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engineering economy

Engineering Economy 17th Edition William Sullivan, Elin Wicks, C Koelling - Solutions

4-20. Compound interest is a very powerful way to save for your retirement. Saving a little and giving it time to grow is often more effective than saving a lot over a short period of time. To illustrate this, suppose your goal is to save $1 million by the age of 65. This can be accomplished by
4-19. In 2017, 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? (4.6)
4-18. 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. (4.6)
4-17. The monthly average cable TV bill in 2017 is $70.45. If cable costs are climbing at an annual rate of 6% per year, how much will the typical cable subscriber pay in 2021? (4.6)
4-16. Use the rule of 72 to determine how long it takes to accumulate $10,000 in a savings account when P = $5,000 and i = 10% per year. (4.6)
4-15. A zero coupon bond will be worth $10,000 when it matures and is redeemed after 10 years. How much would an investor be willing to pay now for this bond if a 2% per year yield is desired? (4.6.2)
4-14. What rate of interest compounded annually is involved if an investment of $10,000 made now is result in a receipt of $24,760 in 8 years? (4.6.1)
4-13. How long does it take to become a millionaire? A $100,000 investment will hit $1 million in 37 years at an annual interest rate of 6.42%. How long will it take to become a millionaire if the annual interest rate increases to 7.46%? (4.6.4)
4-12. A new oven will save $100 per year in electricity expense. How much can we afford to pay for this oven if it is expected to last 15 years? The interest rate is 12% per year. (4.7.2)
4-11. Are annuities good investments? To answer this question, consider the situation of John. He is 50 years old and can purchase a lifetime annuity for $200,000. The annuity pays John $9,000 per year for the rest of his life. If John lives to be 85, what rate of return will he earn on this
4-10. A new roof on a house will cost $10,000. It will be installed in 20 years. If the interest rate is 8% per year, how much must be saved each year to accumulate $10,000 after 20 years? (4.7.3)
4-9. 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
4-8. If money is worth more than 0% per year to you, would you rather pay $10,000 per year for five years or pay $5,000 per year for 10 years? (4.4)
4-7. Refer to Plan 2 in Table 4-1. This is the customary way to pay off loans on automobiles, house mortgages, etc. A friend of yours has financed $24,000 on the purchase of a new automobile, and the annual interest rate is 12% (1% per month). (4.4)a. Monthly payments over a 60-month loan period
4-6. An amount of $15,000 is borrowed from the bank at an annual interest rate of 12%.a. Calculate the equal end-of-year payments required to completely pay off the loan in four years.b. Calculate the repayment amounts if the loan ($15,000) will be repaid in two equal installments of $7,500 each,
4-5. 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
4-4. 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. (4.2)
4-3. In Europe people are experiencing negative interest rates. This means banks charge their customers for protecting the patron’s money. If 10,000 euros (European Union currency) is deposited in a “savings” account that is subject to a negative interest rate of 1% per year, how much money
4-2. What is the future equivalent of $1,000 invested at 6% simple interest per year for 3 years? (4.2)
4-1. Compare the interest earned by $9,000 for five years at 8% simple interest with interest earned by the same amount for five years at 8% compounded annually. Explain why a difference occurs. (4.2)
3-41. A small textile plant was constructed in 2008. The major equipment, costs, and factors are shown below. Estimate the cost to build a new plant in 2018 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.
3-40. A car rental agency is considering a modification in its oil change procedure. Currently, it uses a Type X filter, which costs $5 and must be changed every 7,000 miles along with the oil (5 quarts). Between each oil change, one quart of oil must be added after each 1,000 miles. The proposed
3-39. A foreperson supervises A, B, and eight other employees. The foreperson states that he spends twice as much time supervising A and half as much time supervising B, compared with the average time spent supervising his other subordinates. All employees have the same production rate. On the
3-38. An automatic process controller will eliminate the current manual control operation. Annual cost of the current method is $4,000. If the controller has a service life of 13 years and an expected market value of 11% of the first cost, what is the maximum economical price for the controller?
3-37. 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.
3-36. 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) 330.693 (b) 305.5404 (c) 245 (d) 347.3211
3-35. Given the following information, how many units must be sold to achieve a profit of $25,000? [Note that the units sold must account for total production costs (direct and overhead) plus desired profit.] (3.4, 3.5) Direct labor hours: 0.2 hour/unit Direct labor costs: $21.00/hour Direct
3-34. You have been asked to estimate the per unit selling price of a new line of clothing. Pertinent data are as follows: Direct labor rate: $15.00 per hour Production material: $375 per 100 items Factory overhead: 125% of direct labor Packing costs: 75% of direct labor Desired profit: 20% of
3-33. What is the projected impact on the per unit demanufacturing cost of a 50% increase in training costs coupled with a 90% increase in transportation costs? What is the revised cost reduction percentage? (3.5) Use the cost template presented in Section 3.5 to solve Problems (3-34) and (3-35).
