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engineering economy
Engineering Economy 16th edition William G. Sullivan, Elin M. Wicks, C. Patrick Koelling - Solutions
A small textile plant was constructed in 2004. The major equipment, costs, and factors are shown below. Estimate the cost to build a new plant in 2014 if the index for this type of equipment has increased at an average rate of 12% per year for the past 10 years. Select the closest answer.(a)
You borrow $500 from a family member and agree to pay it back in 6 months. Because you are part of the family, you are only being charged simple interest at the rate of 0.5% per month. How much will you owe after 6 months? How much is the interest?
What is the future equivalent of $1,000 invested at 6% simple interest per year for 3½years?
Compare the interest earned by P dollars at i% per year simple interest with that earned by the same amount P for five years at i% compounded annually.
How much interest is payable each year on a loan of $2,000 if the interest rate is 10% per year when half of the loan principal will be repaid as a lump sum at the end of four years and the other half will be repaid in one lump-sum amount at the end of eight years? How much interest will be paid
Suppose you contribute $10 per week ($520 per year) into an interest-bearing account that earns 6% a year (compounded once per year). That’s probably one less pizza per week! But if you contribute faithfully each week into this account, how much money would you have saved through the compounding
You have just invested a one-time amount of $5,000 in a stock-based mutual fund. This fund should earn (on average) 9% per year over a long period of time. How much will your investment be worth in 35 years?
A 12-cylinder heavy-duty diesel engine will have a guaranteed residual value of $1,000 in 5 years. Today (year 0) the equivalent worth of this engine is how much if the interest rate is 9% per year?
A certain college graduate, Sallie Evans, has $24,000 in student-loan debt at the end of her college career. The interest rate on this debt is 0.75% per month. If monthly payments on this loan are $432.61, how many months will it take for Sallie to repay the entire loan?
Mr. Smith has saved $1,800 each year for 20 years. A year after the saving period ended, Mr. Smith withdrew $7,500 each year for a period of 5 years. In the sixth and seventh years, he only withdrew $5,000 per year. In the eighth year, he decided to withdraw the remaining money in his account. If
In 1803, Napoleon sold the Louisiana Territory to the United States for $0.04 per acre. In 2014, the average value of an acre at this location is $10,000. What annual compounded percentage increase in value of an acre of land has been experienced?
Calculate the compounded future value of 20 annual payments of $5,000 each into a savings account that earns 6% per year. All 20 payments are made at the beginning of each year.
In 2014, the average debt for college student loans is $28,700. This amounts to a $330 monthly payment for a “standard” loan repayment plan over 10 years. What monthly interest rate is being charged on this typical student loan?
In 1885, first-class postage for a one-ounce letter cost $0.02. The same postage in 2015 costs $0.49. What compounded annual increase in the cost of first-class postage has been experienced over this period of time?
In 1972, the maximum earnings of a worker subject to Social Security tax (SST) was $9,000. The maximum earnings subject to SST in 2012 is $110,100. What compound annual increase has been experienced over this 40-year period of time? How does it compare with a 3% annual increase in the consumer
The Dominion Freight Company has invested $50,000 in a new sorting machine that is expected to produce a return of $7,500 per year for the next 10 years. At a 7% annual interest rate, is this investment worthwhile?
Your parents make 20 equal annual deposits of $2,000 each into a bank account earning 3% interest per year. The first deposit will be made one year from today. How much money can be withdrawn from this account immediately after the 20th deposit?
Football coach Ira Blooper has just been fired as head coach at a large university. His buyout amount is $7.5 million, and Blooper will be repaid (as per his contract) in monthly installments over the next 4 years. If the interest rate is 1% per month, how much will Blooper receive each month?
A credit card company wants your business. If you accept their offer and use their card, they will deposit 1% of your monetary transactions into a savings account that will earn a guaranteed 5% per year. If your annual transactions total an average of $20,000, how much will you have in this savings
Enrico Suarez has decided to purchase a house instead of renting an apartment. He can afford a monthly payment of $800, and he has saved $6,000 to use as a down-payment on a house. If the mortgage is 4% nominal interest (compounded monthly) on a 30-year loan, how much can Enrico afford to spend on
An outright purchase of $20,000 now (a lump-sum payment) can be traded for 24 equal payments of $941.47 per month, starting one month from now. What is the monthly interest rate that establishes equivalence between these two payment plans?
The Anderson County board of super-visors has agreed to fund an ambitious project that will “spend money now to save much more money in the future.” A total of $16.2 million will be awarded to the York Corporation for energy improvements in 40 buildings, 27 parks, and 37 traffic intersections.
