Questions and Answers of Engineering Economy

Army Research Laboratory scientists developed a diffusion-enhanced adhesion process which is expected to significantly improve the performance of multifunction hybrid composites. NASA engineers
A plaintiff in a successful lawsuit was awarded a judgment of $4800 per month for 5 years. The plaintiff has the need of a fairly large sum of money immediately for an investment of his own, and has
Aloma, a university graduate who started a successful business, wants to start an endowment in her name that will provide scholarships to IE students. She wants the scholarship to provide $10,000 per
Steel cable barriers in highway medians are a lowcost way to improve traffic safety without overstressing department of transportation budgets. Cable barriers cost $44,000 per mile, compared with
Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was $130,000 with annual costs of $49,000 and revenues of $78,000 in year
A broadband service company borrowed $2 million for new equipment and repaid the loan in amounts of $200,000 in years 1 and 2 plus a lumpsum amount of $2.2 million at the end of year 3. What was the
Swagelok Enterprises is a manufacturer of miniature fittings and valves. Over a 5-year period, the costs associated with one product line were as follows: first cost of $30,000 and annual costs of
What rate of return per month will an entrepreneur make over a 2½-year project period if he invested $150,000 to produce portable 12-volt air compressors? His monthly costs are $27,000 and his
Over a 7-year period, the number of uninsured motorists in New Mexico dropped from 33% to 10% because an up-to-date computer database allowed the state to better police its requirements for car and
Jamison Specialties manufactures programmable incremental encoders that resist shock and vibration for use in harsh environments. Five years ago, the company invested $650,000 in an automated quality
Determine the rate of return for the following cash flow series. 12,000 i = ? 1 2 3 4 5 6 7 Year 100 100 100 300 300 300 300 4000
The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating into the groundwater. The fill area was 50,000 m2 and the installed liner cost was $8 per m2. In
Determine i* per year for the cash flows shown using factors and the IRR function. See Problem 7.55 for additional spreadsheet work with this series. 3 2 Year Cash Flow, $ 0 -80,000 9000 70,000 30,000
Use factors and a spreadsheet to determine the interest rate per period from the following equation:0 = −40,000 + 8000(P∕A,i*,5) + 8000(P∕F,i*,8)
If a manufacturer of electronic devices invests $650,000 in equipment for making compact piezoelectric accelerometers for general purpose vibration measurement, estimate the rate of return from
The production of polyamide from raw materials of plant origin, such as castor oil, requires 20% less fossil fuel than conventional production methods. Darvon Chemicals borrowed $6 million to
A small industrial contractor purchased a warehouse building for storing equipment and materials that are not immediately needed at construction job sites. The cost of the building was $100,000 and
Spectra Scientific of Santa Clara, CA manufactures Q-switched solid state industrial lasers for LED substrate scribing and silicon wafer dicing. The company got a $60 million loan to be repaid over a
A to Z Mortgages made a home equity loan to your friend. For a 4-year loan of $10,000 at 10% per year, what annual payment must he make to pay off the entire loan in 4 years if interest is charged
A $10,000 loan amortized over 5 years at an interest rate of 10% per year requires payments of $2638 to completely remove the loan when interest is charged on the unrecovered balance of the
What is(a) The highest, and(b) Lowest rate of return (in percent) possible?
An A&E firm planning for a future expansion deposited $40,000 each year for 5 years into a sinking (investment) fund that was to pay an unknown rate of return. If the account had a total of
Your grandmother deposited $10,000 in an investment account on the day you were born to help pay the tuition when you go to college. If the account was worth $50,000 seventeen years after she made
A start-up company that makes robotic hardware for CIM (computer integrated manufacturing) systems borrowed $1 million to expand its packaging and shipping facility. The contract required the company
A northern California consulting firm wants to start saving money for replacement of network servers. If the company invests $5000 at the end of year 1 but decreases the amount invested by 5% each
A civil engineer planning for her retirement places 10% of her salary each year into a high-technology stock fund. If her salary this year (end of year 1) is $160,000 and she expects her salary to
To improve crack detection in military aircraft, the Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair
Calculate the present worth of a geometric gradient series with a cash flow of $35,000 in year 1 and increases of 5% each year through year 6. The interest rate is 10% per year.
