Questions and Answers of Contemporary Engineering Economics

You borrowed $22,000 to buy a new car from a bank at an interest rate of 9% compounded monthly. This loan will be repaid in 60 equal monthly installments over five years. Immediately after the 24th
A building is priced at $250,000. If a down payment of $25,000 is made and a payment of $5,000 every month thereafter is required. how many months will it take to pay for the building? Interest is
The Economist, a professional business journal, offers three types of subscriptions, payable in advance: three months auto-renewing at $45, one year at $160, and two years at $279, If money can earn
A sum of $25,000 per year will be received uniformly over a seven-year period beginning two years from today. What is the present value of this deferred-funds flow if interest is compounded
How much money would be accumulated in 10 years for a deposit of S 10.000 made at the end- of-year zero if the account earned interest at 6% per year for the first three years. 9% per year for the
Mr. Smith wants to buy a new car that will cost $ 18,000. Fie will make a down payment in the amount of $8,000. He would like to borrow the remainder from a bank at an interest rate of 9% compounded
Suzan Long is considering buying a home for $350,000.(a) If she makes a down payment of $50,000 and takes out a mortgage on the rest of the money at 5.5% compounded monthly. what will be her monthly
Consider the investment projects in Table P5.6. all of which have a four-year investment life.(a) What is the payback period of each project?(b) What is the discounted payback period at an interest
Consider the sets of investment projects in Table P5.17, all of which have a three-year investment life.(a) Compute the net future worth of each project at i = 15% Which project or projects are
Consider the following three individuals. Just after their 19th payment;• Robert Dixon had a balance of $80,000 on a 9%, 15-year mortgage;Wanda Harper had a balance of $80,000 on a 9%, 20-year
Consider the following two options for financing a car:Option A. Purchase the vehicle at the normal price of $26,200 and pay for the vehicle over three years with equal monthly payments at 0% APR
James Wilson wants to purchase a set of furniture worth $5,000. He plans to finance the furniture for three years. The furniture store tells James that the interest rate is only 1% per month, and his
The Green Cable Corporation issued a new series of bonds on January 5, 2015. The bonds were sold at par ($1,000), have a 6% coupon rate, and mature in 30 years on December 31, 2045. Coupon interest
Business at your design engineering firm has been brisk. To keep up with the increasing workload. you are considering the purchase of a new state-of- the-art CAD/CAM system costing $500,000, which
Technology is taking much of the fun out of finding a place to park the car. Now, in cities from New York to Seattle. the door is open to a host of wireless technologies seeking to improve the
Consider the project balances in Table P5.19 for a typical investment project with a service life of four years.(a) Determine the interest rate used in computing the project balance.(b) Reconstruct
Consider the accompanying project balance diagram for a typical investment project with a service life of five years (Figure P5.21). The numbers in the figure indicate the beginning project
What is the present worth of the project which requires $100,000 investment now and receives $30,000 every year for five years at an interest rate of 12%?