A 45-year-old person wants to accumulate $750,000 by age 70. How much will she need to save each month, starting one month from now, if the interest rate is 0.5% per month?
A large electronic retailer is considering the purchase of software that will minimize shipping expenses in its supply chain network. This software, including installation and training, would be a $10-million investment for the retailer. If the firm’s effective interest rate is 15% per year and
The Dell Corporation borrowed $10,000,000 at 7% interest per year, which must be repaid in equal EOY amounts (including both interest and principal) over the next six years. How much must Dell repay at the end of each year? How much of the total amount repaid is interest?
The cost to equip a large cruise ship with security cameras is $500,000. If the interest rate is 15% per year and the cameras have a life of six years, what is the equivalent annual cost (A) of the security cameras?
Consider the accompanying cash-flow diagram. (See Figure P4-49.)a. If P = $1, 000, A = $200, and i% = 12% per year, then N=?b. If P = $1, 000, A = $200, and N=10 years, then i =?c. If A = $200, i% = 12% per year, and N = 5 years, then P = ?d. If P = $1,000, i% = 12% per year, and N = 5 years, then
Today the average undergraduate student is responsible for paying off a $3,500 balance on his/her credit card. Suppose the monthly interest rate is 1.75% (21% APR). How many months will it take to repay the $3,500 balance, assuming monthly payments of $100 are made and no additional expenses are
You have just inherited $100,000 as a lump-sum amount from your distant aunt. After depositing the money in a practically risk-free certificate of deposit (CD) earning 5% per year, you plan to withdraw $10,000 per year for your living expenses. How many years will your $100,000 last in view of
Suppose you drive a 2013 model auto-mobile that averages 25 miles per gallon (mpg) for 15,000 miles annually. If you purchase a new automobile that averages 30 mpg, how much extra money can you afford, based on fuel savings, to invest in the new car? Your personal interest rate is 6% per year, and
Kris borrows some money in her senior year to buy a new car. The car dealership allows her to defer payments for 12 months, and Kris makes 48 end-of-month payments thereafter. If the original note (loan) is for $28,000 and interest in 0.5% per month on the unpaid balance, how much will Kris’
Leon and Heidi decided to invest $3,000 annually for only the first eight years of their marriage. The first payment was made at age 25. If the annual interest rate is 10%, how much accumulated interest and principal will they have at age 65?
How much money should be deposited each year for 12 years if you wish to withdraw $309 each year for five years, beginning at the end of the 14th year? Let i = 8% per year.
Lisa plans to retire on her 61st birthday. On her 22nd birthday, Lisa will start saving $A per year for 40 years. Starting on her 62nd birthday, Lisa plans on withdrawing $10,000 and will continue these annual withdrawals until the account is exhausted on her 85th birthday. If Lisa’s bank account
Maintenance expenses for a bridge on the Ohio River are estimated to be $20,000 per year for the first 8 years, followed by two separate $100,000 expenditures in years 12 and 18. The expected life of the bridge is 30 years. If i = 6% per year, what is the equivalent uniform annual expense over the
A father wants to set up a bank account that will pay his daughter $18,000 at the end-of-quarter (EOQ) 4 and $32,000 at EOQ 8. He will fund this account by making quarterly payments of $X from the present (time zero) through EOQ 7.a. Draw a cash-flow diagram from the father’s viewpoint.b. If the
John has just graduated from State University. He owes $35,000 in college loans, but he does not have a job yet. The college loan company has agreed to give John a break on a deferred-payment plan that works as follows. John will not have to repay his loan for 5 years. During this “grace
What value of T makes these two cash flow diagrams (see Figure P4-74) economically equivalent at 8% annual interest?Figure P4-74: $1,000 $1,000 т $500 $500 2 3 4 6. EOY EOY 3T in 1.
Start saving for retirement immediately! Even a modest amount will add up in a hurry. Jay decides to follow this advice and puts away 1% of his annual salary of $50,000 per year. This equates to $500 on his 21st birthday, and his salary will increase by 2% (on average) every year thereafter until
A geometric gradient that increases at f̅ = 6% per year for 15 years is shown in the accompanying diagram. The annual interest rate is 12%. What is the present equivalent value of this gradient?
