Engineering Economic Analysis 11th Edition Donald Newnan, Ted Eschenbach, Jerome Lavelle - Solutions

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4. 10.15 Find the present worth sum of money that would be equivalent to the future amounts of $5000 in year 6 and $7000 in year 8 if the real interest rate is 10% per year and the inflation rate is 5% per year. Solve using the factors and their equations with (a) an inflation-adjusted rate, and
3. 10.14 Calculate the present worth of $35,000 to be received 6 years from now, if the predicted real rate of return is 15% per year and the inflation rate is 10% per year.
2. 10.13 Cellgene Biometrics, a small biotech company, uses a MARR of 40% per year when evaluating new investments. If the inflation rate in the bio field is 6% per year, what will the real rate of return be, provided it realizes its optimistic MARR objective?
1. 10.12 α-β, Inc., a high-tech company in San Diego, whose stock trades on the NYSE exchange, uses a MARR of 25% per year. If the chief financial officer (CFO) said the company expects to make a real rate of return of 20% per year on its investments over the next 3-year period, what is the
11. 10.11 The inflation rate over a 10-year period for an automatic dishwasher that costs $1000 now is shown below. (a) What will be the cost at the end of year 10? (b) Do you get the same cost using an average inflation rate of 5% per year through the 10-year period? Why? Table Summary: A table
10. 10.10 According to data from the National Association of Colleges and Employers (NACE), engineering graduates’ average salaries at $66,521 were among the highest for the class of 2018. You expect to graduate in 2023. What might you use as an aimed-at starting salary when you graduate, if the
9. 10.9 At an international meeting of consumer advocates for price control, a comparison of CPI growth was made to understand the cost increases that inflation imposes on citizens in the United States, Mexico, and Turkey. The annual CPI percentages are shown for 2 years. (a) If the base spending
8. 10.8 An engineer who is now 65 years old began planning for his retirement 40 years ago. At that time, he thought that if he had $1 million when he retired, he would have more than enough money to live his remaining life in luxury. Assume the inflation rate over the 40-year time period was 2.69%
7. 10.7 A website determines how many dollars today have the same buying power as a stated amount of money at the beginning of any year in the past. When the values 1920, 2019, and $1000 are entered for the beginning of the initial year, beginning of the desired year, and initial amount,
6. 10.6 Assume that you want to retire 30 years from now with an amount of money that will have the same value (purchasing power) as $1.5 million today. If you believe the inflation rate will average 4% per year, determine the amount of future dollars you will need.
5. 10.5 If the inflation rate is 5% per year, how many years will it take for the cost of an item to double, if the price increases only by the inflation rate? Obtain the answer using (a) an equation, and (b) Figure 1.3.
4. 10.4 In 2019, the average salary of petroleum engineers was $98,400. Predict what their salary will be in 2028 if their salary increases only by the inflation rate. Assume the inflation rate over this time period is constant at 2.5% per year.
3. 10.3 In 1951, your grandmother could purchase a loaf of bread for $0.14. The cost to you in 2020 was $2.60. What was the average inflation rate per year over the 69 years between 1951 and 2020?
2. 10.2 If the inflation rate is 6% per year, how many (future) dollars will be required 10 years from now to buy the same things that $15,000 buys now?
1. 10.1 At a time when the inflation rate is 8% per year, $100,000 (future dollars) 15 years from now is equivalent to how many of today’s constant-value dollars?
