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Engineering Economics Analysis 9th Edition Ted G. Feller - Solutions
Annual maintenance costs for a particular section of highway pavement are $2000. The placement of a new surface would reduce the almual maintenance cost to $500 per year for the first 5 years and to $1000 per year for the next 5 years. After 10 years the annual maintenance would again be $2000. If
An investor is considering buying a 20-year corporate bond. The bond has a face value of $1000 and pays 6% interest per year in two semiannual payments. Thus the purchaser of the bond will receive $30 every 6 months in addition to $1000 at the end of 20 years, along with the last $30 interest
A road building contractor has received a major highway construction contract that will require 50,000 m3 of crushed stone each year for 5 years. The needed stone can be obtained from a quarry for $5.80/m3 as an alternative, the contractor has decided to try and purchase the quarry. He believes
A new office building was constructed 5 years ago by a consulting engineering firm. At that time the firm obtained a bank loan for $100,000 with a 12% annual interest rate, compounded quarterly. The terms of the loan call for equal quarterly payments to repay the loan in 10 years. The loan also
IBP Inc. is considering establishing a new machine to automate a meat packing process. The machine will save $50,000 in labor annually. The machine can be purchased for $200,000 today and will be used for a period of 10 years. It is has a salvage value of $10,000 at the end of its useful life. The
Argentina is considering constructing a bridge across the Rio de la Plata to connect its northern coast to the southern coast of Uruguay. If this bridge is constructed, it will reduce the travel time from Buenos Aires, Argentina, to Sao Paulo, Brazil, by over 10 hours and has the potential to
A student has a job that leaves her with $250 per month in disposable income. She decides that she will use the money to buy a car. Before looking for a car, she arranges a 100% loan whose terms are $250 per month for 36 months at 18% annual interest. What is the maximum car purchase price that she
The student in Problem 5-27 finds a car she likes and the dealer offers to arrange financing. His terms are 12% interest for 60 months and no down payment. The car's sticker price is $12,000. Can she afford to purchase this car with her $250 monthly disposable income?
The student in Problem 5-28 really wants this particular car. She decides to try and negotiate a different interest rate. What is the highest interest rate that she can accept, given a 60-month term and $250 per month payments?
We know a car costs 60 monthly payments of $199. The car dealer has set us a nominal interest rate of 4.5% compounded daily. What is the purchase price of the car?
A machine costs $980,000 to purchase and will provide $200,000 a year in benefits. The company plans to use the machine for 13 years and then will sell the machine for scrap, receiving $20,000. The company interest rate is 12%. Should the machine be purchased?
A corporate bond has a face value of $l 000 with maturity date 20 years from today. The bond pays interest manually at a rate of 8% per year based on the face value. The interest rate paid on similar corporate bonds has decreased to a current rate of 6%. Determine the market value of the bond.
Calculate the present worth of a 4.5%, $5000 bond with interest paid semiannually. The bond matures in 10 years, and the investor desires to make 8% per year compounded quarterly on the investment.
A rather wealthy man decided he would like to arrange for his descendants to be well educated. He would like each child to have $60,000 for his or her education. He plans to set up a perpetual trust fund so that six children will receive this assistance in each generation. He estimates that there
A man who likes cherry blossoms very much would like to have an urn full of them put on his grave once each year forever after he dies. In his will, he intends to leave a certain sum of money in the trust of a local bank to pay the florist's annual bill. How much money should be left for this
A home builder must construct a sewage treatment plant and deposit sufficient money in a perpetual trust fund to pay the $5000 per year operating cost and to replace the treatment plant every 40 years. The plant will cost $150,000, and future replacement plants will also cost $150,000 each. If the
The local botanical society wants to ensure that the gardens in the town park are properly cared for. They recently spent $100,000 to plant the gardens. They would like to set up a perpetual fund to provide $100,000 for future replanting of the gardens every 10 years. If interest is 5%, how much
An elderly lady decided to distribute most of her considerable wealth to charity and to retain for herself only enough money to provide for her living. She feels that $1000 a month will amply provide for her needs. She will establish a trust fund at a bank that pays 6% interest, compounded monthly.