3-32. What cost factor is the per unit demanufacturing cost most sensitive to and why? (3.5)
3-31. What other cost factors might you include in such an economic analysis? (3.5)
3-30. 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 affect R and the standard
3-29. The Betterbilt Construction Company designs and builds residential mobile homes. The company is ready to construct, in sequence, 16 new homes of 2,400 square feet each. The successful bid for the construction materials in the first home is $64,800, or $27 per square foot. The purchasing
3-28. Refer to Example 3-7. Construct a graph to show how the time to complete the 10th car changes as the learning curve slope parameter is varied from 75% to 95%. (3.4)
3-27. Extended Learning Exercise. 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
3-26. A small plant has been constructed and the costs are known. A new plant is to be estimated with the use of the exponential (power sizing) costing model. Major equipment, costs, and factors are as shown in Table P3-26. (Note MW = 106 Watts.) If ancillary equipment will cost an additional
3-25. Your FICO score is a commonly used measure of credit risk (see www.myfico.com). A score of 850 is the best (highest) score possible. Thirty-five percent of the FICO score is based on payment history for credit cards, car loans, home mortgages, and so on. Suppose your current FICO score is 720
3-24. Today a proposed community college is estimated to cost $34.6 million, which is $127 per square foot of space multiplied by 272,310 square feet. If construction costs are expected to increase by 19% per year because of high demand for construction labor and materials, how much would a
3-23. A 250 square foot shell and tube heat exchanger was purchased for $15,250 in 2004 when the index value was 830. Estimate the cost of 150 square foot shell and tube heat exchanger in 2014 when the index value is 1,059 and the appropriate cost-capacity factor is 0.6. (3.4)
3-22. In the packaging department of a large aircraft parts distributor, a fairly reliable estimate of packaging and processing costs can be determined by knowing the weight of an order. Thus, the weight is a cost driver that accounts for a sizable fraction of the packaging and processing costs at
3-21. The cost of building a supermarket is related to the total area of the building. Data for the last 10 supermarkets built for Regork, Inc., are shown in the accompanying table. Building Area (ft2) Cost ($) 1 14,500 800,000 2 15,000 825,000 3 17,000 875,000 4 18,500 972,000 5 20,400 1,074,000 6
3-20. A company that manufactures shuttle cars and mines for the coal mining industry has determined that “coal production in the U.S.” is a fairly reliable three-quarter leading indicator of their sales. This quarter’s coal production in the United States can be obtained from the Department
3-19. For the data below (3.4.3):a. Find the regression equation, y = b0 + b1x.b. If x = 170 orders, how many shipments are expected?Shipments, y No. of Liner Board Orders, x 573 157 603 161 658 175 725 194
3-18. The cumulative average labor hours to assemble the first five units of product A were 15.882 hours. If the learning curve, based on the previous experience with similar products, is 85%, what is the estimated time (labor hours) that will be required to assemble the 20th unit? (3.4.2)
3-17. The time to assemble the first unit on a production line is 10 hours. The learning rate is 0.90. Approximately how long will it take for the sixth unit to be assembled? (3.4.2)
3-16. A firm has recently added a new product to their offerings. Manufacturing reports that production is going smoothly and factory workers are becoming familiar with the manufacture of this product. All expectations are that the current rate of learning will continue and the manufacture of
3-15. The capacity of a switchgrass-fueled ethanol plant is 100,000 gallons per month. Its capital investment is $600,000. Another design is being considered with a capacity of 40,000 gallons per month, and its capital investment is $300,000. Based on capital investment only, what is the
3-14. The capital investment cost for a switchgrass-fueled ethanol plant with a capacity of 250,000 gallons per year is $6 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
3-13. 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
3-12. Today (year 0) a new 7-megaWatt (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
3-11. The purchase price of a natural gas-fired commercial boiler (capacity X) was $181,000 eight years ago. Another boiler of the same basic design, except with capacity 1.42X, is currently being considered for purchase. If it is purchased, some optional features presently costing $28,000 would be
3-10. A 20,000-square-foot warehouse was just constructed for $800,000. If the cost-capacity factor is 0.83, what is the estimated cost to construct a 30,000-square-foot warehouse? (3.4.1)
3-9. Prepare a composite (weighted) index for housing construction costs in 2014, using the following data: (3.3) Reference Type of Year Housing Percent (l = 100) 2014 Single units 70 41 62 Duplex units 5 38 ⎫ ⎪⎬ ⎪⎭ $/ft2 57 ⎫ ⎪⎬ ⎪⎭ $/ft2 Multiple 25 33 53
3-8. 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? (3.3) Year Index Year Index 2014 220 2017 257 2015 238 2018 279 2016