Stan Moneymaker needs 15 gallons of gasoline to top off his automobile’s gas tank. If he drives an extra eight miles (round trip) to a gas station on the outskirts of town, Stan can save $0.10 per gallon on the price of gasoline. Suppose gasoline costs $3.90 per gallon and Stan’s car gets 25
The decision was made by NASA to abandon rocket-launched payloads into orbit around the earth. We must now rely on the Russians for this capability. Use the principles of engineering economy to examine this decision.
A typical discounted price of a AAA battery is $0.75. It is designed to provide 1.5 volts and 1.0 amps for about an hour. Now we multiply volts and amps to obtain power of 1.5 watts from the battery. Thus, it costs $0.75 for 1.5 Watt-hours of energy. How much would it cost to deliver one kilo
Henry Ford’s Model T was originally designed and built to run on ethanol. Today, ethanol (190-proof alcohol) can be produced with domestic stills for about $0.85 per gallon. When blended with gasoline costing $4.00 per gallon, a 20% ethanol and 80% gasoline mixture costs $3.37 per gallon. Assume
A large electric utility company has proposed building an $820 million combined cycle, gas-powered plant to replace the electric generation capacity at one of its coal-fired facilities. Develop three other alternatives for replacing this electric generation capacity.
Studies have concluded that a college degree is a very good investment. Suppose that a college graduate earns about 75% more money per hour than a high-school graduate. If the lifetime earnings of a high-school graduate average $1,200,000, what is the expected value of earning a college degree?
Automobile repair shops typically recommend that their customers change their oil and oil filter every 3,000 miles. Your automobile user’s manual suggests changing your oil every 5,000–7,000 miles. If you drive your car 15,000 miles each year and an oil and filter change costs $30, how much
Often it makes a lot of sense to spend some money now so you can save more money in the future. Consider filtered water. A high-tech water filter cost about $60 and can filter 7,200 ounces of water. This will save you purchasing two 20-ounce bottle of filtered water every day, each costing $1.15.
The manufacturer of Brand A automobile tires claims that its tire can save 110 gallons of fuel over 55,000 miles of driving, as compared to a popular competitor (Brand B). If gasoline costs $4.00 per gallon, how much per mile driven does this tire save the customer (Brand A versus Brand B)?
The Almost-Graduating Senior Problem. Consider this situation faced by a first-semester senior in civil engineering who is exhausted from extensive job interviewing and penniless from excessive partying. Mary’s impulse is to accept immediately a highly attractive job offer to work in her
Bad news: You have just wrecked your car! You need another car immediately because you have decided that walking, riding a bike, and taking a bus are not acceptable. An automobile wholesaler offers you $2,000 for your wrecked car €œas is.€ Also, your insurance
Owing to the rising cost of copper, in 1982 the U.S. Mint changed the composition of pennies from 95% copper (and 5% zinc) to 2.5% copper (and 97.5% zinc) to save money. Your favorite aunt has a collection of 5,000 pennies minted before 1982, and she intends on gifting the collection to you.a. What
Energy can be conserved when your home heating/cooling system works less during the heating and cooling seasons. In fact a one degree Fahrenheit difference in your thermostat setting can reduce energy consumption by up to 5%. Identify the assumptions necessary to make this statement valid for
Jill Smith opens an apartment-locator business near a college campus. She is the sole owner of the proprietorship, which she names Campus Apartment Locators. During the first month of operations, July 2015, she engages in the following transactions:a. Smith invests $35,000 of personal funds to
An experimental composite engine block for an automobile will trim 20 pounds of weight compared with a traditional cast iron engine block. It is estimated that at least $2,500 in life-cycle costs will be saved for every pound of weight reduction over the engine’s 8-year expected life. Given that
Classify each of the following cost items as mostly fixed or variable:Raw materials..........................................Administrative salariesDirect labor..............................................Payroll taxesDepreciation............................................Insurance (building and
Lubbock Engineering Consultants is a firm of professional civil engineers. It mostly does surveying jobs for the heavy construction industry throughout Texas. The firm obtains its jobs by giving fixed-price quotations, so profitability depends on the ability to predict the time required for the
A company has determined that the price and the monthly demand of one of its products are related by the equation D = √(400 − p), where p is the price per unit in dollars and D is the monthly demand. The associated fixed costs are $1,125/month, and the variable costs are $100/unit. Use this
A company has determined that the price and the monthly demand of one of its products are related by the equation D = √(400 − p), where p is the price per unit in dollars and D is the monthly demand. The associated fixed costs are $1,125/month, and the variable costs are $100/unit. Use this