Consider the following cash flows and present worth profile.(a) Determine the values of X and Y.(b) Calculate the terminal project balance of project 1 at MARR = 24%.(c) Find the values of a, b, and
Beloit Co. is a manufacturer of mini-doughnut machine makers. Early in 2015 a customer asked Beloit to quote a price for a custom-designed doughnut machine to be delivered by the end of 2015. Once
You are considering purchasing a new injection-molding machine. This machine will have an estimated service life of 10 years with a negligible after-tax salvage value. Its annual net after-tax
Consider the following investment projects using the information in Table P5.25.(a) Compute the future worth at the end of life for each project at i = 10%.(b) Determine the discounted payback period
Consider the independent investment projects in Table P5.29. Compute the project worth of each project at the end of six years with variable MARRs as follows: 10% for n = 0 to n = 3 and 15% for n = 4
Consider two mutually exclusive investment projects, each with MARR = 12%, as shown in Table P5.41. On the basis of the NPW criterion, which alternative would be selected? TABLE P5.41 Two Mutually
Suppose that you undertook an investment project with the following estimated cash flows:At the end of year 3, you have received an offer to buy the project from another firm; what minimum price
Consider the cash flow data in Table P5.39 for two competing investment projects. At i = I2%, which of the two projects would be a belier choice? TABLE P5.39 n 0 1 2 3 4 5 6 7 8 9 10 Project
Consider the cash flows in Figure P6.1 and compute the equivalent annual worth at i = 10%. 0 $300 $100 4 1 Figure P6.1 2 $160 $150 3 لیا $200 4 $200 5 $130 6
Consider the accompanying cash flow diagram. Compute the equivalent annual worth at i = 13%. $20,000 Years 12 3 4 5 6 $5,000 Figure P6.2 $8,000 $11,000 $14,000 $17,000
Consider the two mutually exclusive service projects in Table P5.47.Assuming that you need service of either machine for an indefinite period, which project would be selected at i = 16%? Assume
Consider each of the after-tax cash flows shown in Table P5.54.Suppose that projects B and C are mutually exclusive. Suppose also that the required service period is eight years and that the company
A professional football player has a contract on hand at the beginning of 2015 season. He will earn either $11,406.000 (deferred plan) over 12 years or $8,600,000 (non-deferred plan) over 6 years. He
Consider the sets of investment projects from Table P6.9. Compute the equivalent annual worth of each project at i = I 2%, and determine the acceptability of each project. TABLE
The repeating cash flows for a certain project are as given in Table P6.10. Find the equivalent annual worth for this project at i = 10%, and determine the acceptability of the project. TABLE
The cash flows in Table P6.39 represent the potential annual savings associated with two different types of production processes. each of which requires an investment of $40,000. Assume an interest
Two types of heating systems are considered to provide heat for a 35,000 ft2 office building. Cost data for each system is given in Table P6.47.At 12% interest. which system would be more economical?
Consider the infinite cash-flow series with repeated cash-flow patterns given in Table P7.9.Determine i* for this infinite cash-flow series. TABLE
K.T. Labs bought a Gene gun for $25,000. The accounting department has estimated that the machine would have an annualized capital cost of $3,880 over its 10-year service life. What salvage value was
Consider two investments. A and B. with the sequences of cash flows given in Table P7.13.(a) Compute i* for each investment.(b) Plot the present-worth curve for each project on the same chart, and
You are considering purchasing a dump truck. The truck will cost $75,000 and have operating and maintenance costs that start at $18,000 the first year and increases by $2,000 per year. Assume that
The present price (year 0) of kerosene is $4.30 per gallon, and its cost is expected to increase by 10% per year. (At the end of year I. kerosene will cost $4.73 per gallon.) Mr. Garcia uses about
Consider the investment projects given in Table P7.26.Which of the following statements is correct?(a) All projects are nonsimple investments.(b) Project 3 should have three real rates of return.(c)
The city of Carlsbad in California is considering building a $300 million water-desalination plant. The facility would be the largest in the Western Hemisphere. producing 50 million gallons of
Consider an investment project with the cash flows given in Table P7.29. Compute the IRR for this investment. Is the project acceptable at MARR = 10%? TABLE P7.29 n 0 1 2 3 Cash
The City of Washington is considering adding new buses for its current mass-transit system that links from the Tacoma International Airport to clustering city destinations on non-stop basis. The
A company is currently paying its employees $0.56 per mile to drive their own cars on company business. The company is considering supplying employees with cars, which would involve purchasing at
Consider the cash flow of a certain project given in Table P7.30. If the project’s JRR is 10%:(a) Find the value of X.(b) Is this project acceptable at MARR = 8%? TABLE P7.30 0 1 2 3 Net Cash
Suppose that you invest $1,000 in stock. Two years later, your investment yields $1,865. What is the rate of return of your investment?
