Assignment #1 (SKKC 3343/SKKK 4173) CO1

Direction: Answer all Questions. Please show a cash flow diagram in your solutions and box
your final answer.

1. Look up the numerical value for the following factors from the interest tables:

a) (A/F, 2%, 30)

b) (P/G, 35%, 15)

c) (A/G, 15%, 20)

d) (A/P, 10%, 10)

e) (P/F, 6%,8)

2. Creatifusion LLC is a company that provides world class autoresponder service. How much
can the company afford to spend now on a new mail delivery server system if it will save the
company $22,300 per year for the next 6 years? Use the interest rate of 9% per year.

3. Sendtracknow Inc. purchases a new office building for 1.3 million for expanding its
intelligent environmental haze detection gadget. What must the building be worth in 10
years? The company expects all expenditures to earn a rate of return of at least 18% per year.

4. MJ Corp produces and sells new model of photovaltaic (PV). Annual cash flows are shown in
table below. Determine the future worth of the net cash flows at an interest of 10% per year.

Year 1 2 3 4 5 6 7 8

Income,
200 200 200 200 200 200 200 200
$1000

Cost,
90 90 90 90 90 90 90 90
$1000

5. Find the numerical value of the following factors by using (a) interpolation, and (b) formula
i. (F/P,14%,60)

ii. (A/F,1%,45)

Copyright 2015 Engineering Economics and Project Management SKKK4173

6. Profit from production of biodiesel using palm fatty acid distillate have an increased at a
constant rate of $1100 in each of the last 4 years. If this year's profit (end of year 1) is
expected to be $6000 and the profit trend continues through year 5, (a) what will the profit be
at the end of year 5 and (b) what is the present worth of the profit at an interest rate of 8% per
year.

7. Sam wants to be a millionaire before he reaches the age of 45. He drafted a master plan. If the
value of Sam's investment portfolio increased from $170,000 to $813,000 over a 15 year
period, with no deposits made to the account over that period, what annual rate of return did
Sam make?

8. Obara owns a small engineering consulting company. If he invest $200,000 of the company's
money in a project that is expected to provide income of $29,000 per year, how long must the
project be going on at that rate in order to get the money back plus a rate return of 10% per
year.

9. Innocom LTD, a small manufacturer of quartz products, borrowed $2 million to renovate one
of its testing lab. In an effort to pay off the loan quickly, the company made four payments in
years 1 through 4, with each payment being twice as large as the preceding one. At an interest
rate of 10% per year, what was the size of the first payment?

10. You just graduated and plan to start an annuity plan by making your first deposit now. If you
make annual deposits of a uniform amount A into the account that earns interest at a rate of
7% per year, how many years from now will it be until the value of the account is equal to 10
times the value of the single deposit?

Due date: 15/2/2019

Copyright 2015 Engineering Economics and Project Management SKKK4173