan of a solar energy company that manufactures high-efficiency solar cells includes an expansion of its physical plant in 4 years. The engineer in charge of planning estimates the expenditure required now to be $8 million, but in 4 years, the cost will be higher by an amount equal
Five years ago, an industrial engineer deposited $10,000 into an account and left it undisturbed until now. The account is now worth $25,000.(a) What was the overall ROR during the 5 years?(b) If the inflation over that period was 4% per year, what was the real ROR?(c) What is the buying power of
The Nobel Prize is administered by The Nobel Foundation, a private institution that was founded in 1900 based on the will of Alfred Nobel, the inventor of dynamite. In part, his will stated: "The capital shall be invested by my executors in safe securities and shall constitute a fund, the interest
Timken Roller Bearing is a manufacturer of seamless tubes for drill bit collars. The company is planning to add larger-capacity robotic arms to one of its assembly lines 3 years from now. If it is done now, the cost of the equipment with installation is $2.4 million. If the company's real MARR is
The data below show two patterns of inflation that are exactly the opposite of each other over a 20-year time period.(a) If each machine costs $10,000 in year 0 and they both increase in cost exactly in accordance with the inflation rate, how much will each machine cost at the end of year 20?(b)
Factors that increase costs and prices—especially for materials and manufacturing costs sensitive to market, technology, and labor availability—can be considered separately using the real interest rate i, the inflation rate f, and additional increases that grow at a geometric rate g. The future
An electric utility is considering two alternatives for satisfying state regulations regarding pollution control for one of its generating stations. This particular station is located at the outskirts of a major U.S. city and a short distance from a large city in a neighboring country. The station
A chemical engineer who is smitten with wanderlust wants to build a reserve fund that will be sufficient to permit her to take time off from work to travel around the world. Her goal is to save enough money over the next 3 years so that when she begins her trip, the amount she has accumulated will
An entrepreneur engaged in wildcat oil well drilling is seeking investors who will put up $500,000 for an opportunity to reap high returns if the venture is successful. The prospectus states that a return of at least 22% per year for 5 years is likely. How much will the investors have to receive
Veri-Trol, Inc. manufactures in situ calibration verification systems that confirm flow measurement accuracies without removing the meters. The company has decided to modify the main assembly line with one of the enhancement processes shown below. If the company's real MARR is 15% per year, which
Johnson Thermal Products used austenitic nickel-chromium alloys to manufacture resistance heating wire. The company is considering a new annealing-drawing process to reduce costs. If the new process will cost $3.7 million now, how much must be saved each year to recover the investment in 5 years if
The costs associated with a small X-ray inspection system are $40,000 now and $24,000 per year, with a $6000 salvage value after 3 years. Determine the equivalent cost of the system if the real interest rate is 10% per year and the inflation rate is 4% per year.
Maintenance costs for pollution control equipment on a pulverized coal cyclone furnace are expected to be $180,000 now and another $70,000 three years from now. The CFO of Monongahela Power wants to know the equivalent annual cost of the equipment in years 1 through 5. If the company uses a real
MetroKlean LLC, a hazardous waste soil cleaning company, borrowed $2.5 million for 5 years to finance start-up costs for a new project involving site reclamation. The company expects to earn a real rate of return of 20% per year. The average inflation rate is 5% per year.(a) Determine the capital
If the market interest rate is 16% per year when the inflation rate is 9% per year, the real interest rate is closest to:(a) 6.4%(b) 7%(c) 9%(d) 15.6%
The market interest rate if is 12% per year compounded semiannually. For an inflation rate of 2% per 6 months, the effective semiannual interest rate is closest to:(a) 2%(b) 3%(c) 4%(d) 6%
Construction equipment has a cost today of $40,000. If its cost has increased only by the inflation rate of 6% per year, when the market interest rate was 10% per year, its cost 10 years ago was closest to:(a) $15,420(b) $22,335(c) $27,405(d) $71,630
The amount of money that would be accumulated now from an investment of $1000 25 years ago at a market rate of 5% per year and an inflation rate averaging 2% per year over that time period is closest to:(a) $1640(b) $3385(c) $5430(d) Over $5500
If $1000 is invested now, the number of future dollars required 10 years from now to earn a real interest rate of 6% per year, when the inflation rate is 4% per year, is closest to:(a) $1480(b) $1790(c) $2650(d) Over $2700
If you expect to receive a gift of $50,000 six years from now, the present worth of the gift at a real interest rate of 4% per year and an inflation rate of 3% per year is closest to:(a) $27,600(b) $29,800(c) $33,100(d) $37,200
When the inflation rate is 5% per year, how many inflated dollars will be required 10 years from now to buy the same things that $10,000 buys now?
Assume that you want to retire 30 years from now with an amount of money that will have the same value (same purchasing power) as $1.5 million today. If you estimate the inflation rate will be 4% per year, how many future (then-current) dollars will you need?
