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    Chapter 1 - Problems

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    TSAR
    This document contains 8 practice problems related to engineering economy concepts: 1) Calculating interest amount and rate on a $10,000 loan repaid after 1 year. 2) Calculating principal amount and interest earned for a deposit of $1000 at 5% interest over 1 year. 3) Defining engineering economy symbols for a multi-year investment scenario with annual deposits and withdrawals. 4) Evaluating true/false statements about battery costs that increase by 5% annually to cover inventory carrying charges. 5) Constructing a cash flow diagram for a real estate investment generating annual income over 5 years before sale. 6) Constructing a cash flow diagram for an outflow at

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    Chapter 1 - Problems

    Uploaded by

    TSAR
    34 views9 pages
    This document contains 8 practice problems related to engineering economy concepts: 1) Calculating interest amount and rate on a $10,000 loan repaid after 1 year. 2) Calculating principal amount and interest earned for a deposit of $1000 at 5% interest over 1 year. 3) Defining engineering economy symbols for a multi-year investment scenario with annual deposits and withdrawals. 4) Evaluating true/false statements about battery costs that increase by 5% annually to cover inventory carrying charges. 5) Constructing a cash flow diagram for a real estate investment generating annual income over 5 years before sale. 6) Constructing a cash flow diagram for an outflow at

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    Chapter 1_Problems

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    This document contains 8 practice problems related to engineering economy concepts: 1) Calculating interest amount and rate on a $10,000 loan repaid after 1 year. 2) Calculating principal amount and interest earned for a deposit of $1000 at 5% interest over 1 year. 3) Defining engineering economy symbols for a multi-year investment scenario with annual deposits and withdrawals. 4) Evaluating true/false statements about battery costs that increase by 5% annually to cover inventory carrying charges. 5) Constructing a cash flow diagram for a real estate investment generating annual income over 5 years before sale. 6) Constructing a cash flow diagram for an outflow at

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    34 views9 pages

    Chapter 1 - Problems

    Uploaded by

    TSAR
    This document contains 8 practice problems related to engineering economy concepts: 1) Calculating interest amount and rate on a $10,000 loan repaid after 1 year. 2) Calculating principal amount and interest earned for a deposit of $1000 at 5% interest over 1 year. 3) Defining engineering economy symbols for a multi-year investment scenario with annual deposits and withdrawals. 4) Evaluating true/false statements about battery costs that increase by 5% annually to cover inventory carrying charges. 5) Constructing a cash flow diagram for a real estate investment generating annual income over 5 years before sale. 6) Constructing a cash flow diagram for an outflow at

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 9

    Chapter 1.

    Basic of Engineering
    Economy

    Instructor: Dr. Christine SAAB References: Blank & Tarquin, Engineering Economy, 8th Edition. ISBN 0073523437, McGraw
    Hill Education, 2017 1
    Problem 1
     An employee borrows $10,000 on May 1 and must repay a total of
    $10,700 exactly 1 year later. Determine the interest amount and
    the interest rate paid.
    Problem 2
     Calculate the amount deposited 1 year ago to have $1000 now at
    an interest rate of 5 % per year
     Calculate the amount of interest earned during this time period
    Problem 3
     You plan to make a lump-sum deposit of $5000 now into an
    investment account that pays 6% per year, and you plan to
    withdraw an equal end-of-year amount of $1000 for 5 year, starting
    next year. At the end of the sixth year, you plan to close your
    account by withdrawing the remaining money. Define the
    engineering economy symbols involved.
    Problem 4
     Manufacturers make backup batteries for computer systems available to
    Batteries + dealers through privately owned distributorships. In general,
    batteries are stored throughout the year and a 5% cost increase is added
    each year to cover the inventory carrying charge for the distributorship
    owner. Make the calculations necessary to show which of the following
    statements are true and which are false about batteries costs.
    a) The amount of $98 now is equivalent to a cost of $105.60 one year from now
    b) A truck battery cost of $200 one year ago is equivalent to $205 now
    c) A $38 cost now is equivalent to $39.90 one year from now
    d) A $3000 cost now is equivalent to $2887.14 one year earlier
    e) The carrying charge accumulated in 1 year on an investment of $20,000
    worth of batteries is $1000
    Problem 5
     A man buys a store for $ 120,000. Its activity will generate a net
    income of $ 15,000 / year for the first year, increasing by $ 2,000
    each year after the first year. At the end of the fifth year, the store
    is sold at $ 155,000. Draw the Cash Flow diagram for this project.
    Problem 6
     Construct a cash flow diagram for the following cash flows: $25,000
    outflow at time 0, $9000 per year inflow in years 1 through 5 at an
    interest rate of 10% per year, and an unknown future amount in
    year 5.
    Problem 7
     During a recession, the price of goods and services goes down
    because of low demand. A company that make 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 if the company will
    do the expansion now instead of 1 year from now. If the interest
    rate is 15 % per year, how much of a discount is the company
    getting?
    Problem 8
     A solid waste disposal company borrowed money at 10% per year
    interest to purchase new haulers and other equipment needed at
    the company-owned landfill site. If the company got the loan 2
    years ago and paid it off with a single payment of $4,600,000,
    what was the principal amount P of the loan?

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