Engineering Economics – Dr.
Araby Ibrahim
Assignment 2 – Solution
F=?
1) i = 8%
F = 150000(F/P, 8%, 8) = 277639.53
2) i = 12%
P = 7000(P/F, 12%, 2) + 9000(P/F, 12%, 3) +5000(P/F, 12%, 5) = 14823.51
F=?
3) i = 6%
F = 70000(F/P, 8%, 5) +90000(F/P, 8%, 3) = 200867.23
4) i = 8%
290000 = 100000 (F/P, 8%, 3) + 75000 (F/P, 8%, 2) +X (F/P, 8%, 1)
Then you can get the value of X
5) i = 8%
P = 5000 + 500 (P/A, 8%, 6) (P/F, 8%, 2) = $6981.60
6) i = 10%
P = 6000 (P/F, 10%, 1) + 9000 (P/F, 10%, 3) +10000 (P/F, 10%, 6) = 17861.12
Annual Worth in years 1 through 7) = P (A/P, 10%, 7) = 17861.12 *(A/P, 10%, 7) = 4101.04
7) i = 10% (it is an equivalence problem)
The budget The Expenses
74000 (P/A, 10%, 5) = 42000 (P/F, 10%, 1) + X (P/A, 10%, 4) (P/F, 10%, 1) then, you get X
8) i =10%
0 2 3 5
1,600,000
0 Z
2Z
3Z
1,600,000 = Z + 2Z(P/F,10%,2) + 3Z(P/A,10%,3)(P/F,10%,2)
1,600,000 = Z + 2Z(0.8264) + 3Z(2.4869)(0.8264)
8.8183Z = 1,600,000
Z = $181,440
Payment at year 2: 2Z = $362,880
Allen Bradley claims that its XM1Z1A and XM442 electronic over speed detection relay (٩
modules provide customers a cost-effective monitoring and control system for turbo
machinery. If the equipment provides more efficient turbine performance to the extent of
$20,000 in year 1, $22,000 in year 2, and amounts increasing by $2000 per year, how much
could Mountain Power and Light afford to spend now at 10% per year interest if it wanted to
recover its investment in 5 years?
Solution
Gradient A = 20000 and G=2000 increasing
P = -20000(P/A, 10%,5) -2000(P/G, 10%,5) = -89539.34
The present worth of income from an investment
hatt follows an arithmetic gradient was (١٠
projected to be $475,000. If the income in year one is expected to be $25.000, how much
would the gradient have to be in each year through year 8 if the interest rate is 10% per year?
Solution
P = 475,000
A = 25000
N = 8 and i = 10% G = ???
475000 = 25000 (P/A, 10%,8) + G(P/G, 10%,8)
475000 = 25000 *5.335 + G*16.029
Then get G
NMTeX Oil Company owns several gas wells in Carlsbad, NM. Income from the depleting(١١
wells has been decreasing according to an arithmetic gradient for the past five years. If the
income in year 1 from well no. 24 was $390,000 and it decreased by $15,000 each year
thereafter, (a) what was the income in year 3, and (b) what was the equivalent annual worth
of the income through year 5 at an interest rate of 10% per year?
Solution
i = 10% n =5 years
Gradient (decreasing)
A = 390000 and G = 15000
a) Income at year 3 = A -2G = 390000 – 2*15000
b) (the equivalent annual worth = Aeq = 390000 – 15000(A/G, 10%, 5
The future worth in year 8 for the cash flow shown is $20,000. At an interest rate of 10% epr (١٢
year, what is the value x of the cash flow in year 4?
Solution
F = 20000 i = 10% X =?
P = 1000(P/A, 10%, 3) + 200(P/G,10%,3) + X (P/F,10%,4) + [1800(P/A, 10%, 4) +
200(P/G,10%,4)]* (P/F,10%,4)
20,000 = P (F/P, 10%, 8) (P in this equation is the one we just have calculated in the previous step)
20,000 = {1000(P/A, 10%, 3) + 200(P/G,10%,3) + X (P/F,10%,4) + [1800(P/A, 10%, 4) +
200(P/G,10%,4)]* (P/F,10%,4)} * (F/P, 10%, 8)
Then you get X
The annual worth (years 1 through 8) of the cash flows shown is $30,000. What is the amount (١٣
x of the cash flow in year 3, if the interest rate is 10% per year?
Solution
Annual worth = AW = 30000 i = 10% X =?
P = 2000(P/A, 10%, 2) + 200(P/G,10%,2) + X (P/F,10%,3) + 2X (P/F,10%,4) + [2800(P/A, 10%, 4)
+ 200(P/G,10%,4)]* (P/F,10%,4)
30,000 = P (A/P, 10%, 8) (P in this equation is the one we just have calculated in the previous
step)
30,000 = {2000(P/A, 10%, 2) + 200(P/G,10%,2) + X (P/F,10%,3) + 2X (P/F,10%,4) + [2800(P/A,
10%, 4) + 200(P/G,10%,4)]* (P/F,10%,4)} * (A/P, 10%, 8)
Then you get X