A trust was set up by your grandfather that states you are to receive $250,000 exactly 5 years from today. Determine the buying power of the $250,000 in terms of today's dollars if the market interest rate is 10% per year and the inflation rate is 4% per year.
A Toyota Tundra can be purchased today for $32,350. A civil engineering firm is going to need three more trucks in 2 years because of a land development contract it just won. If the price of the truck increases exactly in accordance with an estimated inflation rate of 3.5% per year, determine how
Multiple Choice Questions1. Inflation occurs when:(a) Productivity increases(b) The value of the currency decreases(c) The value of the currency increases(d) The price of gold decreases2. “Then-current” (future) dollars can be converted into constant-value dollars by:(a) Multiplying them by (1
The savings and investments that an individual maintains should have some balance between equity (corporate stocks that rely on market growth and dividend income) and fixed-income investments (bonds that pay dividends to the purchaser and a guaranteed amount upon maturity). When inflation is
Rank the following estimate types in terms of time spent to carry out the estimate (most time to least time): partially designed, design 60% to 100% complete, order of magnitude, scoping/feasibility, detailed estimate.
Classify the following cost elements as first cost (FC) components or annual operating cost (AOC) components for a piece of equipment on the shop floor: supplies, insurance, equipment cost, utility cost, installation, delivery charges, labor cost.
State whether actual (A) or estimated (E) costs are more likely to be used to carry out the following activities: calculate taxes, make bids, pay bonuses, determine profit or loss, predict sales, set prices, evaluate proposals, distribute resources, plan production, and set goals.
Identify the output and input variables in both the bottom-up and top-down approaches to cost estimating.
Classify the following costs as typically direct (D) or indirect (I):Project staff ......................Audit and legalUtilities .............................RentRaw materials .................Equipment trainingProject supplies ..............LaborAdministrative staff ........Miscellaneous office
Identify each of the following costs associated with owning an automobile as direct or indirect (assume a direct cost is one that is directly attributable to the number of miles driven): license plate, driver's license, gasoline, highway toll fee, oil change, repairs after collision, gasoline tax,
The equipment required to place 160 cubic yards of concrete by experienced workers is two gasoline engine vibrators and one concrete pump. If the vibrators cost $76 per day and the concrete pump costs $580 per day, estimate(a) The cost of the equipment per cubic yard of concrete(b) The equipment
A labor crew for placing concrete consists of 1 labor foreman at $25.85 per hour, 1 cement finisher at $28.60 per hour, 5 laborers at $23.25 per hour each, and 1 equipment operator at $31.45 per hour. Such a crew, called a C20 crew, can place 160 cubic yards of concrete per 8-hour day. Determine
Site work activities associated with constructing a small bridge are shown in the table below. The table includes the quantity of each activity, the unit of measurement associated with each activity, and the unit cost of each activity. Use the data to determine(a) The total cost for structural
From historical data, you discover that the national average construction cost of middle schools is $10,500 per student. If the state index for Texas is 76.9 and for California it is 108.5, estimate the total construction cost of a middle school for 800 students in each state.
A consulting engineering firm is preparing a preliminary cost estimate for a design-construct project of a coal processing plant. The firm, which completed a similar project in 2001 with a construction cost of $30 million, wants to use the ENR construction cost index to update the cost. Use the
If the editors at ENR decide to redo the construction cost index so that the year 2000 has a base value of 100, determine the value for the year(a) 1995(b) 2009.
(a) Estimate the value of the ENR construction cost index by using the average (compounded) percentage change in its value between 1995 and 2005 to predict the value in 2009.(b) How much difference (numerical) is there between the estimated and actual 2009 values? Is this an underestimate or
An engineer who owns a construction company that specializes in large commercial projects noticed that material costs increased at a rate of 1% per month over the past 12 months. If a material cost index were created for each month of this year with the value of the index set at 100 for the
Using 1913 as the base year with a value of 100, the ENR construction cost index (CCI) for August 2009 was 8563.35. For August 2010, the CCI value was 8837.38.(a) What was the inflation rate for construction for that 1-year period?(b) What will be the CCI value in August 2013 provided the inflation
The ENR materials cost index (MCI) had a value of 2708.51 in August 2010. In the same month, the cost for cement was $96.55 per ton. If cement increased in price exactly in accordance with the MCI, what was the cost of cement per ton in 1913 when the MCI index value was 100?
A contractor purchased equipment costing $40,000 in 2010 when the M&S equipment cost index was at 1461.3. He remembers purchasing the same equipment for $21,771 many years ago, but he does not remember the year that he did so. If the M&S equipment cost index increased by 2.68% per year over
Use the exponent values in Table 15-6 to estimate the cost for the following equipment to be placed on an offshore drilling platform.Sample Exponent Values for Cost-Capacity Equations(a) The cost of a 125-hp centrifugal pump if a 200-hp pump costs $28,000.(b) The cost of a 1700-gallon stainless
The on-site manager told you that the variable frequency drive (VFD) for a 300-hp motor costs $20,000. Make the best cost estimate possible for the VFD for a 100-hp motor. The exponent in the cost-capacity equation is not available currently where you are located.