3-7. Equipment purchased in 2006 for $30,000 must be replaced in late 2017. What is the estimated cost of the replacement equipment based on the following cost indices? (3.3.1) End of Year Index 2004 128 2005 140 2006 149 2007 150 2008 165 2009 178 2010 186 End of Year Index 2011 192 2012 200 2013
3-6. An electric power distributor charges residential customers $0.10 per kilowatt-hour (kWh). The company advertises that “green power” is available in 150 kWh blocks for an additional $4 per month. (Green power is generated from solar, wind power, and methane sources.) (3.3)a. If a certain
3-5. 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
3-4. 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
3-3. An architect-engineering firm is planning a parking lot to accommodate 500 vehicles. Each parking space will be 8.5 feet × 15 feet. It has been estimated that the space required for aisles will be 80% of the space required for parking. A local paving company charges $10 per square foot for
3-2. 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
3-1. A “green” (environmentally friendly) office building costs as average of $3.50 per square foot each year to heat and cool. What is the total annual heating and cooling cost of an office building that has 10,000 square meters of space? (3.3)
2-58. A manufacturer makes 7,900,000 memory chips per year. Each chip takes 0.4 minutes of direct labor at the rate of $8 per hour. The overhead costs are estimated at $11 per direct labor hour. A new process will reduce the unit production time by 0.01 minutes. If the overhead cost will be reduced
2-57. The fixed costs incurred by a small genetics research lab are $200,000 per year. Variable costs are 60% of the annual revenue. If annual revenue is $300,000, the annual profit/loss is most nearly which answer below? (2.2) (a) $66,000 profit (b) $66,000 loss (c) $80,000 profit (d) $80,000 loss
2-56. If the selling price is lowered to $35 per unit, how many units must be sold each year for the company to earn a profit of $60,000 per year? (a) 12,000 (b) 10,000 (c) 16,000 (d) 18,000 (e) 5,143
2-55. If 10,000 units per year are sold, what is the annual profit?(a) $280,000 (b) $50,000 (c) $150,000 (d) −$50,000 (e) $30,000
2-54. How many units per year must be sold for the company to breakeven? (a) 4,800 (b) 3,000 (c) 8,000 (d) 6,667 (e) 4,000
2-53. Which of the following values of D represents the breakeven point? (a) 10 units (b) 15 units (c) 20 units (d) 25 units 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
2-52. What is the optimal number of units that should be produced and sold each month? (a) 10 units (b) 15 units (c) 20 units (d) 25 units
2-51. Visit your local car dealer (either in person or online) to determine the cost of the daytime running lights option. How many accidents (per unit time) would have to be avoided for this option to be cost effective? (2.5)A company has determined that the price and the monthly demand of one of
2-50. What are the key factors in this analysis, and how would your decision change if the assumed value of these factors changes? For example, what impact does rising fuel costs have on this analysis? Or, what if studies have shown that drivers can expect to avoid at least one accident every 10
2-49. Refer to Example 2-7. If the average inside temperature of this house in Virginia is increased from 65◦F to 72◦F, what is the most economical insulation amount? Assume that 100,000,000 Btu are lost with no insulation when the thermostat is set at 65◦F. The cost of electricity is now
2-48. Refer to Example 2-4. If your focus was on reducing expenses, would it be better to reduce the fixed cost (B1) or variable cost (B2) component? What is the effect of a ± 10% change in both of these factors? (2.2)
2-47. Web Exercise Home heating accounts for approximately one-third of energy consumption in a typical U.S. household. Despite soaring prices of oil, coal, and natural gas, one can make his/her winter heating bill noninflationary by installing an ultraconvenient corn burning stove that costs in
2-46. Extended Learning Exercise The student chapter of the American Society of Mechanical Engineers is planning a six-day trip to the national conference in Albany, NY. For transportation, the group will rent a car from either the State Tech Motor Pool or a local car dealer. The Motor Pool charges
2-45. A hot water leak in one of the faucets of your apartment can be very wasteful. A continuous leak of one quart per hour (a “slow” leak) at 155◦F causes a loss of 1.75 million Btu per year. Suppose your water is heated with electricity. (2.3)a. How many pounds of coal delivered to your
2-44. Which of the following statements are true and which are false? (all sections)a. Working capital is a variable cost.b. The greatest potential for cost savings occurs in the operation phase of the life cycle.c. If the capacity of an operation is significantly changed (e.g., a manufacturing
2-43. Ocean water contains 0.9 ounces of gold per ton. Method A costs $550 per ton of water processed and will recover 90% of the metal. Method B costs $400 per ton of water processed and will recover 60% of the metal. The two methods require the same capital investment and are capable of producing
2-42. One method for developing a mine containing an estimated 100,000 tons of ore will result in the recovery of 62% of the available ore deposit and will cost $23 per ton of material removed. A second method of development will recover only 50% of the ore deposit, but it will cost only $15 per