5. Use different spreadsheet functions to perform inflation-adjusted equivalence calculations. Spreadsheets
4. Calculate an annual amount in future dollars that is equivalent to a specified present or future sum. AW with inflation
3. Determine the real interest rate and the inflation-adjusted MARR, and calculate a future worth with an adjustment for inflation. FW with inflation
2. Calculate present worth with an adjustment for inflation. PW with inflation
1. Determine the difference inflation makes between money now and money in the future. Impact of inflation
14. 9.44 When performing an abandonment study, all of the following are correct, except: 1. Revenues are included in the analysis 2. Year of abandonment has the smallest AW value 3. First cost is the current market value 4. A maximum number of years of retention can be specified
13. 9.43 The annual worth values for a defender, which can be replaced with a similar used asset, and a challenger are estimated. The defender should be replaced: 1. Now 2. 1 year from now 3. 2 years from now 4. 3 years from now Table Summary: A table divided into 2 main columns shows a replacement
12. 9.42 The amounts below represent AW values if an asset is retained for the number of years shown. The ESL is: 1. 1 year 2. 2 years 3. 3 years 4. 4 years Table Summary: A table divided into 4 columns shows the AW analysis for an equipment for 5 years. The column headers are marked as: Years
11. 9.41 A machine was purchased 3 years ago for $45,000; it can be sold today for $24,000. The operating costs for this machine are $9000 per year, and it is expected to last 4 more years with a $5000 salvage value. Used machines similar to this one will be available at any time in the future. A
10. 9.40 A small residential developer is analyzing a potential challenger to his current front-end loader. The loader was purchased 6 years ago for $53,000. The most recent economic information about the loader is shown below. In determining the economic life of the vehicle, the AW for keeping the
9. 9.39 For a 4-year study period, the decision is to:1. Retain the defender 2. Replace the defender now 3. Select the challenger after 1 more year 4. Perform another replacement study in 2 years
8. 9.38 For a 1-year study period, the decision is to: 1. Retain the defender 2. Replace the defender now 3. Select the challenger after 1 more year 4. Do nothing
7. 9.37 The economic service life of the defender is: 1. 2 years 2. 3 years 3. 4 years 4. 5 years
6. 9.36 The economic service life of the challenger is: 1. 2 years 2. 3 years 3. 4 years 4. 5 years
5. 9.35 Quality inspection equipment purchased 2 years ago for $50,000 was expected to have a useful life of 5 years with a $5000 salvage value. Due to increased demand, it was upgraded for $20,000 one year ago. A new product line now requires that the equipment be upgraded again for another
4. 9.34 To determine the economic service life, you must calculate the AW for each year of an asset’s useful life. Max just bought an old pickup truck for $10,000. If estimated operating costs and year-end salvage values are as shown, and i = 10% per year, the AW for keeping the truck for 2 years
3. 9.33 An engineer determined that the equivalent annual worth of an existing machine over its remaining useful life of 3 years will be $ −70,000 per year. It can be replaced now or later with a machine that will have an AW of $−80,000 if it is kept for 2 years or less, $−68,000 if it is
2. 9.32 A consulting engineering firm purchased field test equipment 2 years ago for $50,000 that was expected to have a useful life of 5 years with a $5000 salvage value. Its performance was less than expected, and it was upgraded for $20,000 one year ago. Increased demand now requires that the
1. 9.31 In a replacement study conducted last year, it was determined that the defender should be kept for 3 more years. In reviewing the current costs, it appears that the estimates for this year and next are still valid. The proper course of action is to: 1. Replace the existing asset now. 2.
5. 9.30 Clarksville Pottery has long sold a coffee cup style made inhouse using machinery purchased 5 years ago for $110,000. The product line will be discontinued and the machinery disposed of during the year of the largest estimated AW. Use the following estimates to determine when the machinery
4. 9.29 Hydrochloric acid, which fumes at room temperatures, creates a very corrosive work environment. A mixing machine working in this environment is deteriorating fast and can be used for only 1 more year, at which time it will be scrapped. It was purchased 3 years ago for $88,000 and its
3. 9.28 For some years, Mel has contracted with several major pizza retailers for home delivery services. He uses a MARR of 12% per year in all business dealings. His current van, purchased 10 years ago for $75,000, can be used for 3 more years, with an AOC of $63,000 and an estimated $25,000
2. 9.27 Huntington Medical Center purchased a used low-field MRI scanner 2 years ago for $445,000. Its operating cost is $272,000 per year and it can be sold for $150,000 anytime in the next 3 years. The Center’s director is considering replacing the presently owned MRI scanner with a