A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of $20,000 per year. Each unit of the product produced costs $15 in labor and $10 in materials. The product can be sold for
A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of $20,000 per year. Each unit of the product produced costs $15 in labor and $10 in materials. The product can be sold for
You are planning to build a new home with approximately 2,000–2,500 gross square feet of living space on one floor. In addition, you are planning an attached two-car garage (with storage space) of approximately 450 gross square feet. Develop a cost and revenue structure for designing and
A large electric utility company releases 62 million tons of greenhouse gases (mostly carbon dioxide) into the environment each year. This company has committed to spending $1.2 billion in capital over the next five years to reduce its annual emissions by 5%. More will be spent after five years to
The proposed small office building in Example 3-2 had 24,000 net square feet of area heated by a natural gas furnace. The owner of the building wants to know the approximate cost of heating the structure from October through March (6 months) because she will lease heated space to the building’s
Suppose that your brother-in-law has decided to start a company that produces synthetic lawns for senior homeowners. He anticipates starting production in 18 months. In estimating future cash flows of the company, which of the following items would be rela-tively easy versus relatively difficult to
A water filtration system in an industrial process was purchased in 2014 for $250,000. It will be replaced at the end of year 2019. What is the estimated cost of the replacement, based on the following equipment cost index? Year Index Year Index 220 2017 2014 257 279 2015 238 2018 2016 247 2019 298
Prepare a composite (weighted) index for housing construction costs in 2014, using the following data: Reference Type of Housing Year (/ = 100) 2014 Percent Single units 62 70 41 38 $/ft? 57 $/ft? Duplex units Multiple 25 33 53
A microbrewery was built in 2012 at a total cost of $650,000. Additional information is given in the accompanying table (all 2000 indices = 100).a. Calculate a weighted index for microbrewery construction in 2016.b. Prepare a budget estimate for a microbrewery in 2016. Average Percentage of Total
Today (year 0) a new 7-mega Watt (MW) solar panel farm is constructed at a cost of $14 million. Four years from today, a smaller 6-MW solar farm will be added to the existing farm. The inflation rate on solar panel construction projects averages 8% per year. If the cost-capacity factor is 0.85 for
Six years ago, an 80-kW diesel electric set cost $160,000. The cost index for this class of equipment six years ago was 187 and is now 194. The cost-capacity factor is 0.6.(3.4)a. The plant engineering staff is considering a 120-kW unit of the same general design to power a small isolated plant.
The capital investment cost for a switch grass-fueled ethanol plant with a capacity of 250,000 gallons per year is $3 million. The cost-capacity factor for this particular plant technology is 0.59 for capacities ranging from 200,000 gallons per year to 500,000 gallons per year. What is the
A biotech firm is considering abandoning its old plant, built 23 years ago, and constructing a new facility that has 50% more square footage. The original cost of the old facility was $300,000, and its capacity in terms of standardized production units is 250,000 units per year. The capacity of the
In a learning curve application, 658.5 work hours are required for the third production unit and 615.7 work hours are required for the fourth production unit. Determine the value of n(and therefore s)in Equation (3-5).
You have been asked to estimate the cost of 100 prefabricated structures to be sold to a local school district. Each structure provides 1,000 square feet of floor space, with 8-feet ceilings. In 2003, you produced 70 similar structures consisting of the same materials and having the same ceiling
In the packaging department of a large aircraft parts distributor, a fairly reliable estimate of packaging and processing costs can be determined by knowing the weight of an order. Thus, the weight is a cost driver that accounts for a sizable fraction of the packaging and processing costs at this
A 250 square foot shell and tube heat exchanger was purchased for $15,250 in 2004 when the index value was 830. Estimate the cost of 150 square foot shell and tube heat exchanger in 2014 when the index value is 1,059 and the appropriate cost-capacity factor is 0.6.
You have been asked to prepare a quick estimate of the construction cost for a coal-fired electricity generating plant and facilities. A work breakdown structure (levels one through three) is shown is Table P3-27. You have the following information available:€¢ A coal-fired generating
Refer to Example 3-8. While cleaning out an old file, someone uncovers the first spacecraft manufactured by your company—30 years ago! It weighed 100 pounds and cost $600 million. Extend the spreadsheet to include this data point. How does adding this observation affectRand the standard error?