In 1970, Wal-Mart offered 300,000 shares of its common stock to the public at a price of $16.50 per share. Since that time, Wal-Mart has had 11 two-for-one stock splits. On a purchase of 100 shares
As a rule of thumb. 8% annualized net return over a minimum holding period of five years is a realistic figure. Pablo Picasso’s 1905 portrait Boy with ci Pipe sold for $104.2 million in an auction
Which of the capital investment projects in Figure P7.42 would you choose, and why?(a) Select Project A because it has a larger IRR.(b) Select Project B because it has a larger cash flow.(c) Select
Harris Company manufactures a single product. Costs for the year 2015 for output levels of 1,000 and 2,000 units are given in Table P8.4.At each level of output. compute the following:(a) Total
The E. F. Fedele Company is considering acquiring an automatic screwing machine for its assembly operation of a personal computer. Three different models with varying automatic features are under
The following information on four mutually exclusive projects is given here. All four projects have the same service life and require investment in year 0 only one. Suppose that you are provided with
You established an investment fund with an initial deposit of $5,000. You contributed another $5,000 at the end of the first year. The fund value, including interest, is $11,500 at the end of two
A company invests $2,000 at the beginning of a five-year project. At the end of every year for the first three years, the project generates $500. At the end of the fourth year, the project generates
The accompanying graph (Figure P8.8) is a cost—volume—profit graph, In the graph, identify the following line segments or points.(a) Line EF represents(b) The horizontal axis AB represents
Hyundai Automobile U.S.A. is sponsoring a charity golf tournament to raise monies for a children’s hospital in Birmingham. There are two possible venues:• RTJ Golf Resort at Prattville, which has
Consider the two companies Google and Yahoo, which compete with each other in the mobile advertising sector. Google enjoys strong relations hips among businesses and has a dominant role in online
Compare Monsanto Company (MON) and E.I. du Pont de Nemours & Company (DD) using a thorough financial ratios analysis.(a) For each company, compute all the ratios listed in Figure 2.7 (i.e., debt
Read the Coca-Cola Company’s Annual Report (most recent one) and calculate the various financial ratios defined in Figure 2.7. Then give your assessment of the company’s general financial
Table P2.5 on Page 54 summarizes the financial conditions for Intel Corporation (INTC), a manufacturer of various computer-processing chips for fiscal year 2013. Compute the various financial ratios
Which of the following statements is incorrect?(a) The quickest way to determine whether the firm has too much debt is to calculate the debt ratio.(b) The best rule of thumb for determining the
Consider the following financial data for North-gate Corporation ($ in millions):• Cash and marketable securities. $100• Total fixed assets, $280• Annual sales, $1,200• Net income, $358•
Consider B&B Company’s financial data as follows: (unit: millions of dollars except ratio figures):Fill in the blanks by calculating the appropriate accounting entries in the balance or the
The following table summarizes some of key financial data for Copeland Corporation (unit: thousand dollars except ratio figures):(a) Determine the accounts receivables.(b) Determine the amount of
Consider Fisher & Company’s financial data as follows: (unit: millions of dollars except ratio figures):(a) Find Fisher’s accounts receivable.(b) Calculate the amount of current assets.(c)
Compare the interest earned by $10.000 for five years at I0% simple interest with that earned by the same amount for five years at 10% compounded annually.
It always makes the papers when a well-known sports star signs a multi-million dollar contract. (such as the payment schedule for a football player who has signed a 10-year, $130 million contract
You are considering investing $4.500 at an interest rate of 8.5% compounded annually for five years or investing the $4500 at 9% per year simple interest for five years. Which option is better?
You are about to borrow $15000 from a bank at an interest rate of 8% compounded annually. You are required to make three equal annual repayments the amount of $5,820.50 per year, with the first
Suppose you have the alternative of receiving either $22,000 at the end of five years or P dollars today. Currently, you have no need for money, so you could deposit the P dollars in a bank that pays
Suppose that you are obtaining a personal loan from your uncle in the amount of $30.000 (now) to be repaid in three years to cover some of your college expenses. If your uncle usually earns 9%
If you deposited $100 now (n = 0) and $200 two years from now (n = 2) in a savings account that pays 10% annual interest, how much would you have at the end of year 10?
The average price of a new home is $250,000. If new home prices are increasing at a rate of 6% per year, how much will a new home cost in 10 years?