A company that manufactures purgable hydrogen sulfide monitors will make deposits such that each one is 7% larger than the preceding one. How large must the first deposit at the end of year 1 be if
The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $500,000. If the gradient increase each year, G, is $3,000, determine the cash flow in year 1 at an
Tacozza Electric, which manufactures brush dc servo motors, budgeted $95,000 per year to pay for specific components over the next 5 years. If the company expects to spend $55,000 in year 1, how much
Apple Computer wants to have $2.1 billion available 5 years from now in order to finance initial production of a device that, based on your behavior, will learn how to monitor and control nearly all
For the cash flows below determine the amount in year 1, if the annual worth in years 1 through 9 is $3500 and the interest rate is 10% per year. 1 2 4 5 6 7 3 Year Cost, A A+40A+80A+120 A+160 A+200
For the cash flow revenues shown below, find the value of G that makes the equivalent annual worth in years 1 through 7 equal to $500. The interest rate is 10% per year. Cash Flow, $ Year Year Cash
Solar Hydro manufactures a revolutionary aeration system that combines coarse and fine bubble aeration components. This year (year 1) the cost for check valve components is $9,000. Based on closure
NMTeX Oil owns several gas wells in Carlsbad, NM. Revenue from the wells has been increasing according to an arithmetic gradient for the past 5 years. The revenue in year 1 from well no. 24 was
An arithmetic cash flow gradient series equals $500 in year 1, $600 in year 2, and amounts increasing by $100 per year through year 9. At i = 10% per year, determine the present worth of the cash
Determine the numerical value of the following factors using(a) Linear interpolation,(b) The formula, and(c) The spreadsheet function from Figure 2-9.1. (Pˆ•F,8.4%,15)2.
The cost of a fence that can detect poacher intrusion into a National Wildlife Preserve is $3 million per mile. If the effective life of the fence is 10 years, determine the equivalent annual cost of
The Public Service Board (PSB) awarded two contracts worth a combined $3.07 million to increase the depth of a retention basin and reconstruct a spillway that was severely damaged in a flood 2 years
Durban Moving and Storage wants to have enough money available 5 years from now to purchase a new tractor-trailer. If the estimated cost is $250,000, how much should the company set aside each year
American Gas Products manufactures a device called a Can-Emitor that empties the contents of old aerosol cans in 2 to 3 seconds. This eliminates the need to dispose of the cans as hazardous waste. If
Stanley, Inc. makes self-clinching fasteners for stainless steel applications. It expects to acquire new time-saving punching equipment 4 years from now. If the company sets aside $125,000 each year,
Meggitt Systems, a company that specializes in extreme-high temperature accelerometers, is investigating whether it should update certain equipment now or wait and do it later. If the cost now is
Loadstar Sensors is a company that makes load/ force sensors based on capacitive sensing technology. For a major plant expansion project, the company wants to have $30 million 5 years from now. If
Labco Scientific sells high-purity chemicals to universities, research laboratories, and pharmaceutical companies. The company wants to invest in new equipment that will reduce shipping costs by
Electric car maker Gentech signed a $75 million contract with Power Systems, Inc. to automate a major part of its assembly line system. If Power Systems will be paid 2 years from now, when the
Thompson Mechanical Products is planning to set aside $150,000 now for possible replacement of large synchronous refiner motors when it becomes necessary. If the replacement isn’t needed for 5
How much could BTU Oil & Gas Fracking afford to spend on new equipment each year for the next 3 years if it expects a profit of $50 million 3 years from now? Assume the company’s MARR is 20%
Determine the size of your investment account 30 years from now (when you plan to retire) if you deposit $12,000 each year, beginning 1 year from now, and the account earns interest at a rate of 10%
Calculate the present worth of 10 uniform payments of $8000 that begin 1 year from now at an interest rate of 10% per year.
