Questions and Answers of Fundamentals Engineering Economics

Compare Google and Baidu, a Chinese search engine, using a thorough financial ratios analysis.Part A: For each company, compute all the ratios listed in Figure 13.7 for the current year (or the most
Consider the Coca‐Cola Company and Pepsi‐Cola Company. Both companies compete with each other in the soft‐drink sector. Get the most recent annual report for each company, and answer the
Reconsider Problem 10.23. Suppose that the purchase also requires an investment in working capital in the amount of $50,000, which will be recovered in full at the end of year 5. Determine the net
Reconsider Problem 10.17. Suppose that the project requires a $30,000 investment in working capital at the beginning of the project and the entire amount will be recovered at the end of project life.
Reconsider the chapter opening story about the return on investment on college education. According to a recent study, attending a university full-time costs the average student more than $17,000 a
Ms. Kennedy borrowed $4,909 from a bank to finance a car at an add‐on interest rate4 of 6.105%. The bank calculated the monthly payments as follows:• Contract amount = $4,909 and contract period
Kevin Moore received his monthly credit card statement from his bank. His current outstanding balance is $3,168.97. The minimum monthly payment due is 1% of the outstanding balance or $20, whichever
Consider the following two mutually exclusive service projects with project lives of three years and two years, respectively. (The mutually exclusive service projects will have identical revenues for
To decrease the costs of operating a lock in a large river, a new system of operation is proposed. The system will cost $650,000 to design and build. It is estimated that it will have to be reworked
Consider the following two mutually exclusive investment projects:Which project would you select if you used the infinite planning horizon with project repeat ability likely (same costs and benefits)
You are considering buying a new car worth $15,000. You can finance the car either by withdrawing cash from your savings account, which earns 8% interest compounded monthly, or by borrowing $15,000
In 2011, Kevin Jones, Texas Tigers quarterback, agreed to an eight‐year, $50 million contract that at the time made him the highest‐paid player in professional football history. The contract
Consider the following project-balance profiles for proposed investment projects:Now consider the following statements:Statement 1: For Project A, the cash flow at the end of year 2 is $100.Statement
Consider an investment project for which the cash flow pattern repeats itself every four years indefinitely, as shown in the accompanying figure. At an interest rate of 12% compounded annually,
At i = 15%, what is the annual-equivalence amount for the infinite series shown next? $5,000 $3,000 3 4 5 8 9 10 11 12 13 Years
A company is currently paying its employees $0.51 per mile to drive their own cars when on company business. However, it is considering supplying employees with cars, which would involve the
A large food-processing corporation is considering using laser technology to speed up and eliminate waste in the potato-peeling process. To implement the system, the company anticipates needing $3
Consider the following cash flows and present-worth profiles on Page 218:(a) Determine the values for X and Y.(b) Calculate the terminal project balance of Project 1 at MARR = 24%.(c) Find the values
Consider the following project balances for a typical investment project with a service life of five years:(a) Fill in the blanks by constructing the original cash flows of the project and
Consider the following sets of investment projects:(a) Compute the future worth at the end of life for each project at i = 15%.(b) Determine the area of negative project balance for
Consider the following set of independent investment projects:(a) For a MARR of 10%, compute the net present worth for each project, and determine the acceptability of each project.(b) For a MARR of
Maintenance money for a new building at a college is being solicited from potential alumni donors. You would like to make a donation to cover all future expected maintenance costs for the building.
A group of concerned citizens has established a trust fund that pays 6% interest compounded monthly to preserve a historical building by providing annual maintenance funds of $25,000 forever. Compute
A newly constructed bridge costs $10,000,000. The same bridge is estimated to need renovation every 10 years at a cost of $1,000,000. Annual repairs and maintenance are estimated to be $100,000 per
Consider a retired gentleman who starts to collect his Social Security benefits at the age of 66. The monthly check would be close to $2,460. Assuming that his interest rate is 6% compounded monthly,
Consider the following two mutually exclusive projects:(a) At an interest rate of 25%, which project would you recommend choosing?(b) Compute the area of negative project balance, discounted payback
Consider the following cash flow data for two competing investment projects:(a) At i = 12%, which of the two projects would be a better choice?(b) At i = 22%, which project is chosen
Consider the following two mutually exclusive investment projects: Assume that the MARR = 12%.(a) Which alternative would you select by using the NPW criterion?(b) Which alternative would you
Consider the following two mutually exclusive investment projects:Assume that the MARR = 15%.(a) Using the NPW criterion, which project would you select?(b) On the same chart, sketch the
Consider the following two mutually exclusive projects:What value of X would make the decision maker indifferent between A and B at an interest rate of 12%? A B п -$12,000 -$10,000 $X $4,000 $6,000
Consider the following two mutually exclusive investment projects that have unequal service lives:(a) What assumption(s) do you need in order to compare a set of mutually exclusive investments with
Consider the following two mutually exclusive investment projects:Salvage values represent the net proceeds (after tax) from the disposal of assets if they are sold at the end of the year listed.