What amount of money deposited 50 years ago at 8% interest would provide a perpetual payment of $10,000 a year beginning this year?
A depositor puts $25,000 in a savings account that pays 5% interest, compounded semiannually. Equal annual withdrawals are to be made from the account, beginning one year from now and continuing forever. What is the maximum annual withdrawal?
A trust fund is to be established for three purposes(1) To provide $750,000 for the construction and $250,000 for the initial equipment of a small engineering laboratory;(2) To pay the $150,000 per year laboratory operating cost; and(3) To pay for $100,000 of replacement equipment every 4 years,
The local Audubon Society has just put a new bird feeder in the park at a cost of $500. The feeder has a useful life of 5 years and an annual maintenance cost of $50. Our cat, Fred, was very impressed with the project. He wants to establish a fund that will maintain the feeder in perpetuity (that's
We want to donate a marble birdbath to the city park as a memorial to our cat, Fred, while he can still enjoy it. We also want to set up a perpetual care fund to cover future expenses "forever." The initial cost of the bath is $5000. Routine annual operating costs are $200 per year, but every fifth
Dr. Fog E. Professor is retiring and wants to endow a chair of engineering economics at his university. It is expected that he will need to cover an annual cost of $100,000 forever. What lump sum must he donate to the university today if the endowment will earn 10% interest?
Dr. Fog E. Professor is retiring and wants to endow a chair of engineering economics at his university. It is expected that he will need to cover an annual cost of $100,000 forever. What lump sum must he donate to the university today if the endowment will earn 10% interest? Discuss.
A man had to have the muffler replaced on his 2-yearold car. The repairman offered two alternatives. For $50 he would install a muffler guaranteed for 2 years. But for $65 he would install a muffler guaranteed "for as long as you own the car." Assuming the present owner expects to keep the car for
A consulting engineer has been engaged to advise a town how best to proceed with the construction of a 200,000 m3 water supply reservoir. Since only 120,000 m3 of storage will be required for the next 25 years, an alternative to building the full capacity now is to build the reservoir in two
If interest is computed at 4%, which construction plan is preferred?A weekly business magazine offers a 1-yearsubscripticor $58 and a 3-year subscription for $116. If you thought you would read the magazine for at least the next 3 years, and consider 20% as a minimum rate of return, which way would
Use an 8-year analysis period and a 10% interest rate to determine which alternative should be selected: A
Telephone Mexico is expanding its facilities to serve a new manufacturing plant. The new plant will require 2000 telephone lines this year and another 2000 lines after expansion in 10 years. The plant will be in operation for 30 years. The telephone company is evaluating two options to serve the
Dick Dickerson Construction Inc. has asked to you help them select a new backhoe. You have a choice between a wheel-mounted version, which costs $50,000 and has an expected life of 5 years and a salvage value of $2000, and a track-mounted one, which costs $80,000, with a 5-year life and an expected
Walt Wallace Construction Enterprises is investigating the purchase of a new dump truck. Interest is 9%. The cash flows for two Likely models are as follows
Two different companies are offering a punch press for Company a charges $250,000 to deliver and install the device. Company A has estimated that the machine will have maintenance and operating costs of $4000 a year and will provide an annual benefit of $89,000. Company B charges $205,000 to
A battery manufacturing plant has been ordered to cease discharging acidic waste liquids containing mercury into the city sewer system. As a result, the form must now adjust the pH and remove the mercury from its waste liquids. Three firms have provided quotations on the necessary equipment. An
A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are: A
A steam boiler is needed as part of the design of a new plant. The boiler can be fired by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. An analysis of the costs shows that the installed cost, with all controls, would be least for natural gas a: $30,000: for fuel oil
Austin General Hospital is evaluating new office equipment offered by three companies. In each case the interest rate is 15% and the useful life of the equipment is 4 years. Use NPW analysis to determine the company from which you should purchase the equipment.
