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engineering economy
Basics Of Engineering Economy 3rd Edition Leland T. Blank, Anthony Tarquin - Solutions
12. 8.58 Jeri, a self-employed geo-tech engineering consultant, has recently experienced financial problems in meeting monthly bills, in part, due to a “lumpy” income pattern compared to a relatively uniform, but steadily increasing, expense pattern throughout the year. The typical monthly
11. 8.57 (Spreadsheet exercise) A university wants to raise funds for scholarships using a unique approach. The focus will be on alumniowned companies. A marketing and communications program will cost $300,000 up front. Depending on the type of business (legal, industrial, IT, or financial),
10. 8.56 Bennington Health purchased three dialysis systems each at an installed cost of $100,000 for different locations in the city. The AOC over 2 years varied as shown. (All values are costs.) The load factor in terms of percentage of clients at each location is shown in decimal form. Find the
9. 8.55 (Spreadsheet exercise) A newsstand manager is tracking Y, the number of weekly magazines left on the shelf when the new edition is delivered. Data collected over a 30-week period are summarized by a discrete probability distribution. A colleague determined that the expected value and
8. 8.54 A discrete variable X that can take on integer values from 1 to 10 was sampled 50 times and resulted in the probability estimates shown. (a) Determine the sample average and standard deviation. (b) Determine the values 1 and 2 standard deviations from the mean. Of the 50 sample points, how
7. 8.53 An engineer was asked to determine whether the average air quality index (AQI) in a volatile chemical mixing room was within OSHA guidelines. The following nine AQI readings in ppm (parts per million) were collected: 181, 186, 180, 191, 183, 183, 196, 185, and 189 1. Determine the
6. 8.52 You just inherited the royalties from several hydraulically fractured (fracked) oil wells. Data collected from similar wells in an established oilfield were used to develop a probability-royalty relationship. Calculate (a) the expected value of royalties per year, and (b) the probability
5. 8.51 An officer of the state lottery commission has sampled lottery ticket purchasers over a 1-week period at one location. The amounts distributed back to the purchasers and the associated probabilities for 5000 tickets are as follows: Distribution, $ 0 2 5 10 100 Probability 0.91 0.045 0.025
4. 8.50 A survey of households included questions about the number of operating automobiles N currently owned by people living at the residence, and the interest rate i on the lowest-rate loan for the cars. The results for 100 households are shown. Table Summary: Table (above) divided into two
3. 8.49 For each situation below, determine (1) if the variable is discrete or continuous, and (2) if the information involves decision making under certainty or risk. 1. A friend in real estate tells you there is a 50-50 chance that the price per square foot for new houses will increase 9% during
2. 8.48 Your friend is a “betting man” and wants to double his $20 bill. (a) If you accept the challenge from him that you won’t throw a 6 on one throw of a die, what are the chances you will win $20? Conversely, what are the chances you will lose $20? (b) In your answers, what have you
1. 8.47 Identify a fundamental reason why all decisions in engineering economics are performed under risk.