The cost of a 68 m2 falling-film evaporator was 1.52 times the cost of the 30 m2 unit. What exponent value in the cost-capacity equation yielded these results?
Reinforced concrete pipe (RCP) that is 12 inches in diameter had a cost of $12.54 per linear foot in Dallas, Texas in 2007. The cost for 24-inch RCP was $27.23 per foot. If the cross-sectional area of the pipe is considered the "capacity" in the cost capacity equation, determine the value of the
A 100,000 barrel per day (bpd) fractionation tower cost $1.2 million in 2001 when the Chemical Engineering plant cost index value was 394.3. How much would a 450,000 bpd plant cost when the index value is 575.8, provided the exponent in the cost-capacity equation is 0.67?
In 2008, a military engineer estimated the cost for a classified laser-guided device to be $376,900. The engineer used the M&S equipment index for the years 1998 and 2008 and the cost-capacity equation with an exponent value of 0.61. If the original equipment had only one-fourth the capacity of the
Instead of using a cost-capacity equation for relating project size and construction cost, the Department of Defense uses Size Adjustment Factors (SAFs) that are based on Size Relationship Ratios (SRRs). For example, a SRR of 2.00 has a SAF of 0.942. Determine the required exponent value in the
The equipment cost for a 10 gallon per minute farm-scale ethanol fuel production plant is $243,000. The direct cost factor for construction is 1.28 and for installation is 0.23. The indirect cost factor for licenses, insurance, etc. is 0.84 (applied to total direct cost). Determine the estimated
Nicole is an engineer on temporary assignment at a refinery operation in Seaside. She has reviewed a cost estimate for $430,000, which covers some new processing equipment for the ethylene line. The equipment itself is estimated at $250,000 with a construction cost factor of 0.30 and an
The company you work for currently allocates insurance costs on the basis of cost per direct labor hour. This indirect cost component for the year is budgeted at $36,000. If the direct labor hours for departments A, B, and C are expected to be 2000, 8000, and 5000, respectively, this year,
The director of public works needs to distribute the indirect cost allocation of $1.2 million to the three branches around the city. The recorded amounts for this year are as follows:The director plans to use the allocation and information from last year to determine the rates for this year. This
A company has a processing department with 10 stations. Because of the nature and use of three of these stations, each is considered a separate cost center for indirect cost allocation. The remaining seven are grouped as one center, CC190. Machine operating hours are used as the allocation basis
All the indirect costs are allocated by accounting for a department. The manager has obtained records of allocation rates and actual charges for the prior 3 months and estimates for this month (May) and next month (see the table). The basis of allocation is not indicated, and the company accountant
The mechanical components division manager asks you to recommend a make/buy decision on a major automotive subassembly that is currently purchased externally for a total of $3.9 million this year. This cost is expected to continue rising at a rate of $300,000 per year. Your manager asks that both
The municipal water and desalinization utility in a California city currently allocates some costs for maintenance shop workers to pumping stations based on the number of pumps at each station. At the last director's semiannual meeting, a suggestion was made to change the allocation basis to the
Factory Direct manufactures and sells manufactured homes. Traditionally, it has distributed indirect costs to its three construction plants based on materials cost. Each plant builds different models and floor plans. Advances in weight and shape of plastic and wood composite components have
Using the baggage-traffic basis, determine the allocation rate using last year's total of $667,500, and distribute this amount to the hubs this year.Jet Green Airways historically distributes the indirect costs of lost and damaged baggage to its three major hubs using a basis of annual number of
What are the percentage changes in allocation at each hub using the two different bases?Jet Green Airways historically distributes the indirect costs of lost and damaged baggage to its three major hubs using a basis of annual number of flights in and out of each hub. Last year $667,500 was
On-line Vacation distributes advertising costs to its four resort sites in the Caribbean on the basis of the size of the resort budget. For this year, in round numbers, the budgets and allocation of $1 million advertising indirect costs are as follows:(a) Determine the allocation if the ABC method
A 50-hp turbine pump was purchased for $2100. If the exponent in the cost-capacity equation has a value of 0.76, a 200-hp turbine pump could be expected to cost about:(a) $6020(b) $5320(c) $4890(d) $4260
The city built a recreation park in 1980 for $500,000. The ENR construction cost index had a value of 3378.17 at that time. If the city is planning to construct a similar recreation park when the index value is 5542.16, the estimated cost is closest to:(a) $695,800(b) $750,700(c) $820,300(d)

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