Questions and Answers of Engineering Economy

Bull Built, a design/build engineering company that has always given year-end bonuses in the amount of $4,000 to each of its engineers, is having cash flow problems. The president said that although
The annual cash flows (in $1000 units) for Browning Brothers Glass Works are summarized.(a) Determine the total net cash flow over the 5 years.(b) Calculate the percentage of revenues represented by
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
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
For the cash flows shown, calculate the future worth in year 8 at i = 10% per year. Year Cash Flow, $ 800 800 800 800 500 500 500
For the cash flows shown, calculate the future worth in year 9 using i = 10% per year. 3 4 Year 2 5 Cash Flow, $| 200 200 200 200 300 300 300
For the cash flows shown, find the future worth in (a) Year 5,(b) Year 4. Assume an i of 10% per year. 3 2 Year 5 0 0 3000 3000 3000 3000 Cash Flow, $
A manufacturer of industrial grade gas handling equipment wants to have $500,000 in an equipment replacement contingency fund 10 years from now. If the company plans to deposit a uniform amount of
How much money would be accumulated 18 years from now from deposits of $15,000 per year for five consecutive years, starting 3 years from now, if the interest rate is 8% per year?
Calculate the equivalent future cost in year 10 for the following series of disbursements at an interest rate of 10% per year. Also, write a single-cell spreadsheet function that will determine the
Lifetime Savings Accounts, known as LSAs, allow people to invest after tax money without being taxed on any of the gains. If an engineer invests $10,000 now and $10,000 each year for the next 20
Kenworth Imaging got a $700,000 loan that came with a choice of two different repayment schedules. In Plan 1, the company would have to repay the loan in 4 years with four equal payments at an
For the cash flows shown, find the value of x that makes the equivalent annual worth in years 1 through 7 equal to $300 per year. Use an interest rate of 10% per year. Cash Flow, $ Cash Flow, $ Year
An entrepreneurial electrical engineer has approached a large utility with a proposal that promises to reduce the utility’s power bill by at least 15% per year for the next 5 years through
The operating cost for a pulverized coal cyclone furnace is expected to be $80,000 per year. The steam produced will be needed for only 6 years beginning now (i.e., years 0 through 5). What is the
How much will Kingston Technologies have to pay each year in eight equal payments, starting 2 years from now, to repay a $900,000 loan? The interest rate is 8% per year.
Improvised explosive devices (IEDs) are responsible for many deaths in times of strife and war. Unmanned ground vehicles (robots) can be used to disarm the IEDs and perform other tasks as well. If
What is the equivalent annual cost in years 1 through 7 of a contract that has a first cost of $70,000 in year 0 and annual costs of $15,000 in years 3 through 7? Use an interest rate of 10% per year.
AutomationDirect, which makes 6-inch TFT color touch screen HMI panels, is examining its cash flow requirements for the next 5 years. The company expects to replace office machines and computer
Determine the equivalent annual worth for years 1 through 10 of a uniform series of payments of $20,000 that begins in year 3 and ends in year 10. Use an interest rate of 10% per year. Also, write
A large water utility is planning to upgrade its SCADA system for controlling well pumps, booster pumps, and disinfection equipment for centralized monitoring and control. Phase I will reduce labor
Centrum Water & Gas provides standby power to pumping stations using diesel-powered generators. An alternative is the use of natural gas to power the generators, but it will be a few years before
Pittsburgh Custom Products (PCP) purchased a new machine for ram cambering large I beams. PCP expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which it expects to bend
Because unintended lane changes by distracted drivers are responsible for 43% of all highway fatalities, Ford Motor Co. and Volvo launched a program to jointly develop a technology to prevent
Industrial Electric Services has a contract with an Embassy in Mexico to provide maintenance for scanners and other devices in the building. What is the present worth of the contract (in year 0) if
A proximity sensor attached to the tip of an endoscope could reduce risks during eye surgery by alerting surgeons to the location of critical retinal tissue. If an eye surgeon expects that by using
A maker of micromechanical systems can reduce product recalls by 10% with the installation of new packaging equipment. If the cost of the new equipment is expected to be $40,000 four years from now,
