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    Islamic University of Gaza Faculty of Engineering Industrial Engineering Department EIND4303: Engineering Economy

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    Anonymous zHmefGH30Y
    This document provides solutions to several engineering economy problems. It includes cash flow diagrams and calculations to determine future and present values for projects with increasing or decreasing cash flows over time.

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    Islamic University of Gaza Faculty of Engineering Industrial Engineering Department EIND4303: Engineering Economy

    Uploaded by

    Anonymous zHmefGH30Y
    20 views5 pages
    This document provides solutions to several engineering economy problems. It includes cash flow diagrams and calculations to determine future and present values for projects with increasing or decreasing cash flows over time.

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    HW_Ch4

    Original Title

    HW_Ch4

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    This document provides solutions to several engineering economy problems. It includes cash flow diagrams and calculations to determine future and present values for projects with increasing or decreasing cash flows over time.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    20 views5 pages

    Islamic University of Gaza Faculty of Engineering Industrial Engineering Department EIND4303: Engineering Economy

    Uploaded by

    Anonymous zHmefGH30Y
    This document provides solutions to several engineering economy problems. It includes cash flow diagrams and calculations to determine future and present values for projects with increasing or decreasing cash flows over time.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 5

    Islamic University of Gaza

    Faculty of Engineering
    Industrial Engineering Department
    EIND4303: Engineering Economy
    Instructor: Mohammad Abuhaiba, Ph.D., P.E.
    Teacher Assistants: Eng. Said Matar and Duaa' AbuDagga
    Solution of Quiz (Problem 4.18):
    It is estimated that a copper mine will produce 10,000 tons of ore
    during the coming year. The production is expected to increase by
    5% per year thereafter in each of the next six years. Profit per ton
    will be $14 for years one through seven.
    1. Draw a cash flow diagram for this copper mine operation from
    the companys viewpoint.
    2. If the company can earn 15% per year on its capital, what is
    the future equivalent of the copper mines cash flows at the
    end of year seven?
    i=15%, f=5%, A=$14/ton * 10,000 ton= $140,000

    A7 =A1 (1+.05)7 - 1

    A3 =A1 (1+.05)2
    A2=A1 (1+.05)
    A1=140,000

    A1 [1 - (P/F, i%, N) (F/P, f%, N)]

    P=

    i-f
    140,000[1 - (P/F, 15%, 7) (F/P, 5%,7)]
    =
    .15-.05
    140,000[1 - (.3759) (1.4071)]
    =
    .15-.05
    F= P (F/P, 15%, 7)
    = 659499.55*2.66= $1,754,268.81

    = $659499.55

    Problem 4.67:
    You are the manager of a large crude oil refinery. As part of the
    refining process, a certain heat exchanger must be replaced every
    year. The replacement and downtime cost in the first year is
    $175000. This cost is expected to increase due to inflation at a rate
    of 8% per year for five years, at which time this particular heat
    exchanger will no longer be needed. If the companys cost of capital
    is 15% per year, how much could you afford to spend for a higher
    quality heat exchanger so that these annual replacement and
    downtime costs could be eliminated?
    i=15% , f=5% , A= $175000
    P=
    =
    =

    A [1 - (P/F, i%, N) (F/P, f%, N)]


    i-f
    175000 [1 - (P/F, 15%,5) (F/P,8%,5)]
    .15-.08
    175000 [1 (.4323 ) (1.5869)]
    .07

    = $673660

    You can afford to spend $673660 or less for a higher quality heat exchanger.

    Home work solution Problem 4.33:

    1 2 3 4 5

    15

    30

    50
    A=1000
    A=10,000

    A=10,000

    P = -$1,000 (P/A, 10%, 5) - $10,000 (P/F, 10%, 15) - $10,000 (P/F, 10%, 30)
    = -$1,000 (3.7908) - $10,000 (0.2394) - $10,000 (0.0573)
    = -$6,757.80

    A = -$6,757.80 (A/P, 10%, 50) = -$6,757.80 (0.1009) = -$681.86

    Problem 4.81:

    r = 12%; M = 12, i= (1+r/M) 12 -1= 0.1268 or 12.68%


    P0 = $10,000(P/A, 12.68%, 6) (P/F, 12.68%, 11)
    = $10,000 (4.034) (0.2689) = $10,847.43
    (1 i ) N 1
    (1 .1268) 6 1
    =
    =4.034
    i (1 i ) N
    .1268(1 .1268) 6
    1 N
    1
    ] =[
    ]11 =.2689
    (P/F, 12.68%, 11) = [
    1 .1268
    1 i

    (P/A, 12.68%, 6) =

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