Questions and Answers of Engineering Economy

A chemical engineer is considering two sizes of pipes for moving distillate from a refinery to the tank farm. A small pipeline will cost less to purchase (including valves and other appurtenances),
Two mutually exclusive alternatives have the estimates shown below. Use annual worth analysis to determine which should be selected at an interest rate of 10% per year. First cost, $ -42,000 -80,000
Blue Whale Moving and Storage recently purchased a warehouse building in Santiago. The manager has two good options for moving pallets of stored goods in and around the facility. Alternative 1
An environmental engineer wants to evaluate three different methods for disposing of a non-hazardous chemical waste: land application, fluidized-bed incineration, and private disposal contract. Use
You have two machines under consideration for an improved automated wrapping process for Snickers Fun Size candy bars as detailed below.(a) Using an AW analysis, determine which should be selected at
Two types of robots (Cartesian and Articulated) with the following estimates are under consideration for a dishwasher assembly process. Using an interest rate of 10% per year, determine which one
An international textile company€™s North America Division must decide which type of fabric cutting machines it will use€”straight knife or round knife. The estimates are
A consulting engineering firm is considering two models of SUVs for the company principals. A GM model will have a first cost of $36,000, an operating cost of $4000, and a salvage value of $15,000
Your brother, a new college graduate, wants to be his own boss. He wants to open a restaurant in a small strip center or acquire and operate a food truck, an increasingly popular mode of eating,
Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $125,000 salvage value after its
Polymer Molding, Inc. is considering two processes for manufacturing storm drains. Plan A involves conventional injection molding that will require making a steel mold at a cost of $2 million. The
The Briggs and Stratton Commercial Division designs and manufactures small engines for golf turf maintenance equipment. A robotics-based testing system with support equipment will ensure that their
Airodyne Wind, Inc. has wind tunnels that can operate vertically or horizontally for evaluating the effects of air flow on a component’s PCB response and reliability. The company expects to build a
The Toro Company is expanding its El Paso, Texas plastic molding plant as it continues to transfer work from Juarez, Mexico contractors. The plant bought a $1.1 million precision injection molding
U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $13 million now and another $10
In 2016, Google rented 1000 acres of a historic California airbase in the San Francisco Bay Area for $1.16 billion via a 60-year lease. Annual M&O is expected to be $6.3 million. In addition,
White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 9 years
Humana Hospital Corporation installed a new MRI machine at a cost of $750,000 this year in its medical professional clinic in Cedar Park. This state-of-the-art system is expected to be used for 5
One way to recover invested capital with interest is to collect the principal P over n years as P∕n and also collect the interest on the unrecovered balance. Assume you borrowed $6000 at 10% per
As discussed in Section 6.2, either of the following two equations can be applied to determine the amount necessary to recover invested capital and a required return:CR1 = −P(A∕P,i,n) +
A delivery car had a first cost of $30,000, an annual operating cost of $12,000, and an estimated $4000 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for
A machine used to shread cardboard boxes for composting has a first cost of $10,000, an AOC of $7000 per year, a 3-year life, and no appreciable salvage value. Assume you were told that the service
Assume an alternative has a 3-year life and that you calculated its AW value over its 3-year life cycle. If you were asked to provide the AW value of the alternative for a 4-year study period, is the
The future worth of alternative B is closest to:(a) $ˆ’85,000(b) $ˆ’750,000(c) $ˆ’850,000(d) ˆ’ˆžProblem is based on the following cash flows for
All of the following equations for calculating the capitalized cost of alternative B are correct, except:(a) CCB = ˆ’750,000 ˆ’ 10,000/0.10(b) CCB = ˆ’750,000
The capitalized cost of alternative B is nearest:(a) $ˆ’590,000(b) $ˆ’625,000(c) $ˆ’734,000(d) $ˆ’850,000Problem is based on the following cash flows for
The present worth of alternative B is nearest:(a) $ˆ’85,000(b) $ˆ’750,000(c) $ˆ’850,000(d) $ˆ’950,000Problem is based on the following cash flows for
You have been asked to compare the alternatives on the basis of a present worth comparison. The PW of alternative A is closest to:(a) $ˆ’724,320(b) $ˆ’530,520(c)
An engineer analyzed four independent alternatives by the present worth method. On the basis of her results, the alternative(s) she should select are:(a) Only D(b) Can€™t tell from this
An upgraded version of a CNC machine has a first cost of $200,000, an annual operating cost of $60,000, and a salvage value of $50,000 after its 8-year life. At an interest rate of 10% per year, the
The capitalized cost of an initial investment of $200,000 and annual investments of $30,000 forever at an interest rate of 10% per year is closest to:(a) $−230,000(b) $−300,000(c) $−500,000(d)
When comparing mutually exclusive alternatives that have different lives by the present worth method, it is necessary to:(a) Always compare them over a period equal to the life of the longer-lived
