Faculty of Engineering

Chemical Engineering Department

Engineering Economics- [ENGG04I02]

Assignment [1]

1- In which of the following situations would engineering economics

analysis play a strong role, and why?
a. Buying a new equipment
b. Changing design specifications for a product
c. Deciding on the paint color for the factory floor
d. Deciding which invoice forms to use

2- Telecom Company is considering the development of a new type of cell

phone based on a brand new, emerging technology. If successful, Telecom
will be able to offer a cell phone that works over long distances and even in
mountains areas. Before proceeding with the project, however, what
uncertainties associated with the new technology should they be aware of?
Can sensitivity analysis help address these uncertainties?

3- Use a spreadsheet to determine how long it will take for a £100 deposit
to double in value for each of the following interest rates and compounding
periods. For each, plot the size of the deposit over time, for as many periods as
necessary for the original sum to double.
a. 8% per year, compounded monthly
b. 11 % per year, compounded semiannually
c. 12% per year, compounded continuously

4- Clifford has X Euros right now. In 5 years, X will be £3500 if it is

invested at 7.5%, compounded annually. Determine the present value of X. If
Clifford invested X Euros at 7.5%, compounded daily, how much would the
value of X be in 10 years?

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 Faculty of Engineering
Chemical Engineering Department

5- Rinku has just finished her first year of university. She wants to tour
Europe when she graduates in three years. By having a part-time job through
the school year and a summer job during die summer, she plans to make
regular weekly deposits into a savings account, which bears 18% interest,
compounded monthly.
a. If Rinku deposits £15 per week, how much will she save in three
years? How about £20 per week?
b. Find out exactly how much Rinku needs to deposit every week if
she wants to save £5000 in three years.

6- Ruby's business has been growing quickly over the past few years, with
sales increasing at about 50% per year. She has been approached by a buyer
for the business. She has decided she will sell it for 1/2 of the value of the
estimated sales for the next five years. This year she will sell products worth
£1,456,988. Use the geometric gradient factor to calculate her selling price for
an interest rate of 5%.

7- A UK lottery prize pays £1000 at the end of the first year, £2000 the
second, £3000 the third, and so on for 20 years. If there is only one prize in
the lottery, 10 000 tickets are sold, and you could invest your money
elsewhere at 15% interest, how much is each ticket worth, on average?

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