4. 8.46 When the country’s economy is expanding, AB Investment Company is optimistic and expects a MARR of 15% for new investments. However, in a receding economy, the expected return is 8%. Normally a 10% return is required. An expanding economy causes the estimates of asset life to go down
3. 8.45 Holly Farms is considering two environmental chambers to accomplish detailed laboratory confirmations of online bacteria tests in chicken meat for the presence of E. coli 0157:H7 and Listeria monocytogenes. There is some uncertainty about how long the D103 chamber will be useful. A
2. 8.44 Astor Engineering recently merged with another firm and could lease additional office space or purchase its own building. The $30,000 per year lease agreement will be a net, net, net lease, which means that the lessee (Astor) will pay the real estate taxes on the leased space, the building
1. 8.43 DVH Technologies purchases several parts for the instruments it makes via a fixed-price contract of $190,000 per year from a local supplier. The company is considering making the parts inhouse through the purchase of equipment that will have a first cost of $240,000 with an estimated
9. 8.42 Titan manufactures and sells gas-powered electricity generators. It can purchase a new line of fuel injectors from either of two companies: A or B. The AOC and annual savings estimates are available, but the savings estimate is unreliable at this time. Use an AW analysis at MARR = 10% per
8. 8.41 Determine if the selection of system 1 or 2 is sensitive to variation in the return required by management. The corporate MARR ranges from 8% to 16% per year. In increments of 2%, use tabulated factors or a spreadsheet, as requested by your instructor. Table Summary: Table divided into two
7. 8.40 Ned Thompson Labs performs tests on superalloys, titanium, aluminum, and most metals. Tests on metal composites that rely upon scanning electron microscope results can be subcontracted or the labs can purchase new equipment. Evaluate the sensitivity of the economic decision to purchase the
6. 8.39 Your dad made the following estimates as he considered upgrading the air-conditioning system in their home. Use AW analysis to determine the sensitivity of the economic decision to interest rates of 4%, 6%, and 8% per year. Work this problem by (a) factors, and (b) spreadsheet. Table
5. 8.38 A biofuel subsidiary of Petrofac, Inc. is planning to borrow $12 million to acquire and expand the product line of a small technologybased company. Due to the risk involved, the rate on a 5-year loan is highly variable; it could be as low as 7%, as high as 15%, but is expected to be 10%
4. 8.37 A machine currently used in manufacturing circuit board card locks has AW = $−62,000 per year. A possible replacement is under consideration with a first cost of $64,000 and an AOC of $38,000 per year for the next 3 years. Three different engineers have given their opinion about what the
3. 8.36 Because of international competition, a company that manufactures high-speed submersible rotary indexing spindles must upgrade its production equipment to reduce costs over a 6-year planning horizon. The company can invest $80,000 one year from now, 2 years from now, or 3 years from now.
2. 8.35 A young couple planning ahead for their retirement has decided that $2,600,000 is the amount they will need to retire comfortably 20 years from now. For the past 5 years, they have been able to invest one of their salaries ($50,000 per year, which includes employer contributions) while
1. 8.34 Kahn Instruments is considering an investment of $500,000 in a new product line. The company will make the investment only if it will result in a rate of return of 15% per year or higher. If the revenue is expected to be between $135,000 and $165,000 per year for 5 years, (a) determine if
3. 8.36 Because of international competition, a company that manufactures high-speed submersible rotary indexing spindles must upgrade its production equipment to reduce costs over a 6-year planning horizon. The company can invest $80,000 one year from now, 2 years from now, or 3 years from now.
2. 8.35 A young couple planning ahead for their retirement has decided that $2,600,000 is the amount they will need to retire comfortably 20 years from now. For the past 5 years, they have been able to invest one of their salaries ($50,000 per year, which includes employer contributions) while
1. 8.34 Kahn Instruments is considering an investment of $500,000 in a new product line. The company will make the investment only if it will result in a rate of return of 15% per year or higher. If the revenue is expected to be between $135,000 and $165,000 per year for 5 years, (a) determine if
9. 8.33 The Sundance Detective Agency has purchased new surveillance equipment with the following estimates. The year index is k = 1,2, 3, … Calculate the payback period to make a return of 10% per year.