The present worth of an alternative that provides infinite service is called its:(a) Net present value(b) Discounted total cost(c) Capitalized cost(d) Perpetual annual cost
Petrobras, the Brazilian energy company, has identified two alternatives to provide potable water to offshore platforms—purchase and operate the equipment, or contract long term with Manal and
Hannifin CNG Fuel Dispensers needs to purchase replacement equipment to streamline one of its production lines for a new contract, but may sell the equipment before its expected life is reached at an
Charlie€™s Truck Repair and Service has a new contract that requires him to purchase and maintain new equipment for work on 18-wheeler trucks and heavy road equipment. Two separate vendors
Use a spreadsheet and a study period of 8 years to select alternative A or B in Problem 5.20.Data from problem 5.20 Alternative A First cost, $ -15,000 -28,000 -9,000 Annual operating cost, $/year
You wish to evaluate four independent projects that all have a 10-year life at MARR = 15% per year. Preliminary estimates for first cost, annual net income, and SV have been made.(a) Accept or reject
Leonard Motors is trying to increase its international export business. It is considering several alternatives. Two were available earlier (per Problem 5.11), but a new one has recently been proposed
Compare three alternatives on the basis of their capitalized costs at i = 10% per year. Alternative G First cost, $ AOC, $ per year Salvage value, $ |Life, years -50,000 -300,000 - 10,000 -900,000
Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $250 million. Annual upkeep is expected to amount to
An aggressive stockbroker claims an ability to consistently earn 12% per year on an investor’s money. A client invests $10,000 now, $30,000 three years from now, and $8000 per year for 5 years
Assume that 25 years ago your dad invested $200,000, plus $25,000 in years 2 through 5, and $40,000 per year from year 6 on ward. At a very good interest rate of 12% per year, determine(a) The CC
How much money was deposited 35 years ago at 10% per year interest if it is sufficient to provide a perpetual income of $10,000 per year beginning now, year 35?
The cost of upgrading a section of Grand Loop Road in Yellowstone National Park is $1.7 million. Resurfacing and other maintenance are expected to cost $350,000 every 3 years. What is the capitalized
What is the present worth difference between an investment of $10,000 per year for 50 years and an investment of $10,000 per year forever at an interest rate of 10% per year?
Golden Gate bridge is maintained by 38 painters and 17 ironworkers (who replace corroding steel and rivets). If the painters get an average wage of $120,000 per year (with benefits) and the
Determine the capitalized cost of a permanent roadside historical marker that has a first cost of $78,000 and a maintenance cost of $3500 once every 5 years. Use an interest rate of 8% per year.
A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the “shell” will cost $150,000 and is expected to have a $65,000 salvage
The Department of Energy is proposing new rules mandating either a 20% increase or a 35% increase in clothes washer efficiency in 3 years. The 20% increase is expected to add $100 to the current
Parker Hannifin of Cleveland, Ohio manufactures CNG fuel dispensers. It needs replacement equipment to streamline one of its production lines for a new contract, but plans to sell the equipment at or
A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $12,600 to install and will have a
Three different plans were presented to the GAO (General Accounting Office) by a high-tech facilities manager for operating a portable cyber security facility.Plan A: Renewable 1-year contracts with
You and your partner have become very interested in cross-country motorcycle racing and wish to purchase entry-level equipment. You have identified two alternative sets of equipment and gear. Package
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 10% per year and a study period of 10 years. Alternative D First cost, $ -40,000 -32,000 -3,000
The product development group of a high-tech electronics company developed five proposals for new products. The company wants to expand its product offerings, so it will undertake all projects that
An engineer is trying to decide which process to use to reduce sludge volume prior to disposal. Belt filter presses (BFP) will cost $203,000 to buy and $85,000 per year to operate. Belts will be
Compare two alternatives, A and B, on the basis of a present worth evaluation using i = 10% per year and a study period of 8 years. Alternative A First cost, $ -15,000 -28,000 -9,000 Annual operating
Lego Group in Bellund, Denmark manufactures Lego toy construction blocks. The company is considering two methods for producing special purpose Lego parts. Method 1 will have an initial cost of
NASA is considering two materials for use in a space vehicle tracking station in Australia. The estimates are shown below. Which should be selected on an economic basis of present worth values at an
Dexcon Technologies, Inc. is evaluating two alternatives to produce its new plastic filament with tribological (i.e., low friction) properties for creating custom bearings for 3-D printers. The
Sales of bottled water in the United States totaled 34.0 gallons per person in 2014. Evian, a high-quality natural spring water, costs about 60¢ per bottle, while a local brand of purified municipal
Two methods can be used to produce expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 in year
A company that makes food-friendly silicone (for use in cooking and baking pan coatings) is considering the independent projects shown, all of which can be considered to be viable for only 10 years.