A commercial real estate developer plans to borrow money to finance an upscale mall in an exclusive area of the city. The developer plans to get a loan that will be repaid with uniform payments of
Aero Serve, Inc. manufactures cleaning nozzles for reverse pulse jet dust collectors. The company spent $40,000 on a production control system that will increase profits by $11,096 per year for 5
Maintenance costs for a regenerative thermal oxidizer increased according to an arithmetic gradient for 5 years. The cost in year 1 was $7000. If the interest rate is 10% per year and the present
The winner of a multistate mega millions lottery jackpot worth $175 million was given the option of taking payments of $7 million per year for 25 years, beginning 1 year from now, or taking $109.355
Chemical costs associated with a packed-bed flue gas incinerator for odor control have been decreasing uniformly for 5 years because of increases in efficiency. If the cost in year 1 was $100,000 and
At i = 8% per year, the annual worth for years 1 through 6 of the cash flows shown is closest to:(a) $302(b) $421(c) $572(d) $824 Years 1 2 4 5 300 400 500 600 700 800 3.
The present worth of an increasing geometric gradient is $23,632. The interest rate is 6% per year and the rate of change series is 4% per year. If the cash flow in year 1 is $3,000, the year in
The Gap has some of its jeans stone-washed under a contract with Vietnam Garment Corporation (VGC). If VGC’s estimated operating cost per machine is $26,000 for year 1 and it increases by $1500 per
The cost of tuition at a large public university was $390 per credit hour 5 years ago. The cost today (exactly 5 years later) is $585. The annual rate of increase is closest to:(a) 5%(b) 7%(c) 9%(d)
An engineer who believes in “save now; play later” wants to retire in 30 years with $2.0 million. At 8% per year interest, the amount the engineer will have to invest each year (starting in year
A chip manufacturing company wants to have $10 million available 5 years from now in order to build new warehouse and shipping facilities. If the company can invest money at 10% per year, the amount
A single deposit of $25,000 was made by your grandparents on the day you were born 25 years ago. The balance in the account today if it grew at 10% per year is closest to:(a) $201,667(b) $241,224(c)
The cost of updating an outdated production process is expected to be $81,000 four years from now. The equivalent present worth of the update at 6% per year interest is closest to:(a) $51,230(b)
The amount of money the Teachers Credit Union should be willing to loan a developer who will repay the loan in a lump sum amount of $840,000 two years from now at the bank’s interest rate of 10%
A manufacturer of prototyping equipment wants to have $3,000,000 available 10 years from now so that a new product line can be initiated. If the company plans to deposit money each year, starting 1
The SEWA (Southwestern Electricity and Water Authority) authorized construction projects totaling $1.07 million to improve desalinization plant efficiency and salinity reduction technology for reject
For the data in Problem 2.60, find the year that your retirement account first exceeds(a) $2 million, and(b) Then $3 million. In setting up the spreadsheet you wish to know the amount that must be
Apple Computer wants to have $2.1 billion available 5 years from now in order to finance initial production of a device that applies IOT technology for home use. The company expects to set aside
You expect to contribute to an investment fund for your retirement over the next 30 years with an annual deposit of a yet-to-be determined amount. Assume your goal is to have $2 million available
A solar-powered personal aircraft with VTOL capability has been under development for the past 30 years by a group of engineers and physicists. SPPAV, as the plane will be termed, is expected to be
You are a well-paid engineer with a well-established international corporation. In planning for your retirement, you are optimistic and expect to make an investment of $10,000 in year 1 and increase
A trusted friend told you that a cash flow sequence that started at $3000 in year 1 and increased by $2000 each year would be worth $15,000 in 12 years at a rate of return of 10% per year. Is she
A company that manufactures ultrasonic wind sensors invested $1.5 million 2 years ago to acquire part-ownership in an innovative chip making company. How long will it take from the date of their
Demco Products, a company that manufactures stainless steel control valves, has a fund for equipment replacement that contains $500,000. The company plans to spend $85,000 each year on new
How many years will it take for a uniform annual deposit of size A to accumulate to 10 times the size of a single deposit at a rate of return of 10% per year?