What is the present worth of an expenditure of $25,000 in year 8 if the interest rate is 10% per year?
A rotary engine is the essence of a vertical takeoff and landing (VTOL) personal aircraft known as the Moller Skycar M400. It is a flying car known as a personal air vehicle (PAV) and it is expected
How much money should a bank be willing to loan a real estate developer who will repay the loan by selling seven lakefront lots at $120,000 each 2 years from now? Assume the bank’s interest rate is
Pressure Systems, Inc. manufactures high-accuracy liquid level transducers. It is investigating whether it should update in-place equipment now or wait and do it later. If the cost now is $200,000,
The Department of Traffic Security of a city is considering the purchase of a new drone for aerial surveillance of traffic on its most congested streets. A similar purchase 4 years ago cost
Look up the numerical value for the following factors from the compound interest factor tables.1. (F∕P,10%,7)2. (A∕P,12%,10)3. (P∕G,15%,20)4. (F∕A,2%,50)5. (P∕G,35%,15)
Emily and Madison both invest $1000 at 10% per year for 4 years. Emily receives simple interest and Madison gets compound interest. Use a spreadsheet and cell reference formats to develop relations
For the following five spreadsheet functions,(a) Write the values of the engineering economy symbols P, F, A, i, and n, using a ? for the symbol that is to be determined, and(b) State whether the
Last month you lent a work colleague $5000 to cover some overdue bills. He agreed to pay you in 1 month with interest at 2% for the month, thus owing you $5100. Today, when the repayment is due, he
Your boss, whose background is in financial planning, is concerned about the company’s highweighted average cost of capital of 21%. He has asked you to determine what combination of debtequity
What is the weighted average cost of capital for a corporation that finances an expansion project using 40% retained earnings and 60% venture capital? Assume the interest rates are 10% for equity
A company that manufactures general-purpose transducers invested $2 million 4 years ago in high-yield junk bonds. If the bonds are now worth $2.8 million, what rate of return per year did the company
Fill in the missing values (A through D) for a loan of $10,000 if the interest rate is compounded at 10% per year. End of Interest Amount Owed End of Year Amount Owed Year for Year After Interest
Valley Rendering, Inc. is considering purchasing a new flotation system for grease recovery. The company can finance a $150,000 system at 5% per year compound interest or 5.5% per year simple
(a) At a simple interest rate of 12% per year, determine how long it will take $5000 to increase to twice as much.(b) Compare the time it will take to double if the rate is 20% per year simple
The Nicor family is planning to purchase a new home 3 years from now. If they have $240,000 now, how much will be available 3 years from now? The fund grows at a compound rate of 12% per year.
