1. 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.
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2. 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?
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3. 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 interest
rate of l0% per year.
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4. 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.
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