8. 8.32 An investor wants to know how many years he must retain ownership of a commercial property to make a current market return of 8% per year. The purchase price is $60,000 with taxes of $1800 the first year, increasing by $100 each year until sold. Assume the property must be retained for at
7. 8.31 How long will Wall’s Pharmacy have to sell a new product that has an estimated revenue of $5000 per month and costs of $1500 per month if the initial purchase was $28,000 and the MARR is (a) 0% and (b) 3% per month? (c) Write the spreadsheet functions to display np for both 0% and 3% per
6. 8.30 The negotiated price of a car you want is $42,000 today. Its price is expected to increase by $1000 each year. You now have $25,000 in an investment account that is earning 10% per year. How many years will it be before you have enough to buy the car without borrowing any money? Solve by
5. 8.29 How long would it take to recover an investment of $245,000 in enhanced CNC controls that include axis control to eight axes on the milling model, if the associated income is $92,000 per year, expenses are $38,000 per year, and the salvage value is estimated to be 15% of the first cost? Use
4. 8.28 You work part time selling mobile phone ads on a commission basis. (a) Using factors and a spreadsheet, determine the number of years you would have to work to break even, if income is estimated to be $5000 per year, expenses are $1500 per year, your initial investment was $28,000, and your
3. 8.27 A vibrating sieve shaker in a soil analysis laboratory has a first cost of $8000 and an expected salvage value of $500 when it is sold. A positive cash flow of only $900 per year can be attributed directly to the shaker. (a) Determine the payback period if the required return is 8% per
2. 8.26 Determine the payback period at an interest rate of 8% per year for an asset that initially cost $28,000, has a salvage value of $1500 whenever it is sold, and generates cash flow of $2900 per year. Use factors and a spreadsheet.
1. 8.25 Assume you started a sideline business in commercial photography last year using your then-owned equipment. Due to excellent success, you plan to purchase new equipment and upgrade your studio facility. 1. Determine the no-return payback period. 2. If you set a study period of 8 years and
14. 8.24 The Ecology Group wishes to purchase a piece of equipment for various metals recycling. Machine 1 costs $123,000, has a life of 10 years, an AOC of $5000, and requires one operator at a cost of $24 per hour to process 10 tons per hour. Machine 2 costs $70,000, has a life of 6 years, an AOC
13. 8.23 In your junior year, you have been elected president of your student engineering organization on campus. A computer and color printer are needed to support activities planned for the fall and spring semesters. You can lease a fully equipped system for $800 per month or purchase one for
12. 8.22 Three methods can be used to produce heat sensors for hightemperature furnaces. Estimates are made for each method: A, B, and C. At an interest rate of 10% per year, determine the breakeven annual production rate between the two lowest cost methods. Table Summary: Table divided into four
10. 8.20 Samsung Electronics is trying to reduce supply chain risk by making more responsible make/buy decisions through improved cost estimation. A high-use component (expected usage is 5000 units per year) can be purchased for $25 per unit with delivery promised within a week. Alternatively,
9. 8.19 Brooke is evaluating two alternatives for improving the exterior appearance of her Victorian-style house that she is remodeling inside. She plans to keep this as her home for 20 more years. The house can be completely painted at a cost of $12,800. The paint is expected to remain attractive
8. 8.18 A waste-holding lagoon situated near the main plant of a chemical company receives sludge on a daily basis. When the lagoon is full, it is necessary to remove the sludge to a site located 4.95 kilometers from the main plant. Currently, when the lagoon is full, the sludge is removed by
7. 8.17 Providing restrooms at parks, zoos, and other city-owned recreation facilities is a considerable expense for municipal governments. City councils usually opt for permanent restrooms in larger parks and portable restrooms in smaller ones. The cost of renting and servicing a portable restroom
6. 8.16 The Rite family wishes to insulate the attic of their home to prevent heat loss. They are considering R-l1 and R-19 insulation. They can install R-l1 for $1600 and R-19 for $2400. They expect to save $150 per year in heating and cooling expenses if R-l1 is installed. How much extra must
5. 8.15 Copper and nickel electroless plating processes are under consideration for printed circuit boards. The copper process has fixed costs of $110,000 per year with a variable cost of $50 per batch. The nickel process has a fixed cost of $85,000 per year and a variable cost of $90 per batch.