Oil from a specific type of marine microalgae can be converted into biodiesel that may serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae,
A software package created by Navarro & Associates can be used for analyzing and designing three-sided guyed towers and three- and four sided self-supporting towers. A single-user license will
Leonard, a company that manufactures explosion proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $900,000 now and
Lennon Hearth Products manufactures glass-door fireplace screens that have two types of mounting brackets for the frame. An L-shaped bracket is used for relatively small fireplace openings and a
In order to provide drinking water as part of its 50-year plan, a west coast city is considering constructing a pipeline for importing water from a nearby community that has a plentiful supply of
One of two methods must be used to produce expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000
You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been
What is meant by the term equal service alternative?
When evaluating projects by the present worth method, how do you know which one(s) to select if the proposals are(a) Independent,(b) Mutually exclusive?
A rapidly growing city is dedicated to neighborhood integrity. However, increasing traffic and speed on a through street are of concern to residents. The city manager has proposed five independent
(a) What is the difference between a service alternative and revenue alternative?(b) What is another name of a service alternative?
When evaluating multiple alternatives or projects, against what must they be compared, if they are(a) Independent,(b) Mutually exclusive?
If you wish to accumulate $10,000 over a 5-year period by placing $200 a month, starting next month, into a Roth IRA retirement fund that pays 6% per year, compounded quarterly with no interperiod
A midcareer engineer hopes to have $2 million available for his use when he retires 20 years from now. He plans to deposit a uniform amount semiannually, beginning now and every 6 months thereafter
If you deposit $P into a savings account that earns interest at a rate of i% per month for n years, the future worth in year n is represented by all of the following equations, except:(a) F =
You are planning to make two equal amount deposits, 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, compounded
The present worth of a deposit of $1000 now and $1000 every 6 months for 10 years at an interest rate of 10% per year, compounded semiannually is represented by which of the following equations:(a) P
An interest rate of 2% per quarter, compounded continuously, is closest to an effective semiannual rate of:(a) 2.00% per semiannual period(b) 2.02% per semiannual period(c) 4.0% per semiannual
Assume you make monthly deposits of $200 starting 1 month from now into an account that pays 6% per year, compounded semiannually. If you want to know how much you will have after 4 years, the value
If you make quarterly deposits for 3 years (beginning one quarter from now) into an account that compounds interest at 1% per month, the value of n in the F∕A factor (for determining F at the end
The only time you change the original cash flow diagram in problems involving uniform series cash flows is when the:(a) Payment period is longer than the compounding period(b) Payment period is equal
An interest rate of 18% per year, compounded continuously, is closest to an effective:(a) 1.51% per quarter(b) 4.5% per quarter(c) 4.6% per quarter(d) 9% per 6 months
An interest rate of 2% per month is the same as:(a) 24% per year, compounded monthly(b) A nominal 24% per year, compounded monthly(c) An effective 24% per year, compounded monthly(d) Both (a) and (b)
Some years ago, Penny purchased the car of her dreams for $25,000 by paying 20% down at purchase time and taking a $20,000, 5-year, 6% per year, compounded monthly loan with 60 monthly payments of
An engineer deposited her annual bonus of $10,000 into an account that pays interest at 8% per year, compounded semiannually. She withdrew $1000 in months 2, 11, and 23. Now, she wants to know the
Solve Problem 4.44 using a spreadsheet, which analyzes the loan on a boat purchased by the Fairfold family. Display the answers for parts (a) through (d) below the spreadsheet and indicate the
The Owner of Blue Bayou CafÃ© usually pays his appliance (refrigerators, dish washers, and freezers) maintenance contract by the year. If he projects the annual costs shown, find the
For the cash flows shown, determine the future worth in year 5. Cash Flow, $/Year Estimated / Per Year 12% 12% 20% Year 5000 6000 1-4 9000
Find the F, P, and A values for the negative cash flows shown in the diagram. i = 14% i = 10% Year 1 2 6 -100 -100 -100 -100 -100 -160 -160 -160 4)
Brady and Sons uses accounts receivable as collateral to borrow money for operations and payroll when revenues are low. If the company borrows $300,000 now at an interest rate of 12% per year,
How much money can a production company that makes fluidized bed scrubbers spend now instead of spending $150,000 in year 5 if the interest rates are estimated to be 10% per year in years 1 to 3 and
How long will it take for a lump-sum investment to double in value at an interest rate of 1.5% per month, compounded continuously? Solve by(a) Formula(b) Spreadsheet function.
A Texas chemical company had to file for bankruptcy because of a nationwide phaseout of methyl tertiary butyl ether (MTBE). The company is in the planning phase of reorganizing and expects to invest
Because of a chronic water shortage in California, new athletic fields must use artificial turf or xeriscape landscaping. If the value of the water saved each month is $6000, how much can a private
Corrosion problems and manufacturing defects rendered a gasoline pipeline between El Paso, TX, and Phoenix, AZ, subject to longitudinal weld seam failures. The pressure was reduced to 80% of the
What nominal rate per quarter is equivalent to an effective rate of 12.7% per year, compounded continuously?

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