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Assignment 1 2015

This document contains 10 questions related to engineering economics and cash flow analysis. The questions cover topics like equivalent worth, uniform series, gradient series, loan payments, and retirement planning. Specific calculations are required to determine amounts like future or present worth, loan balances, and retirement savings totals based on interest rates, time periods, payment/deposit amounts.

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marryam nawaz
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72 views

Assignment 1 2015

This document contains 10 questions related to engineering economics and cash flow analysis. The questions cover topics like equivalent worth, uniform series, gradient series, loan payments, and retirement planning. Specific calculations are required to determine amounts like future or present worth, loan balances, and retirement savings totals based on interest rates, time periods, payment/deposit amounts.

Uploaded by

marryam nawaz
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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COMSATS Institute of Information Technology

Park Road, Chak Shahzad Islamabad Tel: (+92-51) 8318471


(BET)(BCE)
Engineering Economics
Assignment No. 1

Q. No. 1: An electrical engineer wants to deposit an amount P now such that she
can withdraw an equal annual amount of A1 = $2000 per year for the first 5 years,
starting 1 year after the deposit, and a different annual withdrawal of A2 = $3000 per
year for the following 3 years. How would the cash flow diagram appear if i=8.5%
per year?
Q. No. 2: 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.
Assume you own the City Center Batteries + outlet. Make the calculations necessary
to show which of the following statements are true and which are false about battery
costs.
1. The amount of $98 now is equivalent to a cost of $105.60 one year from now.
2. A truck battery cost of $200 one year ago is equivalent to $205 now.
3. A $38 cost now is equivalent to $45.90 four years from now.
4. A $3000 cost now is equivalent to $2087.14 three year earlier.
5. The carrying charge accumulated in 1 year on an investment of $20,000 worth
of batteries is $1000.
Q. No. 3: Sandy, a manufacturing engineer, just received a year-end bonus of
$10,000 that will be invested immediately. With the expectation of earning at the
rate of 8% per year, Sandy hopes to take the entire amount out in exactly 20 years to
pay for a family vacation when the oldest daughter is due to graduate from college.
Find the amount of funds that will be available in 20 years.
Q. No. 4: How much money should you be willing to pay now for a guaranteed
$600 per year for 9 years starting next year, at a rate of return of 16% per year?
Q. No. 5: The president of Ford Motor Company wants to know the equivalent
future worth of a $1 million capital investment each year for 8 years, starting 1 year
from now. Ford capital earns at a rate of 14% per year.
Q. No. 6: A local university has initiated a logo-licensing program. Estimated fees
(revenues) are $80,000 for the first year with uniform increases to a total of
$200,000 by the end of year 9. Determine the gradient and construct a cash flow
diagram that identifies the base amount and the gradient series.
Q. No. 7: A person who is just 30 years old is planning for his retired life. He plans
to invest an equal sum of Rs. 10,000 at the end of every year for the next 30 years
starting from the end of next year. The bank gives 15% interest
rate, compounded annually. Find the maturity value of his account when he is 60
years old.
Q. No. 8: A company is planning to expand its business after 5 years from now. The
money required for the expansion program is Rs. 4,00,00,000. What annual
equivalent amount should the company deposit at the end of every year at an
interest rate of 15% compounded annually to get Rs. 4,00,00,000 after 5 years from
now?
Q. No. 9: Kerri James is considering the purchase of a car. She wants to buy the
new VW Beetle, which will cost her $17,600. She will finance 90% of the purchase
price (i.e., make a 10% down payment) at an interest rate of 5.9 percent, with
monthly payments over three years. How much money will she still owe on the loan
at the end of one year (to the nearest dollar)?
Q. No. 10: A person is planning for his retired life. He has 10 more years of service.
He would like to deposit Rs. 30,000 at the end of the first year and thereafter he
wishes to deposit the same amount (Rs. 30,000) with an annual decrease of Rs.
2,000 for the next 9 years with an interest rate of 18%. Find the total amount at the
end of the 10th year of the above series.

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