Engineering Economy Sample problems w/ solutions PDF

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Republic of the Philippines CAMARINES SUR POLYTECHNIC COLLEGES Nabua, Camarines Sur (054) 288-4421 loc.126 ISO 9001:2015

Aguñas, Jecel B. (Class No No.. 1) 1. 1.)) List the four essentials elements involved in decision making in engineering economic analysis. ANSWER: a. a.)) Cash Flows b. b.)) Times of occurren occurrence ce of Cash Flows c. c.)) Interest rrat at ate e for time vvalue alue of money d. d.)) Measure of Economic worth ffor or selecting an alternative

Azur Azur,, Jeremy Jucel T T.. (Class No No.. 4) 4. 4.)) Identify the following factors as either economic (tangible) or noneconomic (intangible): first cost, leadership, taxes, salvage value, morale, dependability, inflation, profit, acceptance, ethics, interest rate. ANSWER: Economic:

Noneconomic:



First cost



Leadership



Taxes



Morale



Salvage Value



Dependability



Inflation



Acceptance



Profit



Ethics



Interest rate

Dacara, Mar Margaux gaux E. (Class No. 17) 17 17..) Identify the four engineering economy symbols and their values from the following problem statement. Use a question mark with the symbol whose value is to be determined? PROBLEM: A green algae, Chlamydomonas reinhardtii, can produce a hydrogen when temporarily deprived of sulfur for up to 2 days at a time. A small company needs to purchase equipment costing ＄ 3.4 million to commercialize the process. If the company wants to earn a rate of return 10% per year and recover its investment ii 8 years, what must be the net value of the hydrogen produces each year? ANSWER: P = ＄3.4 million i = 10% per year n = 8 years A=?

Engineering Economy

Group Assignment

BSCE-2A

Republic of the Philippines CAMARINES SUR POLYTECHNIC COLLEGES Nabua, Camarines Sur (054) 288-4421 loc.126 ISO 9001:2015

Javier Javier,, Christian Jay Benedict G. (Class No. 27) 27 27..) During a recession, the price of goods and services goes down because of low demand. A company that makes 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? SOLUTION SOLUTION:

1+r ¿ ¿ Pv = Fv /¿ 1+ .15 ¿ ¿ Pv=$ 1,000,000 /¿ Pv=$ 1,000,000 / ( 1.15 ) Pv=$ 869,565.2174 D=$ 869,565.2174 −$ 790,000

D=$ 79,565.2174 ANSWER: A discount of $79,565.2174

Olea, K Kaye aye A. (Class No No.. 37) 37 37..) To make CDs look more attractive than they really are, some banks advertise that their rates are higher than their competitors’ rates; however, the fine print says that the rate is a simple interest rate. If a person deposits $10,000 at 10% per year simple interest, what compound interest rate would yield the same amount of money in 3 years? SOLUTION:

F=$ 13, 000

Simple Interest

F = P +I

I=Prt

Compound Interest

F = P (1+i)n

P=$ 10, 000 r=10 %∨0.10

t=3 years

I=Prt

$ 13,000=$ 10,000(1+i)3

I =( $ 10,000 )( 0.10) ( 3)

$ 13, 000 = ( 1+i )3 $ 10, 000

I =$ 3,000

3

√ 1.3=1+i

F = P +I F=$ 10, 000

1.091=1+i +

$ 3,000

i=1.091−1

Engineering Economy

Group Assignment

BSCE-2A

ISO 9001:2015

Republic of the Philippines CAMARINES SUR POLYTECHNIC COLLEGES Nabua, Camarines Sur (054) 288-4421 loc.126 i=0.091 ×100 %

ANSWER: i = 9.1% per year

Tagum, Mary Joy L. ((Class Class No. 49) All of the following are examples of cash outflows, except: a. Asset salvage value b. Income taxes c. Operating cost of asset d. First cost of asset

ANSWER: a. Asset salva salvage ge value EXPLAN EXPLANA ATION: Salvage value is the estimated amount that an asset is worth at the end of its useful life. It is also known as scrap value or residual value, and is used to determine the annual depreciation expense of an asset. Teñoso, K Kathleen athleen B. (Class No. 50) 50. 50.)) : In most engineering economy studies, the best alternative is the one that: a. Will last the longest time b. Is most politically correct c. Is easiest to implement d. Has the lowest cost

ANSWER: D. Has the lowest cost EXPLAN EXPLANA ATION: We are faced with alternatives in virtually everything we do. Similarly, in engineering practice, there are always several ways of accomplishing a given task, and it is necessary to be able to compare them in a rational manner so that the most economical alternative can be selected. And whether we are aware of it or not, we use criteria every day to choose between alternatives. In economic analysis, financial units are generally used as the tangible basis for evaluation. Thus, when there are several ways of accomplishing a stated objective, the alternative with the lowest overall cost or highest overall net income is selected.

Engineering Economy

Group Assignment

BSCE-2A...