TMI Systems, a company that customizes software for construction cost estimates, repaid a loan obtained 3 years ago at 7% per year simple interest. If the amount that TMI repaid was $120,000,
Durco Automotive needs a $1 million balance in its contingency fund 3 years from now. The CFO (chief financial officer) wants to know how much to deposit now into Durco’s high-yield investment
During a recession, the price of goods and services goes down because of low demand. A company that makes Ethernet adapters is planning to expand its production facility at a cost of $1,000,000 one
A publicly traded construction company reported that it just paid off a loan that it received 1 year earlier. If the total amount of money the company paid was $1.6 million and the interest rate on
Vebco Water and Gas received a contract for a seawater desalination plant wherein the company expected to make a 28% rate of return on its investment.(a) If Vebco invested $8 million the first year,
Use economic equivalence to determine the amount of money or value of i that makes the following statements correct.(a) $5000 today is equivalent to $4275 exactly 1 year ago at i = ___% per year.(b)
To attract new customers, EP Employees Credit Union advertised that they will begin paying 3% interest every quarter on all savings accounts. (Their competitors pay interest every 6 months.) The
Bucknell, Inc. uses the calendar year as its fiscal year. Determine the total net cash flow recorded at the end of the fiscal year. Disbursements, $1000 Month Recelpts, $1000 Jan 300 500 Feb 950 500
Southwestern Moving and Storage wants to have enough money to purchase a new tractor-trailer in 3 years. If the unit will cost $250,000, how much should the company set aside each year provided the
A capital investment firm placed $1.5 million 2 years ago to acquire part-ownership in an innovative chip making company. How long will it take from the date of their initial investment for their
DubaiWorks manufactures angular contact ball bearings for pumps that operate in harsh environments. The company invested $2.4 million in a process that resulted in net profits of $760,000 per year
Bodine Electric, based in Des Moines, Iowa, USA, makes gear motors with a three-stage, selectively hardened gearing cluster that is permanently lubricated. If the company borrows $20 million for a
Determine the amount of money FrostBank might loan a housing developer who will repay the loan 2 years from now by selling eight water-view lots at $240,000 each. Assume the bank’s interest rate is
A new engineering graduate who started a consulting business borrowed money for 1 year to furnish the office. The amount of the loan was $45,800, and it had an interest rate of 10% per year. However,
Callahan Construction borrowed $2.6 million to finance the construction of an entertainment complex in a smart community development project. The company made “interest only” payments of $312,000
RKI Instruments borrowed $4,800,000 from a private equity firm for expansion of its facility for manufacturing carbon monoxide monitors. The company repaid the loan after 1 year with a single payment
Abby purchased 100 shares of her dad’s favorite stock for $25.80 per share exactly 1 year ago, commission free. She sold it today for a total amount of $2865. She plans to invest the entire amount
After starting the wall and roof construction on a custom-designed home, FD, the prime contractor, realized he was not going to make the big profit that he had anticipated due to the many unique
Identify at least five areas of personal finances in which engineering economic analysis can be used by you in the future.
Identify at least five areas of personal finances in which engineering economic analysis can be used by you in the future.
List three evaluation criteria besides the economic ones for selecting the best automobile to purchase.
Define the term measure of worth. Identify three different commonly applied measures.
Identify at least three noneconomic attributes that may be used as evaluation criteria in the decision making process.
When faced with different alternatives, there are many criteria that can be used to identify the best one. What is the tangible criterion that is usually used in an engineering economic analysis?
Hiring an employee is always a multiattribute decision process. Most jobs possess a diversity of requirements, and most applicants have a diversity of skills to bring to the job. Table P14-10 matches
Three large industrial centrifuge designs are being considered for a new chemical plant. a. By using the data in Table P14-8 on p. 594, recommend a preferred design with each method that was
With reference to the data provided in Table P14-6 on p. 594, recommend the preferred alternative by using (a) Dominance, (b) Satisficing, (c) Disjunctive resolution, (d)
Given the matrix of outcomes in Table P14-5 for alternatives and attributes (with higher numbers being better), show what you can conclude, using thefollowing methods:a. Satisficingb. Dominancec.
The Caterpillar Company has a beta (a measure of common stock volatility) of 1.28. What is its estimated cost of equity capital based on the CAPM when the risk-free interest rate is 2.5%?
The market value of a certain asset depends upon its useful life as follows:a. The asset requires a capital investment of $120,000, and MARR is 15% per year. Use Monte Carlo simulation and generate
Answer the problem on the basis of the given graph and the most likely estimates given as follows:Graph:This project (based upon the most likely estimates) is profitable.(a) True(b) False 12%
Answer the problem on the basis of the given graph and the most likely estimates given as follows:Graph:If the initial investment is increased by more than 9%, the project is profitable.(a)
An aerodynamic three-wheeled auto-mobile (the Dart) runs on compressed natural gas stored in two cylinders in the rear of the vehicle. The $13,000 Dart can cruise at speeds up to 80 miles per hour,

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