Engineering Economics

HW2 – 23/10/2012

Due After 1 week

Q 3.3

Amalgamated Iron and Steel purchased a new machine for ram cambering large I-beams. The company expects to bend 80 beams at $2000 per beam in each of the first 3 years, after which the company expects to bend 100 beams per year at $2500 per beam through year 8. If the company's minimum attractive rate of return is 18% per year, what is the present worth of the expected income?

Q3.22

Use the cash flow diagram below to calculate the amount of money in year 5 that is equivalent to all the cash flows shown, if the interest rate is 12% per year.

1

Q 3.30

Find the value of x in the diagram below that will make the equivalent present worth of the cash flow equal to $15,000, if the interest rate is 15% per year.

Q3.35

Exxon-Mobil is planning to sell a number of producing oil wells. The wells are expected to produce 100,000 barrels of oil per year for 8 more years at a selling price of $28 per barrel for the next 2 years, increasing by $1 per banel through year 8. How much should an independent refiner be willing to pay for the wells now, if the interest rate is 12% per year?

2

Q 3.40

A start-up company selling color-keyed carnuba car wax borrows $40,000 at an interest rate of 10% per year and wishes to repay the loan over a 5-year period with annual payments such that the third through fifth payments are $2000 greater than the first two. Determine the size of the first two payments.

Q3.45

Calculate the present worth for a machine that has an initial cost of $29,000, a life of 10 years, and an annual operating cost of $13,000 for the first 4 years, increasing by 10% per year thereafter. Use an interestrate of l0% per year.

3

Q3.49

Compute the present worth (year 0) of the following cash flows at i = 12% per year.

Q3.50

For the cash flow tabulation, calculate the equivalent uniform annual worth in periods I through 10, if the interest rate is 10% per year.

4