The following costs are associated with three tomato-peeling machines being considered for use in a canning plant Machine Machine Machine
A railroad branch line to a missile site is to be constructed. It is expected that the railroad line will be used for 15 years, after which the missile site will be removed and the land turned back to agricultural use the railroad track and ties will be removed at than time.In building the railroad
Consider A-E, five mutually exclusive alternatives: A B C D
An investor has carefully studied a number of companies and their common stock. From his analysis, he has decided that the stocks of six firms are the best of the many he has examined. They represent about the same amount of risk and so he would like to determine one single stock in which to
Six mutually exclusive alternatives, A-F (see Table P5-64), are being examined for an 8% interest rate, which alternative should be selected Each alternative has a six-year useful life.
The management of an electronics manufacturing firm believes it is desirable to automate its production facility. The automated equipment would have a l0-year life with no salvage value at the end of 10 years. The plant engineering department has surveyed the plant and suggested there are eight
A local symphony association offers memberships as follows:Continuing membership, per year $ 15Patron lifetime membership
Using capitalized cost determine which type of road surface is preferred on a particular section of highway Use 12% interest rate.
A city has developed a plan to provide for future municipal water needs. The plan proposes an aqueduct that passes through 500 feet of tunnel in a nearby mountain. Two alternatives are being considered. The first proposes to build a full-capacity tunnel now for $556,000. The second proposes to
An engineer has received two bids for an elevator to be installed in a new building. The bids, plus his evaluation of the elevators, are shown in Table P5-69. The engineer will make a present worth analysis using a 10% interest rate. Prepare the analysis and determine which bid should be accepted.
A building contractor obtained bids for some asphalt paving, based on a specification. Three paving subcontractors quoted the following prices and ten of payment:The building contractor uses a 12% no min interest rate, compounded monthly, in this type c bid analysis. Which paving subcontractor
Given the following data, use present worth analysis to find the best alternative, A, B, or CUse an analysis period of 1.2 years and 10% interest.
Consider the following four alternatives. Three are "do something" and one is "do nothingAt the end of the 5-year useful life of B, a replacement is not made. If a 10-year analysis period and a 10% interest rate are selected, which is the preferred alternative?
A cost analysis is to be made to determine what, if anything should be done in a situation offering three "do-something" and one "do-nothing" alternatives. Estimates of the cost and benefits are as follows.Use a 10-year analysis period for the four mutually exclusive alternatives. At the end of 5
Assume monthly car payments of $500 per month for A 4 years and an interest rate of 1/2% per month. What - initial principal or PW will this repay?
Assume annual car payments of $6000 for 4 years and an interest rate of 6% per year. What initial principal or PW will this repay?
Assume annual car payments of $6000 for 4 years and an interest rate of 6.168% per year. What initial principal or PW will this repay?
Assume mortgage payments of $1000 per month for 30 years and an interest rate of 1/2% per month. What initial principal or PW will this repay?
Assume annual mortgage payments of $12,000 for A 30 years and an interest rate of 6% per year. What initial principal or PW will this repay?
Why do the values in Problems 5-78, 5-79, and .5-80 differ?
Maverick Enterprises is planning new product Annual sales unit costs, and unit revenues are as tabulated; the first cost of R&D and setting up the assembly line is $42,000. If i is 10%, what is the PW?
Northern Engineering is analyzing a mining project. Annual production, unit costs, and unit' revenues are in the table. The first cost of the mine setup is $8 million. If is 15%, what is the PW?
Maverick Enterprises is planning a new product. Annual sales, unit costs, and unit revenues are as tabulated; the first cost of R&D and setting up the assembly line is $42,000. If is 10%, what is the PW?