4. 8.14 Two small chemical feed pumps are under consideration for pumping a corrosive liquid from a catalytic reforming process in a refinery. A pump with a brass impeller costs $800 and is expected to last 3 years. A pump with a stainless-steel impeller will cost $1900 and last 5 years. An
3. 8.13 A project manager received two proposals from a contractor to improve the staff parking area at AGR Industries. Proposal A includes filling, grading, and paving at an initial cost of $50,000. The life of the parking lot constructed in this manner is expected to be 4 years, with an annual
2. 8.12 You need to purchase new tires for the SUV that was willed to you by your favorite aunt. The all-season light truck tires cost $90 each and are expeected to last 30,000 miles. The premium brand on-off-road light truck tires cost $160 each. Assuming you drive 10,000 miles per year, how many
1. 8.11 An IE works in the automation department of a surgical equipment manufacturing company that produces specially-ordered equipment for hospitals. To upgrade the quality of the assembly process of the camera used in laparoscopic surgery probes, two approaches are available: make and buy. The
10. 8.10 Because she lives in a large metropolitan city, Janice sold her car and received approval to release her reserved parking spot for the next four months so she can make some extra money. The rental fee is $200 per month, and she expects to charge $21 per day to one-day parkers.
9. 8.9 ABB purchased fieldbus communication equipment for a project in South Africa for $3.15 million. If net cash flow is estimated at $500,000 per year, and a salvage value of $400,000 is anticipated, determine how many years the equipment must be used just to break even at interest rates ranging
8. 8.8 Brittany is co-oping this semester at Regency Aircraft, which customizes the interiors of private and corporate jets. Her first assignment is to develop the specifications for a new machine to cut, shape, and sew leather or vinyl covers and trims. The first cost is not easy to estimate due
7. 8.7 Almona, Inc. is your dad’s company. It manufactures electrostatic generators for classroom demonstrations and has a capacity of 100,000 units per year. The fixed cost of the process is $150,000. If the generators sell for $70 each, what is the maximum variable cost per unit to break even
6. 8.6 The manufacturer of a toy called SpinX has a capacity of 200,000 units annually. If the fixed cost of the production line is $300,000 with a variable cost of $3 per unit and revenue of $5 per unit, find the percent of present capacity that must be used to break even.
5. 8.5 A company that sells reverse-osmosis water purifiers has the following fixed and variable cost components for its product over a 1-year period. Determine the revenue per unit required to break even if the sales volume is estimated to be 5000 units. Table Summary: Table divided into two
4. 8.4 Jake buys items using his eBay.com account for other people. Last year he purchased 310 items at an average cost of $35.00 per item; plus he charges a 15% fee for each item he purchases for others. He figures his setup at home has a fixed cost of $50.00 per day (220 work days per year) and a
3. 8.3 A call center for insurance-company inquiries has a capacity of 2 million calls per year. The fixed cost of the center is $900,000 and the variable cost averages $1.90 per call. If the average revenue is $3.00 per call, determine the percentage of the capacity that must be placed each year
2. 8.2 A-Max Car Rental has a contract with a local car dealer to have major repairs done for $450 per car. The rental agency estimates that for $280,000 they could develop their own facility with a cost of $200 per car and have a $40,000 salvage value after 20 years. What is the minimum number of
1. 8.1 Fixed costs for Universal Exports are $600,000 annually. Its mainline export item is sold at a revenue of $2.10 per unit with variable costs of $1.50 per unit. (a) How many units must be sold each year for breakeven? (b) What would the annual profit be at sales of 1.3 million units?
7. Understand risk and probability versus certainty and the use of random samples, the average, and standard deviation. Risk, probability, and samples
6. Use a spreadsheet to perform sensitivity and breakeven analyses. Spreadsheets and sensitivity
5. Evaluate the sensitivity of mutually exclusive alternative selection to variation in estimates.Sensitivity of alternatives
4. Evaluate the sensitivity of one or more parameters to variation in the estimates. Sensitivity to estimates
3. Calculate the payback period for a project at i = 0% and i > 0%, and state the cautions on using payback analysis. Payback period
2. Calculate the breakeven value between two alternatives and use it to select one alternative. Two alternative breakeven
1. Determine the breakeven value for a single project. Breakeven point
12. 7.32 The city of St. Louis, Missouri, is considering submitted proposals regarding the disposal of used tires. All of the alternatives involve shredding, but the charges for the service and handling of the tire shreds differ in each plan. An incremental B/C analysis was initiated but never