1. 9.26 Digital Tech Dynamics purchased a new quality inspection system for $550,000. The estimated salvage value was $50,000 after 10 years. Currently the expected remaining life is 7 years with an AOC of $27,000 per year and an estimated salvage value of $40,000. The new president has recommended
5. 9.25 The table that follows shows present worth values of the costs associated with using a presently owned machine (the defender) and a possible replacement (the challenger) for different numbers of years. Determine when the defender should be replaced using an interest rate of 10% per year and
4. 9.24 ABB Communications is considering replacing equipment that had a first cost of $300,000 five years ago. The company CEO wants to know if the equipment should be replaced now or at any other time over the next 3 years to minimize the cost of producing miniature background suppression
3. 9.23 Two processes can be used for producing a polymer that reduces friction loss in engines. Process K will use a presently owned machine that has a current market value of $160,000, an operating cost of $7000 per month, and a salvage value of $50,000 after 1 year and $40,000 after its maximum
2. 9.22 A machine purchased 3 years ago for $140,000 is currently too slow to satisfy increased demand. The machine can be upgraded now for $70,000 or sold to a smaller company for $40,000. The current machine will have an annual operating cost of $85,000 per year and a $30,000 salvage value in 3
1. 9.21 Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment
8. 9.20 (Spreadsheet exercise) A $500,000 piece of laser-driven, fruit cleaning equipment is being rapidly challenged by new technology. Current estimates for the remaining 3 years of possible retention of this defender are: Defender: Market value: $60,000 now, but zerothereafter
7. 9.19 A critical machine in BHP Billiton’s copper refining operation was purchased 7 years ago for $160,000. Last year a replacement study was performed with the decision to retain it for 3 more years. The situation has changed. The equipment is estimated to have a value of $8000 if
6. 9.18 Your employer, which manufactures vibration isolation platforms, is trying to decide whether it should immediately upgrade the current assembly system of belts and gears (the defender), which is rather labor-intensive, with a more highly automated independent moving cart system (the
5. 9.17 A textile processing company is evaluating whether it should retain the current bleaching process which uses chlorine dioxide or replace it with a proprietary Genpure process. The relevant information for each process is shown. (a) Use an interest rate of 15% per year to perform the
4. 9.16 You and a group of friends have purchased an annual lease at a commercial fishing pond for the last several years. It is possible to renew the lease for up to 5 years. Based on past costs, you calculated the AW values for different lease periods.Table Summary: A table divided into 2 columns
3. 9.15 A machine that cost $120,000 three years ago can be sold now for $54,000. Its market value is expected to be $40,000 and $20,000 one year and two years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for
2. 9.14 In planning a plant expansion, Medimmune can upgrade the existing controlled-environment rooms or purchase new ones. The presently owned ones were purchased 4 years ago for $250,000. They have a current “quick sale” value of $20,000, but for an investment of $100,000 now, they would be
1. 9.13 Based on company records of similar equipment, a consulting aerospace engineer at Aerospatiale estimated AW values for a presently owned, highly accurate steel rivet inserter as shown. A challenger has ELS = 2 years and AWC = $−48,000 per year. The MARR is 15% per year. (a) If the
7. 9.12 A large standby electricity generator in a hospital operating room has a first cost of $70,000 and may be used for a maximum of 6 years. Its salvage value, which decreases by 15% per year, is described by the equation S = 70,000(1 − 0.15)n , where n is the number of years after purchase.
6. 9.11 (Spreadsheet exercise) A construction company bought a 180,000 metric ton earth sifter at a cost of $65,000. The company expects to keep the equipment a maximum of 7 years. The operating cost is expected to follow the series described by 40,000 + 10,000k, where k is the number of years
5. 9.10 Leroy purchased an AI-based robotics system with a first cost of $345,000, an AOC of $148,000 per year, a $140,000 salvage value, and an ESL of 3 years. Rather than trading after 3 years, he kept the system for a total of 5 years. Due to the wear factor and expense of repairs, its AOC
4. 9.9 The initial cost of a bridge that is expected to have a very long useful life is $70 million. Maintenance can be done at 1-, 2-, 3-, or 4- year intervals, but the longer the interval between servicing, the higher the cost. The cost of servicing is estimated at $83,000, $91,000, $125,000, and
3. 9.8 As project engineer, you received the AW analysis below from the finance department. It is for a new piece of equipment you ordered some months ago. You were told the interest rate used was 10% per year, but no first cost or projected salvage value were provided and you want to know them.