Compute the value of C for the following diagram, based on a 10% interest rate.
Compute the value of B for the following diagram:
Compute the value of E:
If i = 6%, compute the value of D that is equivalent to the two disbursements shown.
For the diagram, compute the value of D:
What is C in the accompanying figure?
If interest is 10%, what is A?
As shown in the cash flow diagram, there is an annual disbursement of money that varies from year to year from $100 to $300 in a fixed pattern that repeats forever. If interest is 10%, compute the value of A, also continuing forever, that is equivalent to the fluctuating disbursements.
On April 1 a man borrows $100. The loan is to be repaid in three equal semiannual (every 6 months) payments. If the annual interest rate is 7% compounded semiannually, how much is each payment?
An electronics firm invested $60,000 in a precision inspection device. It cost $4000 to operate and maintain in the first year and $3000 in each of the subsequent years. At the end of 4 years, the firm changed their inspection procedure, eliminating the need for the device. The purchasing agent was
A firm is about to begin pilot plant operation on a process it has developed. One item of optional equipment that could be obtained is a heat exchanger unit. The company finds that a unit now available for $30,000 could be used in other company operations. It is estimated that the heat exchanger
The maintenance foreman of a plant in reviewing his records found that a large press had the following maintenance cost record:After consulting with a lubrication specialist, he changed the preventive maintenance schedule. He believes that this year maintenance will be $900 and will decrease $100 a
A firm purchased some equipment at a very favorable price of $30,000. The equipment resulted in an annual net saving of $1000 per year during the 8 years it was used. At the end of 8 years, the equipment was sold for $40,000. Assuming interest at 8%, did the equipment purchase prove to be desirable?
When he started work on his twenty-second birthday, D. B. Cooper decided to invest money each month with the objective of becoming a millionaire by the time he reaches age 65. If he expects his internments to yield 18% per annum, compounded monthly, how much should he invest each month?
Linda 0' Shay deposited $30,000 in a savings account as a perpetual trust. She believes the account will earn 7% annual interest during the first 10 years and 5% interest thereafter. The trust is to provide a uniform end-of-year scholarship at the university. What uniform amount could be used for
A machine costs $20,000 and has a 5-year useful life. At the end of the 5 years, it can be sold for $4000. If annual interest is 8%, compounded semiannually, what is the equivalent uniform annual cost of the machine? (An exact solution is expected.)
The average age of engineering students at graduation is a little over 23 years. This means that the working career of most engineers is almost exactly 500 months. How much would an engineer need to save each month to become a millionaire by the end of his working career? Assume a 15% interest
The Johnson Company pays $200 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $6000 hydraulic press bailer and spend $3000 a year for labor to operate the bailer. The bailer has an estimated useful life of 30 years
An engineer has a fluctuating future budget for the maintenance of a particular machine. During each 01 the first 5 years, $1000 per year will be budgeted. During the second 5 years, the annual budget will be $1500 per year. In addition, $3500 will be budgeted for an overhaul of the machine at the
An engineer wishes to have $5 million by the time he retires in 40 years. Assuming 15% nominal interest, compounded continuously, what annual sum must he set aside?
Art Arfons, a K-State-educated engineer, has made a considerable fortune. He wishes to start a perpetual scholarship for engineering students at K State. The scholarship will provide a student with an annual stipend of $2500 for each of 4 years (freshmen through senior), plus an additional $5000
Jenny McCarthy is an engineer for a municipal power plant. The plant uses natural gas, which is currently provided from an existing pipeline at an annual cost of $10,000 per year. Jenny is considering a project to construct a new pipeline. The initial cost of the new pipeline would be $35,000, but
A machine has a first cost of $150,000, an annual operation and, maintenance cost of $2500, a life of 10 years, and a salvage value of $30,000. At the end of years 4 and 8, it requires a major service, which costs $20,000 and $10,000, respectively. At the end of year 5, it will need to be
Mr. Wiggley wants to buy a new house. It will cost $178,000. The bank will loan 90% of the purchase price at a nominal interest rate of 10.75% compounded weekly, and Mr. Wiggley will make monthly payments. What is the amount of the monthly payments if he intends to pay the house off in 25 years?
