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    Engineering Economics

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    71 views18 pages

    Engineering Economics Review Questions

    Uploaded by

    pganoel
    Engineering Economics

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 18
    Engineering Economics—Practice Problems 267 Practice Problems f you attempt only a few, select those with an asterisk.) 54 Which of the following would be most difficult to monetize? 4) maintenance cost b) selling price) fuel cost) prestige *5.2 If $1,000 is deposited in a savings account that pays 6% annual interest and Value and Interest all the interest is let in the account, what is the account balance after three years? a) $640 b) $1,000 ©) $1,180 ) $1,191 °5.3 Your perfectly reliable friend, Merle, asks for a Joan and promises to pay back $150 two years from now. If the minimum interest rate you will ac- cept is 8%, what is the maximum amount you will loan him? a)sti9——_b) $126 9 si29 4) $139 54 $12,000 is borrowed now at 12% interest. The first payment is $4000 and is made 3 years from now. The balance of the debt immediately after the payment is a) $4000) $8000 )$12,000 ad) $12,860 55 An alumnus establishes a perpetual endowment fund to help Saint Louis University. What amount must be invested now to produce income of $100,000 one year from now and at one-year intervals forever? Interest rate is 8%, a) $8000 _b)$100,000-—) $1,250,000) $10,000,000 *5.6 The annual amount of a series of payments to be made at the end ofeach of Equivalence of Cash the next twelve years is $500. What is the present worth of the payments at Flow Patterns 8% interest compounded annually? a) $500) $3,768, +) $6,000 ) $6480 “57 Consider a prospective investment in a project having a first cost of $300,000, operating and maintenance costs of $35,000 per year, and an es- timated net disposal value of $50,000 at the end of thirty years. Assume an interest rate of 8% What is the present equivalent cost of the investment if the planning hori- zon is thirty years? a) $670,000 b) $689,000 «) $720,000) $791,000 If the project replacement will have the same first cost, life, salvage value, and operating and maintenance costs as the original, what is the capital~ ized cost of perpetual service? a) $670,000 b) $689,000) $720,000) $765,000 Eres 268 Chapter 5—Engineering Economics +58 Maintenance expenditures for a structure with a twenty-year life will come as periodic outlays of $1,000 at the end of the fifth year, $2,000 atthe end of the tenth year, and $3,500 at the end of the fifteenth year. With interest at 10%, what is the equivalent uniform annual cost of maintenance for the ‘twenty-year period? a) $200 ) $262 ) $300 4) $925 59 An alumnus has given Michigan State University ten million dollars to build and operate a laboratory. Annual operating cost is estimated to be one hundred thousand dollars. The endowment will earn 6% interest. ‘Assume an infinite life for the laboratory and determine how much money may be used for its construction. 2) $5.00%10% b) $8.83x10% ) $8,72%10" d) $9. 90108 5.10 An investment pays $6000 at the end of the first year, $4000 at the end of the second yeat, and $2000 at the end of the third year. Compute the pre- cont value of the investment if a 10% rate-of-returm is required. \ a) $8333 —_—b) $9667 $10,300 4) $12,000 5,1 An amount F is accumulated by investing a single amount P for n come pounding periods with intrest rate of. Select the formula that relates P to a) P= F(t4i)™ b) P=F(+i)" ) P= P(r)" 4) P=F(L+ni) 5.12. At the end of each of the next ten years, a payment of $200 is due. At an interest rate of 6%, what is the present worth of the payments? a) $27 b) $200 gga 4) $2000 5.13. The purchase price of an instrument is $12,000 and its estimated mainte- nance costs are $500 for the first year, $1500 for the second and $2500 for the third year. After three years of use the instrument is replaced it has no salvage value, Compute the present equivalent cost ofthe instrument using 10% interest. a)$14,070 b)S15570 «$15,730 4) $16,500 {fan amount invested five years ago has doubled, what is the annual inter- est rate? a) 15% b) 12% 10% d) 6% 515 After a factory has been built near a stream, itis learned that the stream oc casionally overflows its banks. A hydrologic study indicates that the prob- ability of flooding is about 1 in 8 in any one year, A flood would cause about $20,000 in damage to the factory. A levee can be constructed to pre- ‘vent flood damage. Its cost will be $54,000 and its useful life is thirty years. Money can be borrowed at 8% interest, If the annual equivalent cost of the levee is less than the annual expectation of flood damage, the levee should cnr a 268 Chapter 5—Engineering Economics 38 59 5.0 sat 5.2 5.13 544 5a5 Maintenance expenditures for a structure with a twenty-year life will come as periodic outlays of $1,000 at the end of the fifth year, $2,000 at the end of the tenth year, and $3,500 at the end of the fifteenth year. With interest at 10%, what is the equivalent uniform annual cost of maintenance for the twenty-year period? a)$200—_b) $262 9 $300 a) $525 An alumnus has given Michigan State University ten million dollars to build and operate a laboratory. Annual operating cost is estimated to be one hundred thousand dollars. The endowment will earn 6% interest. Assume an infinite life for the laboratory and determine how much money may be used for its construction. a) $5.00%10° b) $8.33%10°

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