Two methods of carrying away surface runoff water from a new subdivision are being evaluated:Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 of re-digging and shaping would be
An electric motor is rated at 10 horsepower (HP) and costs $800. Its full-load efficiency is specified to be 85%. A newly designed, high-efficiency motor of the same size has an efficiency of 90%,
Consider the following cash flows for two types of models:Both models will have no salvage value upon their disposal (at the end of their respective service lives). The firm€™s MARR is
An electric utility company is taking bids on the purchase, installation, and operation of microwave towers:Which is the most economical bid if the interest rate is 11%? Both towers will have no
H-Robotic Incorporated (HRI), a world leader in the robotics industry, produces a line of industrial robots and peripheral equipment that performs many routine assembly-line tasks. However, increased
An engineering design firm needs to borrow $300,000 from a local bank at an interest rate of 9% over five years. What is the required annual equal payment to retire the loan in five years?
You are considering an investment costing $250,000. If you want to recover the initial investment, and also earn 12% interest while your money is being tied up within three years, what is the
The investment shown in the following figure has an annual equivalent worth of $200 at i = 8%. Determine the cash flows in periods 2, 3, 5 and 6. $400 $400 3 4 5 6. Years $2,145
Santa Fe Company, a farm-equipment manufacturer, currently produces 20,000 units of gas filters for use in its lawnmower production annually. The following costs are reported according to the
You are considering a luxury apartment building project that requires an investment of $12,500,000. The building has 50 units. You expect that the maintenance cost for the apartment building will be
A machine costing $25,000 to buy and $3,000 per year to operate will save mainly labor expenses in packaging over six years. The anticipated salvage value of the machine at the end of six years is
The Manufacturing Division of Ohio Vending Machine Company is considering its Toledo plant€™s request for a half€inch€capacity automatic screw€cutting
Rivera Industries, a manufacturer of home-heating appliances, is considering the purchase of a used Amada turret punch press to replace its less advanced present system, which uses four old, small
Consider the cash flows for the following investment projects:(a) For Project A , find the value of X that makes the equivalent annual receipts equal the equivalent annual disbursement at i = 13%.(b)
A city has decided to build a softball complex, and the city council has already voted to fund the project at the level of $800,000 (initial capital investment). The city engineer has collected the
J&M Company is a real-estate developer considering a 40-unit apartment complex in a growing college town. As the area is also booming with foreign automakers locating their U.S. assembly plants,
The estimated cost of a completely installed and ready-to-operate 40-kilowatt generator is $30,000. Its annual maintenance costs are estimated at $500. The energy that can be produced annually, at
A large state university, currently facing a severe parking shortage on its campus, is considering constructing parking decks off campus. A shuttle service composed of minibuses could pick up
Two 180-horsepower water pumps are being considered for installation in a farm. Financial data for these pumps are as follows:If power cost is a flat 6 cents per kWh over the study period, determine
Eradicator Food Prep, Inc., has invested $7 million to construct a food irradiation plant, which would destroy organisms that cause spoilage and disease, thus extending the shelf life of fresh foods
You are considering developing an 18-hole championship golf course that requires an investment of $20,000,000. This investment cost includes the course development, club house, and golf carts. Once
An industrial firm can purchase a certain machine for $40,000. A down payment of $4,000 is required, and the balance can be paid in five equal year-end installments at 7% interest on the unpaid
Two 150-horsepower (HP) motors are being considered for installation at a municipal sewage-treatment plant. The first costs $4,500 and has an operating efficiency of 83%. The second costs $3,600 and
Suppose you deposited $1,000 five years ago and another $1,000 three years ago in your savings account. If your current account balance shows $2,529.24, what is the rate of return on your deposit?
Consider the following sets of investment projects:Compute the equivalent annual worth of each project at i = 13%, and determine the acceptability of each project. Project Cash Flows Period D п
Compute the annual-equivalence amount for the following cash flow series at i = 10%: $1,600 $1,600 $800 $800 $800 4 5 $500 $500 $1,000 3.
Beginning next year, a foundation will support an annual seminar on campus by using the interest earnings on a $100,000 gift it received this year. It is determined that 6% interest will be realized
A machine tool company is considering a new investment in a punch press machine that will cost $100,000 and has an annual maintenance cost of $10,000. There is also an additional overhauling cost of
The owner of a business is considering investing $55,000 in new equipment. He estimates that the net cash flows will be $5,000 during the first year and will increase by $2,500 per year each year
An industrial firm is considering purchasing several programmable controllers and automating their manufacturing operations. It is estimated that the equipment will initially cost $150,000, and the
A certain factory building has an old lighting system. To light this building costs, on average, $30,000 a year. A lighting consultant tells the factory supervisor that the lighting bill could be
Consider a piece of industrial equipment that has an installed cost of $100,000. The equipment is expected to generate $30,000 worth of annual energy savings during its first year of installation.
You have purchased an equipment costing $20,000. The equipment will be used for two years, and at the end of two years, its salvage value is expected to be $10,000. The equipment will be used 6,000
You just purchased a pin-inserting machine to relieve some bottleneck problems that have been created in manufacturing a PC board. The machine cost $56,000 and has an estimated service life of five
Georgia Mills Company (GMC) purchased a milling machine, which it intends to use for the next five years, for $180,000. This machine is expected to save GMC $35,000 during the first operating year.