Steve Lowe must pay his property taxes in two equal installments on December 1 and April 1. The two payments are for taxes for the fiscal year that begins on July I and ends the following June 30. Steve purchased a home on September 1. He estimates the annual property taxes will be $850 per year.
Claude James, a salesman, needs a new car for use in his business. He expects to be promoted to a supervisory job at the end of 3 years, and so his concern now is to have a car for the 3 years he expects to be "on the road." The company reimburses salesmen each month at the rate of 251iper mile
A motorcycle is for sale for $2600. The motorcycle dealer is willing to sell it on the following terms: No down payment; pay $44 at the end of each of the first 4 months; pay $84 at the end of each month after that until the loan has been paid in full. Based on these terms and a 12% annual interest
When he purchased his home, AI Silva borrowed $80,000 at 10% interest to be repaid in 25 equal annual end-of-year payments. After making 10 payments, AI found he could refinance the balance due on his loan at 9% interest for the remaining 15 years. To refinance the loan, AI must pay the original
A company must decide whether to provide their salesmen with company-owned automobiles or to pay the salesmen a mileage allowance and have them drive their own automobiles. New automobiles would cost about $18,000 each and could be resold 4 years later for about $7000 each. Annual operating costs
Your company must make a $500,000 balloon payment on a lease 2 years and 9 months from today. You have been directed to deposit an amount of money quarterly, beginning today, to provide for the $500,000 payment. The account pays 4% per year, compounded quarterly. What is the required quarterly
A manufacturer is considering replacing a production machine tool. The new machine, costing $3700, would have a life of 4 years and no salvage value, but would save the firm $500 per year in direct labor costs and $200 per year indirect labor costs. The existing machine tool was purchased 4 years
Two possible routes for a power line are under study. Data on the routes are as follows:If 7% interest is used, should the power line be routed around the lake or under the lake?
An oil refinery finds that it is now necessary to subject its waste liquids to a costly treating process before discharging them into a nearby stream. The engineering department estimates that the waste liquid processing will have cost $30,000 by the end of the first year. By making process and
Bill Anderson buys an automobile every 2 years at follows: initially he makes a down payment of $600C on a $15,000 car. The balance is paid in 24 equal monthly payments with annual interest at 12%. Where he has made the last payment on the loan, he trade! in the 2-year-old car for $6000 on a new
Alice White has arranged to buy some home recording equipment. She estimates that it will have a 5-year useful life and no salvage value. The dealer, who is, friend, has offered Alice two alternative ways to pa~ for the equipment:(a) Pay $2000 immediately and $500 at the end 0: one year.(b) Pay
Two mutually exclusive alternatives are being considered. One of the alternatives must be selected. Using a 15% nominal interest rate compounded continuously, determine which one. Solve by annual cash flow analysis.
A certain industrial firm desires an economic analysis to determine which of two different machines should be purchased. Each machine is capable of performing the same task in a given amount of time. Assume the minimum attractive return is 8%. The following data are to be used in this analysis:
A suburban taxi company is considering buying taxis with diesel engines instead of gasoline engines. The cars average 50,000 km a year, with a useful life of 3 years for the taxi with the gas engine and 4 years for the diesel taxi. Other comparative information is as follows: Use an annual cash
A company must decide whether to buy Machine A or Machine B:At a 10% interest rate, which machine should be installed? Use an annual cash flow analysis in working this problem.
Consider the following alternatives: The analysis period is 10 years, but there will be replacement for Alternative B at the end of 5 years. Based on a 15% interest rate, determine which alternative should be selected. Use an annual cash flow analysis in working this problem.
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