A systems engineer who invested wisely can retire now because she has $2,000,000 in her self-directed retirement account. Determine how many years she can withdraw(a) $100,000 per year, or(b)
RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has
The business plan for KnowIt, LLC, a start-up company that manufactures portable multi-gas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1
For a 5-year period, determine the compound interest rate per year that is equivalent to a simple interest rate of 15% per year.
Parkhill, Smith, and Cooper, a consulting engineering firm, pays a bonus to each engineer at the end of the year based on the company’s profit for that year. If the company’s initial investment
Assume you were asked to prepare a table of compound interest factor values (like those in the back of this book) used in calculating the present worth of a geometric gradient series. Determine the
A cash flow sequence starts in year 1 at $4000 and decreases by $300 each year through year 9. Determine(a) The value of the gradient G;(b) The amount of cash flow in year 5; and(c) The value of n
Find the numerical value of the following factors using(a) Linear interpolation and(b) The appropriate formula.1. (F∕P,18%,33)2. (A∕G,12%,54)
Find the numerical value of the following factors by(a) Linear interpolation,(b) Using the appropriate formula, and(c) A spreadsheet function.1. (F∕A,19%,20)2. (P∕A,26%,15)
You developed an interest in the LCOE relation and the publicized cost of electricity of 10.27¢/kWh for this year. You wonder if the addition of 60 MW of wind-sourced electricity will make any
A currently-owned asset has B = $150,000, S = $95,000, and a 10-year depreciable life. The book value at the end of year 3 according to the MACRS method would be closest to: dt values for years 1, 2,
An industrial robot that is depreciated by the MACRS method has B = $60,000 and a 5-year depreciable life. If the depreciation charge in year 3 is $8640, the salvage value that was used in the
South African Gold Mines, Inc. is writing off its $210 million investment using the cost depletion method. An estimated 700,000 ounces of gold are available in its developed mines. This year 35,000
A stone and gravel quarry in Texas can use a percentage depletion rate of 5% of gross income, or a cost depletion rate of $1.28 per ton. Quarry first cost = $3.2 million; estimated total tonnage =
A motorized cultivator with a first cost of $28,000 and salvage value of 25% of the first cost is depreciated by the DDB method over a 5-year period. If the operating cost is $43,000 per year, the
Ederly Quarry sells a wide variety of cut limestone for residential and commercial building construction. A recent quarry expansion cost $2.9 million and added an estimated 100,000 tons of
Classic straight line depreciation of a $100,000 asset takes place over a 5 year recovery period. If the salvage value is 15% of first cost, the depreciation charge for year 3 is closest to:(a)
For the last 10 years, Am-Mex Coal has used the cost depletion factor of $2500 per 100 tons to write off the investment of $35 million in its Pennsylvania anthracite coal mine. Depletion thus far
All of the following assets can be depreciated, except:(a) A bulldozer(b) A copper mine(c) A surgical robot(d) A conveyor belt
Carrolton Oil and Gas, an independent oil and gas producer, is approved to use a 20% of gross income depletion allowance. The write-off last year was $700,000 on its horizontal directional drill
The Los Angeles, California, city engineer is analyzing a for-profit public works project at the port authority using an after-tax replacement analysis of the system installed 5 years ago (defender)
Determine(a) The before-tax ROR, and(b) Approximate after-tax ROR for a project that has a first cost of $750,000, a salvage value of 25% of the first cost after 3 years, and annual (GI-OE) of
Vibrations Dynamics uses vibrations sensitive equipment based on lithography to measure vibrations in building foundations caused by subway, rail, and automobile traffic in major cities of the world.
