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engineering economy
Basics Of Engineering Economy 3rd Edition Leland T. Blank, Anthony Tarquin - Solutions
23. 2.99 Page 76San Antonio is considering various options for providing water in their 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 4 years, after which less production will decrease
22. 2.98 Levi Strauss has some of its jeans stonewashed under a contract with independent U.S. Garment Corp. If U.S. Garment’s operating cost per machine is$22,000 per year for years 1 and 2 and then it increases by $1000 per year through year 5, what is the equivalent uniform annual cost per
21. 2.97 In planning for your retirement, you know that you won’t be able to save any money for the first 3 years after you start working, but you expect to save $5000 in year 4, $5150 in year 5, and amounts increasing by 3% each year through year 25.(a) If your investments earn 10% per year,
20. 2.96 An industrial engineering consulting firm signed a lease agreement for simulation software. Calculate the present worth in year 0 if the lease requires a payment of $30,000 now and amounts increasing by 5% per year through year 7.Use an interest rate of 10% per year.
19. 2.95 An arithmetic gradient has cash flow of $500 in year 2, $600 in year 3, and amounts increasing by $100 per year through year 10. At i = 10% per year, what is the present worth of the cash flow series in year 0?
18. 2.94 The cost of energy for operating high-lift pumps in a water distribution system was $1.4 million for the first 4 years. Beginning in year 5, the cost decreased by$30,000 each year through the end of year 12. What is the equivalent annual cost of the energy in years 1 through 12 if the
17. 2.93 Sierra Electric Company is considering the purchase of a hillside ranch for possible use as a wind energy farm sometime in the future. The owner of the 500-acre ranch will sell for $3000 per acre if the company will pay her in two payments—one payment now and another that is twice as
16. 2.92 Amalgamated Iron and Steel purchased a new machine for ram cambering large I-beams. The company expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which the company expects to bend 100 beams per year at$2500 per beam through year 8. If the company’s minimum
15. 2.91 Loadstar Sensors is a company that makes load/force sensors based on capacitive sensing technology. The company wants to have $30 million for a plant expansion five years from now. If the company currently has a total of $15 million in an investment account set aside for the expansion, how
14. 2.90 You plan to pay $38,000 cash for the new truck you want to buy 5 years from now. If you have already saved $12,500, how much will your well-to-do aunt have to give you 2 years from now (as a graduation present) for you to have the total amount of $38,000? Assume all funds are invested and
13. 2.89 If a company makes a deposit of $1000 now, in what year must it make another deposit of $1000 for the account to have a value as close to $8870 as possible in year 20? Assume the account earns interest at 10% per year.
12. 2.88 For the cash flow diagram below, what value of x will make the total equivalent worth in year 7 equal to $8000 at i = 10% per year?
11. 2.87 You hope to make two equal-amount deposits for future savings, one now and the other 3 years from now in order to accumulate $300,000 ten years in the future.If the interest rate is 14% per year, what is the size of each deposit?
10. 2.86 Page 75Assume you borrow $10,000 today and promise to repay the loan in two payments, one in year 2 and the other in year 5, with the one in year 5 being only half as large as the one in year 2. At an interest rate of 10% per year, what is the size of the payment in year 5?
9. 2.85 By spending $10,000 now, and $25,000 three years from now, a plating company can increase its income in years 4 through 10. How much extra income per year is needed in years 4 through 10 to recover the original expenditures plus a return of 12% per year?
8. 2.84 Cindy’s father is now 50 years old. Twenty-one and twenty years ago, respectively, he placed two equal amounts into a balanced stock and bond mutual fund. Due to the growth of the fund, he could withdraw $10,000 now (year 0) and$10,000 per year for the next 14 years.1. If the account
7. 2.83 How much money was deposited each year for 5 years if it now amounts to$100,000 and the last deposit was made 10 years ago? Assume the account earned at 7% per year.
6. 2.82 For the cash flow diagram shown below, find the future worth in year 10 at an interest rate of 10% per year.
5. 2.81 Use (a) factors, and (b) a spreadsheet to determine the amount of money that you could accumulate by the end of year 12 from deposits of $1000 per year in years 4 through 12 if investments earn at the rate of 5.5% per year.