7.31 From the data shown for six mutually exclusive alternatives, determine which one, if any, should be selected.
7.30 Incremental comparisons between five mutually exclusive alternatives are shown. The costs increase from A to E. If one must be accepted, according to the incremental B/C ratios, which alternative should be selected? Table Summary: Table divided into two columns compares five alternatives based
7.29 A group of engineers responsible for developing advanced missile detection and tracking technologies such as shortwave infrared, thermal infrared detection, target tracking radar, etc. recently came up with six proposals for consideration. The present worth (in $ billions) of the capital
7.28 The four independent alternatives shown are being compared using the B/C method. Which alternative(s), if any, should be selected? Table Summary: Table divided into four columns compares four investment options based on the overall cost. Columns 1 to 3 are marked from left to right as:
7.27 Two alternative projects to control flooding from rare, but sometimes heavy, rainfalls in the arid southwest will have the cash flows shown. Determine which alternative should be selected on the basis of a B/C analysis at i = 8% per year and a 20-year study period. Table Summary: Table divided
7.26 The two alternatives shown are under consideration for improving security at a county jail in Travis County, New York. Determine which one, if either, should be selected based on a B/C analysis, an interest rate of 7% per year, and a 10-year study period. Table Summary: Table divided into
5. 7.25 Conventional and solar alternatives are available for providing energy at a remote radar site. Use the B/C ratio to determine which method should be selected at an interest rate of 8% per year and a 5- year study period. Table Summary: Table divided into three columns compares two
4. 7.24 You work for the New Mexico Department of Transportation (NMDOT). Two proposals to improve street safety and lighting in a colonia in south central New Mexico have been proposed. (a) Use a B/C analysis and a discount rate of 8% per year to evaluate the proposals. (b) (Here is a thought
3. 7.23 The Logan Well Services Group is considering two sites for storage and recovery of reclaimed water. The mountain site (MS) will use injection wells that cost $4.2 million to develop and $280,000 per year for M&O. This site will be able to accommodate 150 million gallons per year. The valley
2. 7.22 A state agency is considering two mutually exclusive alternatives for upgrading the skills of its technical staff. Alternative 1 involves purchasing software that will reduce the time required to collect background information on each client. The total cost for the purchase, installation,
1. 7.21 Two alternatives, identified as X and Y, are evaluated using the B/C method. Alternative Y has a higher total cost than X. If the B/C ratios are 1.2 and 1.0 for alternatives X and Y, respectively, which alternative should be selected? Why?
15. 7.20 Nick and Helen Adams have been offered a chance to invest in a Real Estate Trust that pays annual benefits estimated at $12,000 for a lump sum investment now of $70,000. The agent mentioned that there is a small capital improvement fund cost of $2000 per year. He also mentioned that the
14. 7.19 The modified B/C ratio for a city-owned hospital heliport project is 1.7. The initial cost is $1 million, annual benefits are $150,000, and the estimated life is 30 years. What is the amount of the annual M&O costs used in the calculation at a discount rate of 6% per year?
13. 7.18 The conventional B/C ratio estimate of 2.4 was reported to the County Commissioners for a proposed mosquito control program. The person who prepared the report stated that the health benefits were estimated to be $400,000 per year, and that disbenefits of $25,000 per year were used in the
12. 7.17 The conventional B/C ratio for the placement of a 24-hour public medical care facility in a rural commuity was calculated to be 1.2. The benefits were $500,000 per year, disbenefits were $100,000 per year, and the maintenance costs were $200,000 per year. What was the initial cost of the
11. 7.16 The cash flows associated with a public works project in Buffalo, New York, are shown. Use the modified B/C ratio at a discount rate of 5% per year to determine the economic justification.Table Summary: Table divided into two columns shows money invested in a public project for a city.
