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engineering economy
Engineering Economy 17th Global Edition William G. Sullivan ,Elin M. Wicks ,C. Patrick Koelling - Solutions
4. Use uniform series and gradient factors when cash flows are shifted.Shifted cash flows
3. Use the arithmetic gradient factors and the geometric gradient formula.Gradients
2. Use the uniform series factors.P/A, A/P, F/A, and A/F factors
1. Use the compound amount factor and present worth factor for single payments.F/P and P/F factors
10. 1.95 For the spreadsheet built-in function PV(i%,n,A,F), the only parameter that can be completely omitted is:1.a. i%2.b. n 3.c. A 4.d. F
9. 1.94 If inflation has been steady at 3.2% per year for 4 years, the reduction in purchasing power over the 4 years is closest to:1.a. 6%2.b. 12%3.c. 14%4.d. 22%
8. 1.93 A company that utilizes carbon fiber 3-D printing wants to have money available two years from now to add new equipment. The company currently has $650,000 in a capital account and it plans to deposit $200,000 now and another $200,000 one year from now. The total amount available in two
7. 1.92 The simple interest rate per year that will accumulate the same amount of money in 2 years as a compound interest rate of 20% per year is closest to:1.a. 20.5%2.b. 21%3.c. 22%4.c. 25%
6. 1.91 The compound interest rate per year at which amounts of $1000 one year ago and $1345.60 one year hence are equivalent is closest to:1.a. 8.5% per year 2.b. 10.8% per year 3.c. 20.2% per year 4.d. None of the above
5. Page 421.90 The time it would take for a given sum of money to double at 4% per year simple interest is closest to:1.a. 30 years 2.b. 25 years 3.c. 20 years 4.d. 10 years
4. 1.89 In most engineering economy studies, the best alternative is the one that:1.a. Will last the longest time 2.b. Is most politically correct 3.c. Is easiest to implement 4.d. Has the lowest cost
3. 1.88 At an interest rate of 10% per year, the equivalent amount of$10,000 one year ago is closest to:1.a. $8264 2.b. $9095 3.c. $11,000 4.d. $12,000
2. 1.87 An example of an intangible factor is:1.a. Taxes 2.b. Cost of materials 3.c. Morale 4.d. Rent
1. 1.86 All of the following are examples of cash outflows except:1.a. Asset salvage value 2.b. Income taxes 3.c. Operating cost of asset 4.d. First cost of asset
4. 1.85 Stefanie is a design engineer with an international railroad locomotive manufacturing company in the state of Illinois. Management wants to return some of the engineering design work to the United States rather than export all of it to India, where their primary design work has been
3. 1.84 Yesterday, Carol, an engineer with Hancock Enterprises, was at lunch with several work friends. Joe, a person Carol has known for a year or so from similar lunches, proudly mentioned that he got a free flight and tickets to a major league playoff game two weeks from now in a distant city.
2. 1.83 What is one primary use of a code of ethics for a specific discipline of professional practice?Page 41
1. 1.82 Explain the relation between a common moral and a personal moral.
7. 1.81 A Harley-Davidson bike you hope to own in the future costs$12,000 today. If the inflation rate is expected to be 4.5% per year, determine the estimated cost using a spreadsheet function for each of the next 5 years.
6. 1.80 Assume you pay the reduced amount of $4750 for a corporate stock that has a market value of $5000. The stock pays an annual dividend of 4% of its market value. Since this is primarily a dividend-paying stock, you estimate that you will sell the stock 10 years from now at the current$5000
5. 1.79 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 that show a total of $64 more interest for Madison at the end of the 4 years.Assume no
4. 1.78 In a built-in spreadsheet function, if a certain parameter does not apply, under what circumstances can it be left blank, and when must a comma be entered in its place?
3. 1.77 For the following 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 displayed answer will have a positive sign, a negative sign, or it can’t be determined from the
2. 1.76 State the purpose for each of the following built-in spreadsheet functions.1.a. PV(i%,n,A,F)2.b. FV(i%,n,A,P)3.c. RATE(n,A,P,F)4.d. IRR(first_cell:last_cell)5.e. PMT(i%,n,P,F)6.f. NPER(i%,A,P,F)
1. 1.75 Write the engineering economy symbol that is displayed when each of the following spreadsheet functions are entered.1.a. PV 2.b. PMT 3.c. NPER 4.c. IRR 5.e. FV 6.f. RATE
9. 1.74 Construct a cash flow diagram to find the rate of return on an investment of $60,000 made today and accumulated to an amount of$95,000 in 5 years.