4. 2.80 Calculate the equivalent annual worth for years 1 through 7 of Merchant Trucking Company’s net cash flows shown below. Use an interest rate of 10% per year.Year 0 1 2 3 4 5 6 7 Cash flow, $ million −200 200 200 200 200 200 200 200
3. 2.79 Find the present worth of cash flows of $1000 that start now (time 0) and continue through year 8, provided the interest rate is 10% per year.Answer
2. 2.78 Assume you start an investment account by purchasing international corporate stocks with $1000 now, $1500 at the end of year 3, and $500 at the end of each year in years 4 through 10. How much money would you have in the account immediately after the last deposit in year 10 if the interest
1. 2.77 Bart is a junior in college. He plans to invest equal, annual amounts starting 3 years from now for 5 consecutive years to accumulate a total of $50,000 at the end of 15 years. If the funds earn 8% per year, what is the required amount of each deposit?Answer
14. 2.76 Hughes Cable Systems plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 1% of total sales for year-end bonuses for all of its employees. The sales are expected to be $5 million the first year,
13. 2.75 A small northern California consulting firm wants to start a recapitalization pool for replacement of network servers. If the company invests $5000 at the end of year 1 but decreases the amount invested by 5% each year, how much will be in the account 5 years from now? Interest is earned
12. 2.74 Altmax LLC, a company that manufactures automobile wiring harnesses, has budgeted P = $400,000 now to pay for a specially designed wire clip over the next 5 years. If the company expects the cost of the clips to increase by 4% each year, what is the expected cost in year 3 if the company
11. 2.73 Verizon Communications said it plans to spend $22.9 billion to expand its fiber-optic Internet and television network so that it can compete with cable TV providers like Comcast Corp. The company expects to attract 950,000 customers in year 1 and grow its customer base by a constant amount
10. 2.72 Find the 10-year equivalent annual worth of an investment that starts at $8000 in year 1 and increases by 10% each year. The rate of return is 10% per year.Page 74
9. 2.71 A company that manufactures purgable hydrogen sulfide monitors is planning to make deposits such that each one is 5% larger than the preceding one. (a) How large must the first amount be (at the end of year 1) if the deposits extend through year 10 and the fourth deposit is $12,500? Use an
8. 2.70 The future worth in year 10 of a geometric gradient series of cash flows was found to be $80,000. If the interest rate was 15% per year and the annual rate of increase was 9% per year, what was the cash flow amount in year 1?
7. 2.69 A 50-year-old engineer planning for retirement places 10% of his salary each year into a high-yield bond fund. If his salary this year (end of year 1) is $100,000 and he expects his salary to increase by 3% each year, determine the future worth of the retirement fund after 15 years provided
6. 2.68 Determine the difference in the present worth values of the following two commodity contracts at an interest rate of 8% per year.1. Contract 1: costs $10,000 in year 1; costs will escalate at a rate of 4% per year for 10 years.2. Contract 2: same cost in year 1, but costs will escalate at
5. 2.67 Charlotte, a newly graduated chemical engineer is preparing long term for her retirement by depositing 10% of her salary each year into a high-technology stock fund. If her salary this year (end of year 1) is $60,000, and she expects it to increase by 4% each year, determine the future
4. 2.66 If you were told to prepare a table of factor values (like those in the back of this book) for calculating the present worth of a geometric gradient series, determine the first three values (n = 1, 2, and 3) for an interest rate of 10% per year and a rate of change g of 4% per year.