10. 7.15 A project to extend canals for vegetable crop irrigation into an area that was recently cleared of Mesquite trees (a nuisance tree in Texas) and large weeds is projected to have a capital cost of$2,000,000. Annual maintenance and operation costs will be $100,000 per year. Annual favorable
9. 7.14 TxDOT is considering the construction of a scenic byway through a rural area in West Texas. The 12 km road is expected to cost $2.5 million per km, with annual upkeep estimated at $75,000 per year. The improved accessibility is expected to result in additional income to businesses from
8. 7.13 A government-funded wind-based electric power generation company in the southern part of the country has developed the following estimates (in $1000) for a new turbine farm. The MARR is 10% per year and the project life is 25 years. Calculate the (a) conventional B/C ratio, (b) modified B/C
7. 7.12 The U.S. Army Corps of Engineers is considering the economic viability of constructing a small flood control dam in an existing arroyo.The initial cost of the project will be $4.2 million, with inspection and upkeep costs of $10,000 per year. In addition, minor reconstruction will be
6. 7.11 The benefits associated with a nuclear power plant cooling water filtration project located on the Ohio River are $10,000 per year forever, starting in year 1. The costs are $50,000 in year 0 and $50,000 at the end of year 2. At i = 10% per year, use the B/C ratio to determine if the
5. 7.10 Calculate (a) the conventional B/C ratio, (b) the modified B/C ratio, and (c) the PI for the following cash flow estimates at a discount rate of 10% per year. Compare the resulting values.Table Summary: Table divided into two columns shows the cash inflow and outflow value at a 10% rate of
4. 7.9 A proposed regulation regarding the removal of arsenic from drinking water is expected to have an annual cost of $200 per household per year. If it is assumed that there are 126 million U.S. households, how many lives would have to be saved each year for the B/C ratio to be equal to 1.0,
3. 7.8 From the following data, use the conventional B/C ratio for a project which has a 20-year life to determine if it is economically justified. Use an interest rate of 8% per year.Table Summary: Table titled consequences represent the data to prove the economic viability of a project. The
2. 7.7 The cost of grading and spreading gravel on a curvy rural road is expected to be $300,000. The road will have to be maintained at a cost of $25,000 per year. Even though the new road is not very smooth, it allows access to an area that previously could only be reached with offroad vehicles.
1. 7.6 The cash flows associated with a public school building repair project are as follows: costs $550,000 per year; benefits $600,000 per year; disbenefits $90,000 per year. Determine the conventional B/C ratio.
4. 7.4 Identify the following funding sources as primarily public or private.1. Municipal bonds 2. Retained earnings 3. Sales taxes 4. Automobile license fees 5. Bank loans 6. Savings accounts 7. Engineer’s retirement plan 8. State fishing license revenues 9. Entrance fees to Disney World®10.
3. 7.3 State whether a reduction in automobile accidents due to construction of a new state highway is primarily a benefit, disbenefit, or cost from the listed viewpoints. Also give a reason why you classified as you did.1. Local resident driving to/from work 2. Automobile body repair shop 3. State
2. 7.2 Identify the following items as a benefit, disbenefit, or cost:1. Expenditure of $20 million for construction of a highway.2. $200,000 annual income to local businesses because of tourism created by water reservoir.3. $300,000 per year upkeep costs for irrigation canals.4. $100,000 per year
1. 7.1 Indicate whether the following characteristics are primarily associated with public sector or private sector projects:1. Profits 2. Income taxes 3. Disbenefits 4. Infinite life 5. Highway toll fees 6. Corporate bonds
5. Use a spreadsheet to perform B/C analysis of one or more alternatives.Spreadsheets
4. Select the best of two or more alternatives using the incremental B/C ratio method.Alternative selection
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