2. 9.7 To improve package tracking at a UPS transfer facility, conveyor equipment was upgraded with RFID sensors at a cost of $345,000. The operating cost is expected to be $148,000 per year for the first 3 years and $210,000 for the next 3 years. The salvage value of the equipment is expected to
1. 9.6 For equipment that has a first cost of $10,000 and the estimated operating costs and year-end salvage values shown, (a) determine the economic service life at i = 10% per year using factors, and (b) write the PMT function to determine AW for year 4, if net operating costs are entered into
5. 9.5 A piece of equipment that was purchased 2 years ago by Toshiba Imaging for $50,000 was expected to have a useful life of 5 years with a $5000 salvage value. Its performance was less than expected, and it was upgraded for $20,000 one year ago. Increased demand now requires that the equipment
4. 9.4 Newport Corporation purchased equipment for making pneumatic vibration isolators at a cost of $90,000 two years ago. It has a market value that can be described by the relation $90,000 − 8000 k, where k is the years from time of purchase. Experience with this type of equipment has shown
3. 9.3 A civil engineer who owns his own design/build/operate company purchased a small crane 3 years ago at a cost of $65,000. At that time, it was expected to be used for 10 years and then traded in for its salvage value of $10,000. Due to increased construction activities, the company would
2. 9.2 A robotic arm purchased 1 year ago for $85,000 costs more to operate than anticipated. When purchased, it was expected to be used for 10 years with annual maintenance costs of $37,000 and a salvage value of $10,000. However, last year, it cost the company $46,000 to maintain it, and these
1. 9.1 In a replacement study, what is meant by “taking the nonowner’s viewpoint”?
5. Use a spreadsheet to determine the ESL, to perform a replacement study, and to calculate the replacement value.
4. Determine the replacement value to make the defender and challenger equally attractive. Replacement value
3. Perform a replacement study between the defender and a competitive challenger when the study period is not specified and when it is specified. Replacement study
2. Determine the economic service life of an asset that minimizes the total AW of costs. Economic service life
1. Understand the fundamentals and terms for a replacement study. Basics
15. 8.78 All of the following spreadsheet functions will correctly generate a random number, except: 1. = RAND() 2. = RANDBETWEEN(50,45) 3. = RAND()*100 4. = RANDBETWEEN(−35,100)
14. Page 2758.77 The president of Bullnose Shoes estimated the chances of different levels of earnings for this calendar year as shown. The expected value of the earnings is closest to:1. $506,000 2. $493,000 3. $461,000 4. $402,000 Table Summary: Table divided into two columns compares probability
13. 8.76 The net revenue from a candy product called Mummies-Lite has averaged $15,000 per month for the past 12 months. If the value of ∑ (Xi − ) 2 is $4,680,000, the standard deviation value is closest to: 1. $38,100 2. $652 3. $958 4. $425,450
4-31 On January 1, Frank Jenson bought a used car for $7200 and agreed to pay for it as follows: 1/3 down payment; the balance to be paid in 36 equal monthly payments; the first payment due Febru- ary 1; an annual interest rate of 9%, compounded monthly. (a) What is the amount of Frank's monthly
4-30 The first of a series of equal semiannual cash flows occurs on July 1, 2011, and the last occurs on Jan- uary 1, 2024. Each cash flow is equal to $128,000. The nominal interest rate is 12% compounded semi- annually. What single amount on July 1, 2015 is equivalent to this cash flow system?
4-29 What amount will be required to purchase, on an engineers's 40th birthday, an annuity to provide him with 30 equal semiannual payments of $1000 each, the first to be received on his 50th birthday, if nominal interest is 4% compounded semiannually?
4-28 A young engineer wishes to become a millionaire by the time he is 60 years old. He believes that by
4-27 Kelsey Construction has purchased a crane that comes with a 3-year warranty. Repair costs are expected to average $3500 per year beginning in Year 4 when the warranty expires. Determine the present worth of the crane's repair costs over its 15-year life. The interest rate is 10%.
4-26 Determine the breakeven resale price 10 years from now of an apartment house that can be bought today for $449,000. Its annual net income is $54,000. The owner wants a 10% annual return on her investment. Contributed by D. P. Loucks, Cornell University
4-25 LaQuita deposits $3500 in her retirement account every year. If her account pays an average of 6% inter- est and she makes 38 deposits before she retires, how much money can she withdraw in 20 equal payments beginning one year after her last deposit? Contributed by Paul R. McCright, University
4-24 How much money should Timothy and Tiffany deposit annually for 20 years in order to provide an income of $30,000 per year for the next 10 years? Assume the interest rate is a constant 4%. Contributed by Paul R. McCright, University of South Florida
4-23 Martin pays rent of $500 per month for the 9-month academic year. He is going to travel the world this summer and won't be working. How much must he set aside in his savings account for the 3-month sum- mer to cover his rent for next year? The savings account earns 3% with monthly compounding.