3. 2.65 Assume you work at Taco Cabaña part time during college. Your federal income taxes are $3500 this year (year 1) and are expected to follow a geometric gradient series with increases of 5% each year through year 6, when you plan to complete graduate studies. Calculate the present worth of
2. 2.64 The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $500,000. (a) If the arithmetic gradient, G, is +$3000 per year, determine the cash flow, A, in year 1 at an interest rate of 10% per year. (b)(Advanced exercise) Use the GOAL SEEK tool to
1. 2.63 A major drug company anticipates that in future years it could be involved in litigation regarding perceived side effects of one of its antidepressant drugs. In order to prepare a “war chest,” the company wants to have money available 6 years from now that has a present worth today of
17. 2.62 For the cash flows below, determine the amount in year 1 if the annual worth in years 1 through 9 is $601.17 and the interest rate is 10% per year.Year 1 2 3 4 5 6 7 8 9 Cost, $ A A+30 A+60 A+90 A+120 A+150 A+180 A+210 A+240
16. 2.61 For the cash flow series shown below, determine the value of G that will make the future worth in year 4 equal to $6000 at an interest rate of 15% per year.Year 0 1 2 3 4 Cash Flow 0 2000 2000−G 2000−2G 2000−3G
15. 2.60 Ford Motor Company was able to reduce by 80% the cost required for installing data acquisition instrumentation on test vehicles by using MTSdeveloped spinning wheel force transducers. The cost this year (i.e., end of year 1)is expected to be $2000. (a) What was the cost the year before
14. 2.59 Amazon plans to install a computer system to “cube” an item’s dimensions—measure its height, length, and width so that the proper box size will be used for shipment. This will save packing material, cardboard, and labor. If the savings will be $150,000 the first year, $160,000 the
13. 2.58 GKX Industries expects sales of its hydraulic seals (in inch and metric sizes)to increase according to the cash flow sequence ($70 + 4k), where k is in years and cash flow is in $1000.1. What is the amount of the cash flow in year 3?2. What is the future worth of the entire cash flow
12. 2.57 For the cash flows shown, determine the value of G that makes the present worth in year 0 equal to $14,000. The interest rate is 10% per year.Year 0 1 2 3 4 Cash flow, $ per year — 8000 8000−G 8000−2G 8000−3G
11. 2.56 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.
10. 2.55 HGT Oil expects receipts from a fracked well to decline according to an arithmetic gradient of $50,000 per year. If this year’s receipts are expected to be$280,000 (i.e., end of year 1) and the company expects the useful life of the well to be 5 years, (a) what is the amount of the cash
9. 2.54 As shown in the table below, Charlotte’s mother and father have experienced decreasing revenues from their business, Thompson’s Print and Gift Shop, over the last 8 years due to the increased use of digital media and e-commerce purchases.Determine the following for Charlotte’s parents
8. 2.53 Omega Instruments budgeted $300,000 per year to pay for special-order ceramic parts over the next 5 years. If the company expects the cost of the parts to increase uniformly according to an arithmetic gradient of $10,000 per year, what is the cost estimated to be in year 1 at an interest
7. 2.52 A report by the Government Accountability Office (GAO) shows that the GAO expects the U.S. Postal Service to lose a record $7 billion at the end of this year, and, if the business model is not changed, the losses will total $241 billion by the end of year 10. If the losses increase
6. 2.51 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 $9000. Based on closure of a new contract with a distributor in Malaysia and volume discounts, the company expects
5. 2.50 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 flow series in year 0. Solve using factors and a spreadsheet.Page 72
4. 2.49 Profits from recycling paper, cardboard, aluminum, and glass at a liberal arts college have increased at a constant rate of $1100 in each of the last 3 years. This year’s profit (end of year 1) is expected to be $6000, and the profit trend is expected to continue through year 5. (a) What
3. 2.48 For a cash flow sequence that starts in year 1 and is described by (900 –100k), where k represents years 1–5, determine (a) the value of the gradient G, and(b) the cash flow in year 5.
2. 2.47 Cisco Systems expects sales to be described by the cash flow sequence(6000 + 5k), where k is in years and cash flow is in millions. In actual dollar amounts, determine (a) the value of the gradient G, (b) the amount of cash flow in year 6, and (c) the value of n for the gradient if the cash
1. 2.46 A cash flow sequence starts in year 1 at $3000 and decreases by $200 each year through year 10. (a) Determine the value of the gradient G; (b) determine the amount of cash flow in year 8; and (c) determine the value of n for the gradient.
44. 2.45 An engineer who was contemplating retirement had $1.6 million in his investment portfolio. However, a severe recession caused his portfolio to decrease to only 55% of the original amount, so he kept working. If he was able to invest his money at a rate of return of 9% per year after the
43. 2.44 Demco Products, a company that manufactures stainless-steel control valves, has a fund for equipment replacement that contains $500,000. The company plans to spend $85,000 each year on new equipment. (a) Estimate the number of years it will take to reduce the fund to no more than $85,000
42. 2.43 You own a small engineering consulting company. If you invest $200,000 of the company’s money in a natural gas well that is expected to provide income of$29,000 per year, how long must the well produce at this income level to get the money back plus a rate of return of 10% per year?
41. 2.42 Acme Bricks, a masonry products company, wants to have $600,000 on hand before it invests in new conveyors, trucks, and other equipment. If the company sets aside $80,000 per year in an account that increases in value at a rate of 15% per year, how many years will it be before Acme can
40. 2.41 How many years will it take for money to increase to at least three times the initial amount, if money earns at 10% per year?