You invest in a piece of equipment costing $30,000. The equipment will be used for two years, at the end of which time the salvage value of the machine is expected to be $10,000. The machine will be
Consider an investment project with the following repeating cash flow pattern every four years forever:What is the annual-equivalence amount of this project at an interest rate of 14%? $100 $100 $100
A newly constructed water treatment facility cost $2 million. It is estimated that the facility will need revamping to maintain the original design specification every 30 years at a cost of $1
An airline is planning to make iPads® available on some of its Boeing 747 air crafts with in-flight e-mail and Internet service on transoceanic flights. Passengers on these flights will be able to
A drill press was purchased for $250,000. It was expected to last 10 years and to have a salvage value of $25,000. If the firm’s interest rate is 20%, what would be the capital cost for each year
You purchased a CNC machine for $44,000. It is expected to have a useful life of 10 years and a salvage value of $3,000. At i = 15%, what is the annual capital cost of this machine?
Susan is considering buying a 2011 Smart ForTwo costing $21,635 and finds that the retaining values of the vehicle over next five years are as follows:Percent of the total value retained after 36
Nelson Electronics, Inc., just purchased a soldering machine to be used in its assembly cell for flexible disk drives. This machine costs $248,000. Because of the specialized function it performs,
You invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it will be worth $15,000 at the end of two years. The machine will be used for 4,000 hours during the
You are considering purchasing a dump truck. The truck will cost $45,000 and have operating and maintenance costs that start at $15,000 the first year and increase by $2,000 per year thereafter.
An auto-parts manufacturer is considering establishing an engineering computing center. This center will be equipped with three engineering workstations each of which would cost $25,000 and have a
You are considering the purchase of a parking deck close to your office building. The parking deck is a 15-year old structure with an estimated remaining service life of 25 years. The tenants have
A project has a service life of five years with the initial investment outlay of $200,000. If the discounted payback period occurs at the end of the project service life (say five years) at an
Consider the following project balances for a typical investment project with a service life of four years:(a) Construct the original cash flows of the project.(b) Determine the interest rate used in
Consider the following information for a typical investment project with a service life of five years:What interest rate is used in the project-balance calculation? Cash Flow Project Balance п
Consider the following sets of investment projects, each of which has a three year investment life:Compute the net future worth of each project at i = 16%. Project Cash Flows Period A B D п -$2,500
A university is trying to determine how much it should charge for tickets to basketball games to help offset the expenses of the new arena. The cost to build thearena including labor, materials, etc.
You are in the mail-order business, selling computer peripherals, including high-speed Internet cables, various storage devices such as memory sticks, and wireless networking devices. You are
Consider the following investment project:Suppose, as shown in the preceding table, that the company€™s reinvestment opportunities (that is, its MARR) change over the life of the project.
Consider Gizmo, a small manufacturing company whose management wishes to reduce overhead by installing a new, energy‐efficient heating system. The new system costs $100,000. Due to the company’s
In computing the equivalent present worth of the cash flow series at period 0, which of the following expressions is incorrect ?(a) P = $100(P/A, i, 4)(P/F, i, 4).(b) P = $100(F/A, i, 4)(P/F, i,
Peabody Transport Service is considering the purchase of a helicopter for connecting services between its base airport and the new inter county airport being built about 30 miles away. It is believed
You are asked to decide between two projects based on annual equivalent worth. A
You are considering two types of electric motors for your paint shop. Financial information and operating characteristics are summarized as follows: If you plan to operate the motor for 2,000
The following cash flows represent the potential annual savings associated with two different types of production processes, each of which requires an investment of $22,000:Assuming that the interest
A chemical company is considering two types of incinerators to burn solid waste generated by a chemical operation. Both incinerators have a burning capacity of 20 tons per day. The following data
An airline is considering two types of engine systems for use in its planes:System A costs $100,000 and uses 40,000 gallons of fuel per 1,000 hours of operation at the average load encountered in
Norton Auto Parts, Inc., is considering two different forklift trucks for use in its assembly plant:Truck A costs $15,000 and requires $3,000 in annual operating expenses. It will have a $5,000
The city of Peachtree is comparing the following two plans for supplying water to a newly developed subdivision:Plan A will manage requirements for the next 15 years; at the end of that period, the
Capstone Turbine Corporation is the world’s leading provider of micro turbine based Micro CHP (combined heat and power) systems for clean, continuous, distributed-generation electricity. The Micro
Empex Corporation currently produces both videocassette cases (bodies) and metal-particle magnetic tape for commercial use. An increased demand for metal particle videotapes is projected, and Empex
A Veterans Administration (VA) hospital needs to decide which type of boiler fuel system will most efficiently provide the required steam energy output for heating, laundry, and sterilization
You purchased a piece of property at $360,000 five years ago. You can sell the property at $450,000. What is the rate of return on this real estate investment?

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