8. 1.73 Construct a cash flow diagram to find the present worth in year 0 for the following series at i = 15% per year.Table Summary:Table divided into two columns represents value of a loan through years 0 to 4 at a 5% interest rate.The column headers are marked from left to right as: year and
5 at an interest rate of 10% per year, and an unknown future amount in year 5.
7. 1.72 Construct a cash flow diagram for the following cash flows:$25,000 outflow at time zero, $9000 per year inflow in years 1 through
6. 1.71 Identify the type of cost estimation that is associated with each of the following: new suspension bridge, bicycle manufacturing, identity theft deterrent by a nationwide bank corporation, monthly lubrication of heat-sensitive bearings, writing a textbook on engineering economy, 3-D printer.
5. 1.70 List three different types of cost estimation and give an example of each type different than those mentioned in this chapter.
4. 1.69 Many credit unions use semiannual interest periods to pay interest on customer savings accounts. For a credit union that uses June 30 and December 31 as its semiannual interest periods, determine the end-ofinterest period total deposit amounts that will be recorded for the cash flows shown
3. 1.68 Identify the following as cash inflows or outflows to a privately owned water company: well drilling, maintenance, water sales, accounting, government grants, issuance of bonds, energy cost, pension plan contributions, heavy equipment purchases, used-equipment sales, stormwater fees, and
2. 1.67 Identify the following as cash inflows or outflows to a commercial air carrier: fuel cost, pension plan contributions, fares, maintenance, freight revenue, cargo revenue, extra-bag charges, cost of snacks, webbased advertising, landing fees, and seat-preference fees.
1. 1.66 What does the term end-of-period convention mean? What does it not mean?
9. 1.65 Fifteen years ago your grandfather invested $10,000 in a stock fund to pay for your college education. Each year thereafter, he deposited$3000 into the fund. If the investments grew at a rate of 8% per year over the 15 years, how much is in the fund now?
8. 1.64 Vision Technologies, Inc. is a small company that uses ultrawideband technology to develop devices that can detect objects(including people) inside of buildings, behind walls, or below ground.The company expects to spend $100,000 per year for labor and$125,000 per year for supplies before a
7. 1.63 How many years will it take for your investment to be 1.5 times as much as what you deposit now, if the return is 5% per year?
6. 1.62 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 for 5 consecutive years. What rate of return did the company make?
5. 1.61 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 new distribution facility in Europe, how much must it pay back each year to repay the loan in
4. 1.60 Determine the amount of money FrostBank might loan a housing developer who will repay the loan 2 years from now by selling eight lots at $240,000 each. Assume the bank’s interest rate is 10% per year.
3. 1.59 Atlas Long-Haul Transportation is considering the installation of Valutemp temperature loggers in all of its refrigerated trucks for monitoring temperatures during transit. If the systems will reduce insurance claims by $100,000 two years from now, how much should the company be willing to
2. 1.58 Thompson Mechanical Products is planning to set aside $150,000 now for possibly replacing its large synchronous refiner motors whenever it becomes necessary. If the replacement isn’t needed for 7 years, how much will the company have in its investment set-aside account if it achieves a
1. 1.57 Every engineering economy problem will involve at least how many symbols?In problems 1.58 to 1.64, identify the four engineering economy symbols and their values. Use a question mark with the symbol whose value is to be determined.
9. 1.56 Continental Airlines operates in and out of many countries. Country A has a low inflation rate of 3% per year while country B has a high rate of 30% per year. A $1 million fund is maintained in each country for emergency purchases to repair disabled aircraft. (a) Use a formula to determine
8. 1.55 McDougal’s LTD is a food products wholesaler operating in Costa Rica and Mexico where the inflation rate has historically averaged 3%and 5% per year, respectively. The company maintains a cash amount of$500,000 in each country’s banks in case of emergency needs. (a) Use Figure 1.3 to
7. 1.54 Assume you received $500 for your birthday today and placed it in your no-interest checking account for safe keeping. Determine the purchasing power 3 years in the future if (a) f = 3.5% per year, and (b)f = 10% per year. (Round answers to the nearest dollar.) (c) How much more dollar
6. 1.53 You have the $1200 to cover the discounted sales price of your favorite Shimano mountain bike, but no safe storage area if you owned it today. The projected cost increase each year is 5%. Determine the purchasing power of your $1200 if you wait (a) 2 years, and (b) 5 years to spend it.