2-41. Four holes must be drilled in a casting which forms the housing for an electric motor. The holes may be located and drilled without the aid of a jig by a skilled machinist whose wage rate is $25 per hour. His production time will be 1.5 minutes per housing. A jig could be built at a cost of
2-40. A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data: Option A: Purchase 10,000 items per year at a fixed price of $8.50 per item. The cost of placing the order is negligible according to the
2-39. Mr. Lester wants to create a business Web site. He already has the server and all the hardware he needs. So, he just needs to figure out what software to use. He narrows his choices down to either Microsoft IIS or Apache’s Web Server. Mr. Lester expects a high hit rate of 90 hits/minute
2-38. For the production of part R-193, two operations are being considered. The capital investment associated with each operation is identical. Operation 1 produces 2,000 parts per hour. After each hour, the tooling must be adjusted by the machine operator. This adjustment takes 20 minutes. The
2-37. The speed of your automobile has a huge effect on fuel consumption. Traveling at 65 miles per hour (mph) instead of 55 mph can consume almost 20% more fuel. As a general rule, for every mile per hour over 55, you lose 2% in fuel economy. For example, if your automobile gets 30 miles per
2-36. A bicycle component manufacturer produces hubs for bike wheels. Two processes are possible for manufacturing, and the parameters of each process are as follows:Process 1 Process 2 Production rate 35 parts/hour 15 parts/hour Daily production time 4 hours/day 7 hours/day Percent of parts 20% 9%
2-35. 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
2-34. You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $20 per unit. For the make option, the firm can produce product A based on the following cost estimation data.
2-33. A rock drill can be operated at three different operating speeds, each with a unique drilling rate (i.e., rate of production). The faster the dril operates, the sooner the bit wears out and must be replaced. Replacement bits cost $10.00 each and cannot be re-sharpened. The drill operator
2-32. An automobile dealership offers to fill the four tires of your new car with 100% nitrogen for a cost of $20. The dealership claims that nitrogen-filled tires run cooler than those filled with compressed air, and they advertise that nitrogen extends tire mileage (life) by 25%. If new tires
2-31. 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.” (2.4)a.
2-30. A company uses a variable speed honing machine to increase the smoothness of the inside walls of hydraulic jacks. The hone uses acid-dipped “brushes” to perform this operation. Increasing the speed of the machine results in faster operation, but reduces brush life. A single “brush”
2-29. One component of a system’s life-cycle cost is the cost of system failure. Failure costs can be reduced by designing a more reliable system. A simplified expression for system life-cycle cost, C, can be written as a function of the system’s failure rate: C = CI λ + CR · λ · t. Here,
2-28. According to the U.S. Department of the Interior, the amount of energy lost because of poorly insulated homes is equivalent to 2 million barrels of oil per day. In 2009, this is more oil than the United States imports from Saudi Arabia each day. If we were to insulate our homes as determined
2-27. Suppose you are going on a long trip to your grandmother’s home in Seattle, 3,000 miles away. You have decided to drive your old Ford out there, which gets approximately 18 miles to the gallon when cruising at 70 mph. Because Grandma is an excellent cook and you can stay and eat at her
2-26. The cost of operating a large ship (CO) varies as the square of its velocity (v); specifically, CO = knv2, where n is the trip length in miles and k is a constant of proportionality. It is known that at 12 miles/hour, the average cost of operation is $100 per mile. The owner of the ship wants
2-25. A design engineer must select the horsepower for a motor to drive a pump. Horsepower rating is a continuous design parameter with values in the range of 10 to 40 horsepower. The motor will have an annual ownership cost of $120 plus $0.60 per horsepower. The operating costs of such motors for
2-24. A production plant has the capacity to produce 2,000 tons per year. At full capacity, there are total variable costs of $2,000,000 and fixed costs of $700,000. (2.2)a. What is the annual profit for the plant when working at full capacity (2,000 tons) and the product sells for $0.80 per
2-23. 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
2-22. Jerry Smith’s residential air conditioning (AC) system has not been able to keep his house cool enough in 90◦F weather. He called his local AC maintenance person, who discovered a leak in the evaporator. The cost to recharge the AC unit is $40 for gas and $45 for labor, but the leak will
2-21. A regional airline company estimated four years ago that each pound of aircraft weight adds $30 per year to its fuel expense. Now the cost of jet fuel has doubled from what it was four years ago. A recent engineering graduate employed by the company has made a recommendation to reduce fuel
2-20. 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

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