Given the following information, how many units must be sold to achieve a profit of $25,000?Direct labor hours:..................................0.2 hour/unitDirect labor costs:...............................$21.00/hourDirect materials cost:...........................$4.00/unitOverhead
Find the average time per unit required to produce the first 30 units, if the slope parameter of the learning rate is 92% and the first unit takes 460 hours.(a)−3.30693E-11 (b) 305.5404 (c) 245(d) 347.3211
A student is considering the purchase of two alternative cars. Car A initially costs $1,500 more than Car B, but uses 0.05 gallons per mile, versus 0.07 gallons per mile for Car B. Both cars will last for 10 years, and B’s market value is $800 less than A’s. Fuel costs $4.00 per gallon. If all
A group of enterprising engineering students has developed a process for extracting combustible methane gas from cow manure (don’t worry, the exhaust is odorless). With a specially adapted internal combustion engine, the students claim that an automobile can be propelled 15 miles per day from the
A municipal solid-waste site for a city must be located at Site A or Site B. After sorting, some of the solid refuse will be transported to an electric power plant where it will be used as fuel. Data for the hauling of refuse from each site to the power plant are shown in Table P2-4.If the power
Suppose your company has just discovered $100,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options: (1) re-machine the obsolete parts at a cost of $30,000 and then hopefully resell them for $60,000 or (2) scrap
Suppose your wealthy aunt has given you a gift of $25,000. You have come up with three options for spending (or investing) the money. First, you’d like (but do not need) a new car to brighten up your home and social life. Second, you can invest the money in a high-tech firm’s common stock. It
A large, profitable commercial airline company flies 737-type aircraft, each with a maximum seating capacity of 132 passengers. Company literature states that the economic breakeven point with these aircraft is 62 passengers.a. Draw a conceptual graph to show total revenue and total costs that this
A lash adjuster keeps pressure constant on engine valves, thereby increasing fuel efficiency in automobile engines. The relationship between price (p) and monthly demand (D) for lash adjusters made by the Wicks Company is given by this equation: D = (2,000 − p)/0.10. What is the demand (D̂) when
A large company in the communication and publishing industry has quantified the relationship between the price of one of its products and the demand for this product as Price = 150 − 0.01 × Demand for an annual printing of this particular product. The fixed costs per year (i.e., per printing) =
A large wood products company is negotiating a contract to sell plywood overseas. The fixed cost that can be allocated to the production of plywood is $800,000 per month. The variable cost per thousand board feet is $155.50. The price charged will be determined by p = $600 − (0.05)D per 1,000
A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand iswhere p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its
An electric power plant uses solid waste for fuel in the production of electricity. The cost Yin dollars per hour to produce electricity is Y = 12 + 0.3 X + 0.27 X2, where X is in megawatts. Revenue in dollars per hour from the sale of electricity is 15 X − 0.2 X2. Find the value of X that gives
The annual fixed costs for a plant are $100,000, and the variable costs are $140,000 at 70% utilization of available capacity, with net sales of $280,000. What is the breakeven point in units of production if the selling price per unit is $40?
The world price of zinc has increased to the point where “moth balled” zinc mines in east Tennessee have been reopened because of their potential profitability.(a) What is the estimated annual profit for a mine producing 20,000 tons per year (which is at 100% capacity) when zinc sells for $1.00
A cell phone company has a fixed cost of $1,500,000 per month and a variable cost of $20 per month per subscriber. The company charges $39.95 per month to its cell phone customers.a. What is the breakeven point for this company?b. The company currently has 73,000 subscribers and proposes to raise
A plant operation has fixed costs of $2,000,000 per year, and its output capacity is 100,000 electrical appliances per year. The variable cost is $40 per unit, and the product sells for $90 per unit.a. Construct the economic breakeven chart.b. Compare annual profit when the plant is operating at
Ethanol blended with gasoline can be used to power a “flex-fueled” car. One particular blend that is gaining in popularity is E85, which is 85% ethanol and 15% gasoline. E85 is 80% cleaner burning than gasoline alone, and it reduces our dependency on foreign oil. But a flex-fueled car costs
The fixed cost for a steam line per meter of pipe is $450 X + $50 per year. The cost for loss of heat from the pipe per meter is $4.8/X1/2 per year. Here, X represents the thickness of insulation in meters, and X is a continuous design variable.a. What is the optimum thickness of the
Stan Moneymaker has been shopping for a new car. He is interested in a certain 4 - cylinder sedan that averages 28 miles per gallon. But the sales person tried to persuade Stan that the 6-cylinder model of the same automobile only costs $2,500 more and is really a “more sporty and responsive”
A producer of synthetic motor oil for automobiles and light trucks has made the following statement: “One quart of Dynolube added to your next oil change will increase fuel mileage by one percent. This one-time additive will improve your fuel mileage over 50,000 miles of driving.”a. Assume the
Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are sold for $0.70 each. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of lathe
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