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Assignment 1

The document contains engineering economy problems involving calculations of present worth, future worth, equivalent uniform annual worth, and compound interest over multiple time periods at given interest rates. Specifically: - Problem 2.12 calculates the present worth of planned expenditures of $9000 in 2 years, $8000 in 3 years, and $5000 in 5 years at an interest rate of 10%. - Problem 2.24 calculates the total future worth over 5 years of savings passed along from an ISP to its customers at an interest rate of 8%. - Problem 2.31 involves calculating the cash flow in year 3 and equivalent uniform annual worth from year 1 to 5 of declining oil well receipts at an interest rate of 12%.

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Jabnon Nonjab
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638 views

Assignment 1

The document contains engineering economy problems involving calculations of present worth, future worth, equivalent uniform annual worth, and compound interest over multiple time periods at given interest rates. Specifically: - Problem 2.12 calculates the present worth of planned expenditures of $9000 in 2 years, $8000 in 3 years, and $5000 in 5 years at an interest rate of 10%. - Problem 2.24 calculates the total future worth over 5 years of savings passed along from an ISP to its customers at an interest rate of 8%. - Problem 2.31 involves calculating the cash flow in year 3 and equivalent uniform annual worth from year 1 to 5 of declining oil well receipts at an interest rate of 12%.

Uploaded by

Jabnon Nonjab
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
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Engineering Economy 255330

Assignment 1

Chapter 2 Factor: How Time and Interest Affect Money Due Date: 2.12 V-Tek Systems is a manufacturer of vertical compactors, and it is examining its cash flow requirements for the next 5 years. The company expects to replace office machines and computer equipment at various times over the 5-year planning period. Specifically, the company expects to spend $9000 two years from now, $8000 three years from now, and $5000 five years from now. What is the present worth of the planned expenditures at an interest rate of 10% per year? (P = $16,553) 2.20 Under an agreement with the Internet Service Providers (ISPs) Association, SBC Communications reduced the price it charges ISPs to resell its highspeed digital subscriber line (DSL) service from $458 to $360 per year per customer line. A particular ISP, which has 20,000 customers, plans to pass 90% of the savings along to its customers. What is the total future worth of these savings over a 5-year horizon at an interest rate of 8% per year? ( F = $10,348,682) 2.24 Vision Technologies, Inc., is a small company that uses ultra-wideband technology to develop devices that can detect objects (including people) inside buildings, behind walls, or below ground. The company expects to spend $100,000 per year for labor and $125,000 per year for supplies before a product can be marketed. At an interest rate of 15% per year, what is the total equivalent future amount of the companys expenses at end of 3 years? ( F = $781,313) 2.31 Chevron-Texaco expects receipts from a group of stripper wells (wells that produce less than 10 barrels per day) to decline according to an arithmetic gradient of $50,000 per year. This years receipts are expected to be $280,000 (i.e., end of year 1), and the company expects the useful life of the wells to be 5 years. (a) What is the amount of the cash flow in year 3 ($180,000), and (b) what is the equivalent uniform annual worth in year 1 through 5 of the income form the wells at an interest rate of 12% per year ($191,270)?

2.33

2.38

2.45

2.48

Amazon is considering purchasing a sophisticated computer system to cube a books dimensions measure its height, length, and width so that the proper box size will be used for shipment. This will save packing material, cardboard, and labor. If the savings will be $150,000 the first year, $160,000 the second year, and amounts increasing by $10,000 each year for 8 years, what is the present worth of the system at an interest rate of 15% per year? (P = $797,902) A start up direct marketer of car parts expects to spend $1 million the first year for advertising, with amounts decreasing by $100,000 each year. Income is expected to be $4 million the first year, increasing by $500,000 each year. Determine the equivalent annual worth in years 1 through 5 of the companys net cash flow at an interest rate of 16% per year. (A = $4,023,600) Thomasville Furniture Industries offers several types of thigh performance fabrics that are capable of withstanding chemicals as harsh as chlorine. A certain midwestern manufacturing company that uses fabric in several products has a report showing that the present worth of fabric purchases over a certain 5 year period was $900,000. If the costs were known to geometrically increase by 5% per year during that time and the company used an interest rate of 15% per year for investments, what was the cost of the fabric in year 2? (Cost in year 2 = $258,576) A company that manufactures purgable hydrogen sulfide monitors is planning to make deposits such that each one is 5% larger than the preceding one. How large must the first deposit be (at the end of year 1) if the deposits extend through year 10 and the fourth deposit is $1250? Use an interest rate of 10% per year. (First deposit = $1079.80)

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