39. 2.40 How many years will it take Rexchem, Inc. to accumulate $400,000 for a chemical feeder, if the company deposits $50,000 each year starting 1 year from now, into an account that earns interest at 12% per year?
38. 2.39 Ophra invested well and plans to retire now because she has $2,300,000 in her tax-deferred IRA account. How long will she be able to withdraw $125,000 per year (beginning 1 year from now) if her investments earn at a rate of 4% per year? Solve using factors and the NPER function.
37. 2.38 Sterling Pumps de Mexico has a fund for equipment replacement that contains$500,000. If the company spends $75,000 per year on new equipment, how many years will it take to reduce the fund to less than $75,000 at an interest rate of 10%per year? Solve using factors and the NPER function.
36. 2.37 What interest rate is required for uniform deposits of $1453.26 in years 1 through 15 to accumulate to $50,000?
35. 2.36 Assume you plan to retire early in 30 years with $1 million in your IRA(individual retirement account). You want to know the interest rate required to reach your goal if the account currently has $19,627 in it, and (a) no further deposits are made, and (b) you plan to deposit $5000
34. 2.35 To make CDs look more attractive than they really are, some banks advertise that their rates are higher than their competitors’, but the fine print says that the rate is a simple interest rate. If a person deposits $10,000 at 10% per year simple interest, what compound interest rate
33. 2.34 What compound interest rate per year is equivalent to a 12% per year simple interest rate over a 15-year period?
32. 2.33 As a principal in the consulting firm where you have worked for 20 years, you have accumulated 5000 shares of company stock. One year ago, each share of stock was worth $40. The company has offered to buy back your shares for $225,000. At what interest rate would the firm’s offer be
31. 2.32 To improve crack detection in aircraft, the U.S. Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair costs by as much as $200,000 per year. What is the present worth of these projected savings over
30. 2.31 Major automobile insurance companies are now offering telematics, technology that collects information about an individual’s driving behavior. In exchange, the companies reward good driving behavior with policy discounts or cash back awards. If, on average, good driving reduces the
29. 2.30 In an effort to reduce childhood and teenage obesity by decreasing the consumption of sugared beverages, some states have imposed taxes on soda and other soft drinks. A survey by Roland Sturm of 7300 fifth-graders revealed if taxes averaged 4 cents on each dollar’s worth of soda, no real
28. 2.29 China spends an estimated $100,000 per year on cloud seeding efforts, which includes using anti-aircraft guns and rocket launchers to fill the sky with silver iodide. In the United States, utilities that run hydroelectric dams are among the most active cloud seeders, because they believe
27. 2.28 For a profession, Henry Mueller has successfully written short articles for several monthly parks and wildlife magazines. His steady annual cash flows for an 8-year period are shown in the table. He received a good bonus in a single year.Determine the future worth (now, year 8) of the net
26. 2.27 Metso Automation, which manufactures addressable quarter-turn electric actuators, is planning to set aside $100,000 now and $150,000 one year from now for possible replacement of the heating and cooling systems in three of its larger manufacturing plants. If the replacement won’t be
25. 2.26 How much must Animatics Sensors and Controls, Inc. invest each year, beginning 1 year from now, to have $2.7 million dollars for new-product development 5 years from now if the company investments earn a rate of return of(a) 18% per year, and (b) 8% per year? What is the percentage
24. 2.25 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 better matching the size of the completed products with the size of the shipping container. The
23. 2.24 CGK Rheosystems makes high-performance rotational viscometers capable of steady shear and yield stress testing in a rugged, compact footprint. How much could the company afford to spend now on new equipment in lieu of spending$200,000 one year from now and $300,000 three years from now, if
22. 2.23 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 years, how much will the company have in its investment set-aside account? Assume a rate of
21. 2.22 If GHD Plastics purchases a new building now for $1.3 million for a regional corporate headquarters, what must the building be worth in 10 years if the company expects all expenditures to earn a rate of return of at least 18% per year?
