Engineering Economy Assignment 2

255330
Chapter 3 Combining Factors
Due Date:
3.3 Amalgamated Iron and Steel purchased a new machine for ram cambering
large I – beams. The company expects to bend 80 beams at $2000 per beam
in each of the first 3 years, after which the company expects to bend 100
beams per year at $2500 per beam through year 8. If the company’s minimum
attractive rate of return is 18% per year, what is the present worth of the
expected income? (P = $823,691)
3.9 A metallurgical engineer decides to set aside money for his newborn daughter’s
college education. He estimates that her needs will be $20,000 on her 17th,
18th, 19th, and 20th birthdays. If he plans to make uniform deposits starting 3
years from now and continue through year 16, what should be the size of
each deposit, if the account earns interest at a rate of 8% per year?
(A = $2735.79)
3.22 Use the cash flow diagram below to calculate the amount of money in year 5
that is equivalent to all the cash flows shown, if the interest rate is 12% per
year. (Amt, year 5 = $14,145)

3.27 Find the value of x below such that the positive cash flows will be exactly
equivalent to the negative cash flows, if the interest rate is 14% per year.
(x = $6124.64)

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3.35 Exxon – Mobil is planning to sell a number of producing oil wells. The wells are
expected to produce 100,000 barrels of oil per year for 8 more years at a
selling price of $28 per barrel for the next 2 years, increasing by $1 per barrel
through year 8. How much should an independent refiner be willing to pay for
the wells now, if the interest rate is 12% per year? (P = $14,949,887)
3.46 A – 1 Box Company is planning to lease a computer system that will cost (with
service) $15,000 in year 1, $16,500 in year 2, and amounts increasing by 10%
each year thereafter. Assume the lease payments must be made at the
beginning of the year and that a 5- year lease is planned. What is the present
worth (year 0) if the company uses a minimum attractive rate of return of 16%
per year? (P = $67,632)
3.48 Find the present worth (at time 0) of the chrome plating costs in the cash flow
diagram. Assume i = 12% per year. (P = $7209.17)