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Home Assignment # 1 Due: 02 September 2024: Fall 2024-25

Hw1 economy

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layan
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20 views

Home Assignment # 1 Due: 02 September 2024: Fall 2024-25

Hw1 economy

Uploaded by

layan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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College of Engineering

Fall 2024–25
COE202 Engineering Ethics, Economy and Law
Home Assignment # 1 Due: 02 September 2024
(Ch1 - Foundations of Engineering Economy – Simple and Compound interest)
CLO#3 Formulate and solve cash flow, inflation and depreciation problems in engineering projects
[4].
Student ID#______
1092694 Student Name:_______________
Lyan hegazy
Section: 22 / 66 AD
Instructions:
 All assignments should be submitted on Plain A4 Engineering paper neatly worked out with page
numbers at the bottom of the page.
 Show detailed calculations and formulae used (if any).
 Mention your section #, ID # and name on the assignment cover page.
 Students are reminded to strictly adhere to the University’s Academic Integrity Policy. Plagiarism
in any form will not be tolerated.
Note - Students are expected to show all their detailed work/ hand calculations/ equations/
formulae etc.

Interest rate / rate of return, cash flow and economic equivalence


Q1. The manager has decided to purchase a new $30,000 mixing machine. The machine may be paid
for in one of two ways:
a) Pay the full price now minus a 3% discount.
b) Pay $5000 now; at the end of one year, pay $8000; at the end of each of the next four years, pay
$6000.
Draw the cash flow diagram.

Q2. RKI Instruments borrowed $8,500,000 from a private equity firm for expansion of its
manufacturing facility for making carbon monoxide monitors/ controllers. The company repaid the loan
after 1 year with a single payment of $8,885,000. What was the interest rate on the loan?

Q3. Which of the following 1-year investments has the highest rate of return?
a) $12,500 that yields $1125 in interest,
b) $56,000 that yields $6160 in interest,
c) $95,000 that yields $7600 in interest.
Include detailed hand calculations to justify your choice.

Q4. During a recession, the price of goods and services goes down because of low demand. A company
that makes Ethernet adapters is planning to expand its production facility at a cost of $1,000,000 one
year from now. However, a contractor who needs work has offered to do the job for $790,000 provided
the company will do the expansion now instead of 1 year from now. If the interest rate is 10% per year,
how much of a discount is the company receiving?

Simple and Compound Interest


Q5. Durco Automotive needs a $1 million balance in its contingency fund 3 years from now. The CFO
(chief financial officer) wants to know how much to deposit now into Durco’s high-yield investment
account. Determine the amount if it grows at a rate of 20% per year (a) simple interest, and (b)
compound interest.

Q6. A company that utilizes carbon fiber 3-D printing wants to have money available 2 years from now
to add new equipment. The company currently has $650,000 in a capital account and it plans to deposit
$200,000 now and another $200,000 one year from now. Calculate the total amount available in 2 years,
provided it returns a compounded rate of 15% per year.

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