20. 2.21 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 the company already has $15 million in an investment account for the expansion, how much more
19. 2.20 At 30 years old, Sally decided she wants to retire at 60. Determine the size of her investment package 30 years from now if she deposits $12,000 each year, beginning 1 year from now, and the account earns interest at a rate of 10% per year.Solve using (a) tabulated factors, and (b) a
18. 2.19 Turik Electronics manufactures microprocessor-based soft starters that use thyristors for controlled reduced voltage during starting and stopping. The company is planning a production-line expansion that will cost $1.3 million. If the company uses a minimum attractive rate of return of 15%
17. 2.18 One of the biggest vulnerabilities in a control system is network devices, such as Ethernet-based network switches that are located in unsecured locations and accessible to everyone. DeltaX switches, manufactured by Dahne Security, allow the user to automatically lock and unlock the port
16. 2.17 Assume the cost of a homeland security border fence is $3 million per mile. If the life of such a fence is 10 years, what is the equivalent annual cost of a 10-mile long fence at an interest rate of 8% per year? Develop the answer using (a)tabulated factor values, (b) a financial
15. 2.16 A design/build engineering company that usually gives year-end bonuses in the amount of $8000 to each of its engineers is having cash flow problems. The company said that although it couldn’t give bonuses this year, it would give each engineer two bonuses next year: the regular one of
14. 2.15 Ametek Technical & Industrial Products (ATIP) manufactures brushless blowers for boilers, food service equipment, and fuel cells. The company borrowed $17,000,000 for a plant expansion and repaid the loan in eight annual payments of $2,737,680, with the first payment made 1 year after the
13. 2.14 Page 69How large of a repayment must Theresa make each year starting next year if she borrows $60,000 now to start up a consulting office and if she promises to make equal annual payments for 5 years. Assume the interest rate is 8% per year.Develop the answer using (a) tabulated factor
12. 2.13 A family that won a $100,000 prize in a state lottery decided to invest half of the money in a college fund for their child. If the fund earned interest at 6% per year, how much was in the account 14 years after it was started?
11. 2.12 Nusile Tecnnology, 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, what will be the equivalent amount 3 years from now at an interest rate of 10% per year?
10. 2.11 APR Performance Vehicles is considering the purchase of dual-axis inclinometers for installation in a new line of tractors. The distributor of the inclinometers is temporarily overstocked and is offering them at a 40% discount from the regular cost of $142. If the purchaser gets them now
9. 2.10 You just deposited $3000 in an investment account and will deposit $5000 more 4 years from now. How much will be in the account 12 years from now if the rate of return is 10% per year? Use (a) tabulated factor values, (b) TVM functions on a financial calculator, and (c) built-in functions
8. 2.9 Determine the amount of money a bank will loan a developer now who repays the loan by selling seven view lots at $120,000 each 2 years from now. Assume the bank’s interest rate is 10% per year. Use (a) the tabulated factor values in your book, (b) TVM functions on a financial calculator,
7. 2.8 What is the present worth of a future payment of $19,000 in year 7 if the interest rate is 10% per year using (a) the tabulated factor values in your book, (b)TVM functions on a financial calculator, and (c) built-in functions on a spreadsheet?
6. 2.7 The Moller Skycar M400 is a flying car known as a personal air vehicle (PAV).The cost is $985,000, and a $100,000 deposit holds one of the first 100 vehicles.Assume a buyer pays the $885,000 balance 3 years after making the $100,000 deposit. At an interest rate of 10% per year, determine the
5. 2.6 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 year from now. However, a contractor who needs work has offered to do the job for $790,000 if
4. 2.5 Xavier is an engineer who believes in “save now and play later.” He wants to retire from full employment in 20 years with $1.5 million. At 10% per year interest, how much does he have to invest each year (starting in year 1) to reach the$1.5 million goal? Solve by tabulated factors and
3. 2.4 Determine the amount of money Western Bank should be willing to loan a developer who will repay the loan in a lump sum amount of $840,000 two years from now at the bank’s interest rate of 10% per year.
2. 2.3 What is the future worth in year 8 of a present sum in year 0 of $23,000 at an interest rate of 10% per year? Solve using (a) tabulated factor values, and (b) a built-in, single-cell spreadsheet function.
1. 2.2 How much can Azco Autosystems, Inc. afford to spend now on an energy management system, if the software will save the company $21,300 per year for the next 5 years? Use an interest rate of 10% per year.
1. 2.1 (a) Look up the numerical value for the following factors from the compound interest factor tables. (b) Use spreadsheet functions to display the numerical value for the first three factors.1. (F/P,10%,7)2. (A/P,12%,10)3. (F/A,2%,50)4. (P/G,15%,20)5. (A/G,30%,15)
5. Use a spreadsheet or calculator to make equivalency calculations.Spreadsheets/Calculators
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