5. 1.52 When the yield on a U.S. Treasury Bill, considered a “safe”investment, is 3% per year, investors expect the inflation rate to be approximately what value?
4. 1.51 An arc welder with AI software onboard costs $4500 today, $3750 last year, and $3400 one year prior to that. Determine the 1-year rate of inflation for each year.
3. 1.50 You and your sister went shopping today for jeans. The pair she bought costs $49.95 and is identical to a pair you purchased 2 years ago for $37.87. (a) Determine the numerical and percentage increase in cost. (b) Determine the annual inflation rate of the cost increase and compare your
2. 1.49 Suppose you want to purchase a Dodge Ram 1500 pickup that costs $32,000 now, but you don’t have the money. If the cost increases by 5% per year, and you plan to buy it for cash in 5 years, estimate the future cost using two methods: (a) based on Equation [1.7], and (b) the increased
1. 1.48 The NFL should update its online security systems now at a cost of$5 million to avert cyberattacks by hackers. However, since there has been no breach thus far, the tendency is to put off the upgrade and take the risk. If these costs are being inflated at 12% per year, estimate the cost (a)
10. 1.47 Companies frequently borrow money under an arrangement that requires them to make periodic payments of “interest only” and then pay the principal all at once at the end of the loan period. If Cisco International borrowed $500,000 (identified as loan A) at 10% per year simple interest
9. 1.46 Fill in the missing values (A through D) for a loan of $10,000 if the interest rate is compounded at 10% per year.Page 38
8. 1.45 In order to finance a new product line, a company that makes hightemperature ball bearings borrowed $1.8 million at 10% per year compound interest. If the company repaid the loan in a lump sum amount after 2 years, what was (a) the amount of the payment, and (b) the amount and percentage of
7. 1.44 If your money earns compound interest at a generous 20% per year, how long will it take $50,000 to accumulate to at least $85,000? Solve using two methods: (a) year-by-year accumulated total, and (b)Equation [1.6].
6. 1.43 You plan to place your savings into a high-yield account at your company’s Employee Credit Union. How long will it take to double your money at 5% per year simple interest?
5. 1.42 Rambus Diagnostics has extra funds to invest for future capital expansion. If the selected investment pays simple interest, what interest rate would be required for the amount to grow from $60,000 to $90,000 in 5 years?
4. 1.41 If EP Electronics sets aside $1,000,000 now into a contingency fund, how much will the company have in 2 years if it doesn’t use any of the money and the account grows at a rate of 10% per year?
3. 1.40 The Aberdeen Fixed Rate Fund pays a dividend of 10% per year simple interest. If you invest $240,000 today, what total amount will you have accumulated at the end of 3 years?
2. 1.39 Dynamic Data LLC, 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 Dynamic Data repaid was$120,000, calculate the principal of the loan.
1. 1.38 Raydeck International set aside a lump sum investment 4 years ago in order to finance a plant expansion now. The money returned 10% per year simple interest. How much did the company set aside if the investment is now worth $850,000?
6. 1.37 Will and Ben Ice Cream plan to build a new mixing plant to serve customers in Mexico. Because the company is in good financial shape with equity funds returning 11% per year, the bank will charge an interest rate of 8% per year for the loan. An MARR that is 5% over the WACC is required to
5. 1.36 In an effort to increase its customer base, a company set the project MARR at exactly the WACC. If equity capital costs 9% per year and debt capital costs 11.75% for the project, what is the equity-debt percentage mix of capital required to make the WACC = 10%?
4. 1.35 Determine the WACC, MARR, and estimated ROR for the following situation at Himalayan Air, Inc., which owns and operates oxygen bars across the United States and Europe. The management plans a second major expansion of outlets with a hoped-for return of 20%above cost of capital the first
3. 1.34 Dawn is preparing a home office to perform subcontract projects for midsized architect firms. She plans to use $15,000 of her own funds which currently generate a return of 4% per year. The remainder of financing will be provided by a $10,000 bank loan carrying a 9% per year interest rate.
2. 1.33 The MARR is not calculated like an ROR. What is the MARR used for in economic analysis?
1. 1.32 An engineer told you that a project is economically acceptable when its rate of return equals or exceeds the corporation’s cost of capital. Is this correct? Explain your answer.
10. 1.10 Identify at least five areas of personal finances wherein you might use economic analysis in the future.