4-22 Liam dreams of starting his own business to import consumer electronic products to his home country. He estimates he can earn 5% on his investments and that he will need to have $300,000 at the end of year 10 if he wants to give his business a good solid foundation. He now has $28,850 in his
4-21 Elias makes 7 annual end-of-year deposits of $350 into an account earning 2.5% interest. How much is in the account at the end of Year 11, if he makes no additional deposits and makes no withdrawals? Contributed by Paul R. McCright, University of South Florida
4-20 If the university's College of Engineering can ear 4% on its investments, how much should be in its sav ings account to fund one $5000 scholarship each year for 10 years? Contributed by Paul R. McCright, University of South Florida?
4-19 Brad will graduate next year. When he begins work ing, he plans to deposit $3000 at the end of each year into an IRA account. If the retirement account pays 4% interest, how much will be in his account after 40 deposits? Contributed by Paul R. McCright. University of South Florida
4-18 Jose graduated in engineering 5 years ago. His employer will give him a raise of $10,000 per year if he passes the PE exam (Professional Engineer). Over a career of 35 years, what is the present worth of the raise if the interest rate is 8%?
4-17 Rose recently graduated in engineering. Her employ- er will give her a raise of $3500 per year if she passes the FE exam (Fundamentals of Engineering). Over a career of 40 years, what is the present worth of the raise if the interest rate is 7%?
4-16 A student is buying a new car. The car's price is $19,500, the sales tax is 8%, and the title, license, and registration fee is $650 to be paid in cash. Instead of buying the car now, the stu- dent has decided to save money in equal monthly amounts for 48 months and then pay cash. If the
4-15 A student is buying a new car. The car's price is $16,500, the sales tax is 8%, and the title, license, and registration fee is $450 to be paid in cash. The dealer offers to finance 90% of the car's price for 48 months at a nominal interest rate of 9% per year, compounded monthly.
4-14 A manufacturing firm spends $500,000 annually for a required safety inspection procedure on its pro duction lines. A new monitoring technology would enable the company to eliminate the need for such inspection. If the interest rate is 10% per year, how much can the company afford to spend on
4-13 Tori is planning to buy a car. The maximum payment she can make is $3400 per year, and she can get a car loan at her credit union for 7.3% interest. Assume her payments will be made at the end of each year 1-4. If Tori's old car can be traded in for $3325, which is her down payment, what is
4-12 How many months will it take to pay off a $525 debt, with monthly payments of $15 at the end of each month, if the interest rate is 18%, compounded monthly? (Answer: 50 months)
4-11 Using linear interpolation, determine the value of (P/A, 61/2%, 10) from the compound interest tables. Compute this same value using the equation or a TVM calculator. Why do the values differ?
4-10 A student wants to have $30,000 at graduation 4 years from now to buy a new car. His grandfather gave him $10,000 as a high school graduation present. How much must the student save each year if he deposits the $10,000 today and can earn 12% on both the $10,000 and his earnings in a mutual
4-9 A city engineer knows that she will need $25 million in 3 years to replace toll booths on a toll road in the city. Traffic on the road is estimated to be 20 million vehicles per year. How much per vehicle should the toll be to cover the cost of the toll booth replacement project? Interest is
4-8 A company deposits $2000 in a bank at the end of every year for 10 years. The company makes no deposits during the subsequent 5 years. If the bank pays 8% interest, how much would be in the account at the end of 15 years?
4-7 A car may be purchased with a $3000 down payment now and 60 monthly payments of $480. If the interest rate is 12% compounded monthly, what is the price of the car?
4-6 A man buys a car for $18,000 with no money down. He pays for the car in 30 equal monthly pay- ments with interest at 12% per annum, compounded monthly. What is his monthly loan payment? (Answer: $697.47)
4-5 How much must be deposited now at 51/4% interest to produce $300 at the end of every year for 10 years?
4-4 The cash flows have a present value of 0. Compute the value of n, assuming a 10% interest rate.

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Engineering Economic Analysis 11th Edition Donald Newnan, Ted Eschenbach, Jerome Lavelle - Solutions

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