What will be the amount accumulated by each of these present investments?(a) $5,000 in 5 years at 7% compounded annually.(b) $7,250 in 15 years at 9% compounded annually.(c) $9,000 in 33 years at 6%
You are interested in buying a piece of real property that could be worth $300,000 in 10 years. Assuming that your money is worth 8%, how much would you be willing to pay for the property?
For an interest rate of 13% compounded annually. determine the following.(a) How much can be lent now if $12,000 will be repaid at the end of four years?(b) How much will be required in five years to
How many years will it take an investment to triple if the interest rate is 8% compounded annually?
On October 1, 1970. Walmart first offered 300,000 shares of its common stock to the public at a price of$16.50 per share. Since that time. Walmart has had 11 two-for-one stock splits. So if you
If you desire to withdraw the amounts given in Table P3.19 over the next five years from a savings account that earns 7% interest compounded annually. how much do you need to deposit now? TABLE
If $2,000 is invested now, $2,500 two years from now, and $3000 four years from now at an interest rate of 6 compounded annually, what will be the total amount in 10 years?
How much invested now at 8% would be just sufficient to provide three payments. with the first payment in the amount of $9,000 occurring two years hence, then $6,000 five years hence, and finally
What is the future worth of a series of equal year-end deposits of $3,000 for 15 years in a savings account that earns 9% annual interest if the following were true?(a) All deposits are made at the
You are paying into a mutual fund that earns 6% compound interest. If you are making an annual contribution of $10,000, how much will be in the funds in 20 years?
What equal annual series of payments must be paid into a sinking fund to accumulate the following amounts?(a) $45,000 in 11 years at 8% compounded annually.(b) $35,000 in 18 years at 6% compounded
You want to save money from your business operation to replace a truck that has been used in delivery. The truck will be replaced after 10 years from now and the replacement cost would be about
Part of the income that a machine generates is put into a sinking fund to replace the machine when it wears out. If $3,000 is deposited annually at 6% interest. how many years must the machine be
A no-load (commission-free) mutual fund has grown at a rate of 11% compounded annually since its beginning, if it is anticipated that It will continue to grow at that rate, how much must be invested
To help you reach a $10,000 goal five years from now, your father offers to give you $1,000 now. You plan to get a part-time job and make five additional deposits. one at the end of each year. (The
What equal annual payment series is required to repay the following present amounts?(a) $l5,000 in six years at 3.5% interest compounded annually.(b) $7,500 in seven years at 7.5% interest compounded
You have borrowed $50,000 at an interest rate of 12%. Equal payments will be made over a three-year period. (The first payment will be made at the end of the first year.) What will the annual payment
You borrowed $15,000 from a bank with the agreement that you repay the balance in 10 equal annual installments at an interest rate of 9%. What should be the required annual payment size?
What is the present worth of the following series of payments?(a) $1,000 at the end of each year for eight years at 7.2% compounded annually.(b) $4,500 at the end of each year for 12 years at 9.5%
Recently, Matt Ryan, an NFL quarterback, agreed to a five-year, $103.75 million contract extension with the Atlanta Falcons, which made him one of the highest-paid players in professional football
An individual deposits an annual bonus into a savings account that pays 6% interest compounded annually. The size of the bonus increases by $5,000 each year, and the initial bonus amount was $20,000.
Five annual deposits in the amounts of $10,000, $8,000, $6,000, $4,000, and $2,000, in that order, are made into a fund that pays interest at a rate of 8% compounded annually. Determine the amount in
What is the equal payment series for 12 years that is equivalent to a payment series of $15,000 at the end of the first year, decreasing by $1,000 each year over 12 years? Interest is 8% compounded
How much do you have to deposit now in your savings account that earns a 6% annual interest if you warn to withdraw the annual payment series in the figure below? 0 I I I P= ? $1,000 $1,250 1 Figure
Anderson Manufacturing Co., a small fabricator of plastics, needs to purchase an extrusion molding machine for $150.000. Anderson will borrow money from a bank at an interest rate of 7% over five
Joe’s starting salary as a mechanical engineer is around $80,000. Joe is planning to place a total of 10% of his salary each year in the mutual fund. Joe expects a 5% salary increase each year for

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