Economy Sol Week02

June 2016
Engineering Economy
Week 2
)Equal-Payments Series (A
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)P( ( )A .

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June 2016
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June 2016
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() ()HS Engineers
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June 2016
Recommended
If $50,000 must be accumulated in 10 years at 12% compounded annually,

?what should be the value of the annual equal payments to be invested
10
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() ()HS Engineers
()4
June 2016
Recommended
What series of equal payments is necessary to repay a $5,000 loan in

?5 years at 15% compounded annually with annual payments
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(
(

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() ()HS Engineers
()5
Recommended
June 2016
A young couple have decided to make advance plans for financing

their 3-year-old sons college education. Money can be deposited
at 7% compounded annually. What annual deposit on each birthday
from the 4th to the 17th inclusive must be made to provide $16,000
on each birthday from the 18th to the 21st inclusive?
40
$16,000
44
42
43
41
45
46
47 41 41
20
24
( ) 41(
:)
14
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:)
0.07
( ( )
( ) 1( ) ( )
22.55 A $16,000
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)HS Engineers( ()
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info@eng-hs.com 94444260 .
June 2016
Recommended
Use the cash flow diagram to determine the single amount of

in year 4 that is equivalent to all of the cash flows
per year.
money
shown. Use
( ) ( ) .
7
0.10
$25
)
6
0.10
$121.7
0.10
$50
0.1
:
(
])

.
() ()HS Engineers
()7
June 2016
?What is present value of the following series of receipts

(a) $1,500 a year for 15 years at 15% compounded annually.
(b) $1,200 a year for 42 years at 14.5% compounded annually.
)a
15
:
)
)
(
(
)b
42
:
)
)
(
(
:
( )interpolation .
.
() ()HS Engineers
()8
June 2016
Find the numerical value of the following factors by (a) interpolation

and (b) using the appropriate formula.
)1. (F/A, 19%, 20
)2. (P/A, 26%, 15
( ) = 19% () = 18%
( ) = 20% ( (interpolation (.) = 19%
( )19% (
) (
)1.b
(.)interpolation
20
0.19

(.) = 19%

.
() ()HS Engineers
()9
June 2016
Atlantic Metals and Plastic uses austenitic nickel-chromium

alloys to manufacture resistance heating wire. The company is
considering a new annealing-drawing process to reduce costs.
If the new process will cost $1.8 million now, how much must
be saved each year to recover the investment in 6 years at an
interest rate of 12% per year?
:
(
)
(

.
)HS Engineers( ()
)11(
June 2016
A green algae, Chlamydomonas rein-hardtii, can produce

hydrogen when temporarily deprived of sulfur for up to 2 days
at a time. A small company needs to purchase equipment
costing $3.4 million to commercialize the process. If the
company wants to earn a rate of return of 20% per year and
recover its investments in 8 years, what must be the net value
of the hydrogen produced each year?
deprive
sulfur
:
(
)
(

.
)HS Engineers( ()
)11(
Recommended
June 2016
?What series of equal payment is necessary to repay the following present worth
a. $10,000 in 5 years at 10% compounded annually with annual payments.
b. $50,000 in 8 years at 9.5% compounded annually with annual payments.
)a
4
:
(
)b
8
:
)
:
(
(.)interpolation
.
() ()HS Engineers
()12
June 2016
A person wishes to provide withdrawals from his bank of $2,000 each

year for ten years with interest rate of 10% compounded annually.
?a. How much should he invest today
?b. What is the future value of these withdrawals
10
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]
[
[
)b
* ( )P ( )F

.
() ()HS Engineers
()13
June 2016
To improve crack detection in aircraft, the U.S. Air Force

combined ultrasonic inspection procedures with laser
heating to identify fatigue cracks. Early detection of
cracks may reduce repair costs by as much as $200,000
per year. What is the present worth of these savings over
a 5-year period at an interest rate of 10% per year?
. )Savings(
P=?
)
(

.
)HS Engineers( ()
)14(
June 2016
Recommended
Standby power for water utility pumps and other electrical devices
is provided by diesel-powered generators. As an alternative, the
utility can use natural gas to power the generators, but it will be a
few years before the gas is available at remote sites. The utility
estimates that by switching to gas, it will save $22,0000 per year,
starting 3 years from now. At an interest rate of 8% per year,
determine the present worth in year 0 of the projected savings that
will occur in years 3 through 10.
10
P=?

.)
0.08
$22,000
( ( )
8
.) ( )
( )
( ( )
$126,426

.

)HS Engineers( ()
)15(
Recommended
June 2016
The cash flow associated with making self-locking fasteners is

shown below. Determine the net present worth (year 0) at an
interest rate of 10% per year.
( ) ( )Income ( ) ( )Cost (
( )Cash flow ( ) (.)Netcash
$12,000
$5,000
9
( )1 : (
) ( )$12,000
( )$12,000 ( )$18,000
(
) (.)$5,000
0.10 3
$12,000
)
5
0.10
$18,000
)
(
) (
) (
(
) (
).
$68,234

.
() ()HS Engineers
()16
June 2016
Calculate the equivalent annual cost in years 1 through 9 of the

following series of disbursements.
Use an interest rate of 10% per year.
$4,000
$5,000
$8,000
) :
5
0.10
(
0.1 4
])
$4,000
$5,000
( [
) .
9
0.1
$33,004
() ()HS Engineers
()17
June 2016
Recommended
For the cash flows shown in the diagram, determine the value of
.
that will make the future worth in year 8 equal to

( ) :
0.10
)
5
0.10
)
8
) (
) (
0.10
$3.791
) ( ).

.
() ()HS Engineers
()18
June 2016
Calculate the net annual worth in years 1 through 10 of

the following series of incomes and expenses, if the
interest rate is 10% per year.
10
( )Net
$2,500

( ).
0.10
$500
)
6
$1,700
])
(
0.1
) .
10
0.1
$4,142
() ()HS Engineers
()19
June 2016
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(
(

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() ()HS Engineers
()21

Economy Sol Week02

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Economy Sol Week02

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June 2016

If $50,000 must be accumulated in 10 years at 12% compounded annually,

What series of equal payments is necessary to repay a $5,000 loan in

A young couple have decided to make advance plans for financing

Use the cash flow diagram to determine the single amount of

?What is present value of the following series of receipts

Find the numerical value of the following factors by (a) interpolation

)2. (P/A, 26%, 15

Atlantic Metals and Plastic uses austenitic nickel-chromium

A green algae, Chlamydomonas rein-hardtii, can produce

A person wishes to provide withdrawals from his bank of $2,000 each

To improve crack detection in aircraft, the U.S. Air Force

The cash flow associated with making self-locking fasteners is

( )Cash flow ( ) (.)Netcash

Calculate the equivalent annual cost in years 1 through 9 of the

Use an interest rate of 10% per year.

that will make the future worth in year 8 equal to

Calculate the net annual worth in years 1 through 10 of

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