9. 1.9 Of the fundamental dimensions length, mass, time, and electric charge, which one is the most important in economic analysis? Why?
8. 1.8 Interest is a manifestation of what general concept in engineering economy?
7. 1.7 What is meant by the term time value of money?
6. 1.6 Identify the following factors as either tangible or intangible:sustainability, installation cost, transportation cost, simplicity, resale value, rate of return, dependability, deflation rate, and ethics.
5. 1.5 Identify the following factors as either economic (tangible) or noneconomic (intangible); first cost, leadership, taxes, salvage value, morale, inflation, profit, acceptance by others, interest rate.
4. 1.4 List three evaluation criteria besides initial cost that might be used for selecting the best automobile to purchase.
3. 1.3 What is the primary evaluation criterion used in engineering economic analysis?
2. 1.2 What is the name of the alternative that represents the status quo?
1. 1.1 In an economic analysis of alternatives, list three items that are typically included as part of the evaluation.
10. Describe the terms universal and personal morals, and professional ethics; understand the Code of Ethics for Engineers.
9. Formulate spreadsheet and calculator functions used in engineering economy.Spreadsheets/Calculators
8. Understand cash flows, their estimation, and how to graphically represent them.Cash flows
7. Identify and use engineering economy terminology and symbols.Symbols
6. Demonstrate the impact of inflation on costs and purchasing power over time.Inflation and purchasing power
5. Calculate simple interest and compound interest for one or more interest periods.Simple and compound interest
4. Understand what equivalence means in economic terms.Equivalence
3. Perform calculations about interest rate, rate of return, and their relation to the cost of capital.Interest rate
2. Identify what is needed to successfully perform an engineering economy study.Study approach and terms
1. Determine the role of engineering economy in the decision-making process.Definition and role
6-67. Three models of baseball bats will be manufactured in a new plant in Pulaski. Each bat requires some manufacturing time at either Lathe 1 or Lathe 2, according to the following table. Your task is to help decide which type of lathe to install. Show and explain all work to support your
6-66. Bob and Sally have just bought a new house and they are considering the installation of 10 compact fluorescent bulb (CFB) fixtures instead of the 10 conventional incandescent lighting fixtures (which cost a total of $500) typically installed by the builder. According to the home builder, CFBs
6-65. Your university advertises that next year’s“discounted” tuition is $18,000 and can be paid in full by July 1. The other option is to pay the first semester’s tuition of $9,500 by July 1, with the remaining $9,500 due of January 1. Assuming you (or your parents) have$18,000 available
6-64. Your brother has decided to purchase a new automobile with a hybrid-fueled engine and a six-speed transmission. After the trade-in of his present car, the purchase price of the new automobile is $30,000.This balance can be financed by the auto dealership at 2.9% APR and payments over 48
6-63. Your boss has asked you to evaluate the economic viability of refinancing a loan on your plant’s process equipment. The original loan of $500,000 was for six years. The payments are monthly and the nominal interest rate on the current loan is 6% per year. As of the present time, your
6-62. On your student loans, if possible, try to make interest-only payments while you are still in school.If interest is not repaid, it folds into principal after graduation and can cost you hundreds (or thousands) of extra dollars in finance charges.For example, Sara borrowed $5,000 at the
6-61. A telecommunications firm is considering a product expansion of a popular cell phone. Two alternatives for the cell phone expansion are summarized below. The company uses a MARR of 8% per year for decisions of this type, and repeatability may be assumed.Which alternative should be recommended
6-60. Your FICO score makes a big difference in how lenders determine what interest rate to charge you.Consider the situation faced by Edward and Jorge.Edward has a fairly poor FICO score of 660 and, as a result, pays 18.0% APR on the unpaid balance of his credit card. Jorge has a FICO score of 740
6-59. A high-quality filter for tap water and a reusable drinking container cost $75 and typically will last for three years. If a family drinks an average of eight cups of water per day (one cup is 8 fluid ounces), the consumption of water is 547.5 gallons over a three-year period. Tap water costs
6-58. A pump for a reservoir must be operated continuously (8,760 hours per year). In the event of a large storm, the electricity from the local utility’s power grid may be interrupted for an indefinite period of time. To deal with this emergency situation, two mutually exclusive backup diesel
6-57. A single-stage centrifugal blower is to be selected for an engineering design application.Suppliers have been consulted, and the choice has been narrowed down to two new models, both made by the same company and both having the same rated capacity and pressure. Both are driven at 3,600 rpm by
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