Equipment associated with manufacturing small railcars had a first cost of $180,000 with an expected salvage value of $30,000 at the end of its 5-year life. The revenue was $620,000 in year 2, with
Estimate the gross income for Lopez Enterprises when it had a CFAT of $2.5 million, $900,000 in expenses, $900,000 in depreciation charges, and an effective tax rate of 26.4%.
If PSK Engineering had a CFAT of $750,000, charged depreciation of $400,000, and had a Te of 36%, what was PSK’s CFBT?
Estimate the CFAT for a company that has taxable income of $120,000, depreciation of $133,350, and an effective tax rate of 35%.
Helical Products makes machined springs with elastic redundant elements so that a broken spring will continue to function. The company had GI of $450,000 with OE of $230,000 and depreciation of
The last annual report of Harrison Engineering’s 3-D Imaging Division showed GI = $4.9 million, OE = $2.1 million, and D = $1.4 million. If the average federal tax rate is 31% and state/local tax
Borsberry Medical has a gross income of $6.5 million for the year. Depreciation and operating expenses total $4.1 million. The combined state and local tax rate is 7.6%.(a) Use an effective federal
Aquatech Microsystems reported a TI of $80,000 last year. If the state income tax rate is 6%, determine the(a) average federal tax rate,(b) overall effective tax rate,(c) Total taxes to be paid based
Knorr & Associates paid total taxes of $72,000 in the first year of their consulting business.(a) What was the company’s taxable income?(b) What was the average tax rate?(c) What was the
Determine the single-value effective tax rate for a corporation that has a federal tax rate of 35% and state tax rate of 7%.
Determine the taxable income for a company that had gross income of $36.7 million, earnings before interest and income taxes of $21.4 million, and depreciation of $9.5 million.
For a company that had net operating income of $51.3 million and operating expenses of $23.6 million, what was the(a) Gross income, and(b) Earnings before interest and income taxes?
For the events described below, select the taxrelated term from the following list that best applies: gross income, depreciation, operating expense, taxable income, income tax, or net operating
State what the following abbreviations stand for:NOI, GI, Te, NOPAT, TI, R, OE, EBIT.
For a corporation that has a taxable income of $250,000, determine(a) The marginal tax rate,(b) The total taxes, and(c) The average tax rate.
Thomas completed a study of a $1 million 3-yearold DNA analysis and modeling system that DynaScope Enterprises wants to keep for 1 more year or dispose of now. His table (in $1000 units) details the
Guess which depreciation method will have the lower 10%-per-year PW of taxes between the following methods over a 6-year study period: P = $100, S = 0, and GI-OE = $50, and Te = 30%.Verify your
In what alternative evaluation is it considered important that an anticipated capital loss (CL) on an in-place asset should be included in an after-tax analysis? Why?
An in-place machine with B = $120,000 was depreciated by MACRS over a 3-year period. The machine was sold for $60,000 at the end of year 2 when the company decided to import the item that required
A touch-sensitive assembly robot that costs $300,000 had a depreciable life of 5 years with an expected $50,000 salvage value when purchased 3 years ago. Using MACRS depreciation, determine any DR,
A nanotube forming asset was purchased 3 years ago for $240,000. It was just sold for $285,000. The asset was depreciated by the MACRS method with n = 5 years and has a current book value of $69,120.
A couple of years ago, the company Health4All purchased land, a building, and two depreciable assets from another corporation. These have all recently been disposed of. Use the information shown to
An engineer who made an annual return of 8% after taxes on a stock investment was told by his accountant that this is equivalent to a 12% per year before-tax return. What percentage of taxable income
A division of Midland Oil & Gas has a TI of $8.95 million for a tax year. If the state tax rate averages 5% for all states in which the corporation operates, find the equivalent after-tax ROR
When JJ and Sons was awarded a contract to pour a skyscraper€™s foundation, the father had to choose between two pieces of equipment needed to supplement pumping of concrete into foundation

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