Apple Computer wants to have $2.1 billion available 5 years from now in order to finance initial production of a device that applies IOT technology for home use. The company expects to set aside uniformly increasing amounts of money each year to meet its goal, starting with $100 million at the end of year 1. How much will the constant increase, G, have to be each year at a rate of return of 18% per year? Try your skill by using the Goal Seek tool to find the required gradient. Start the evaluation with G = $50 million per year.
> Suppose inter arrival times at a hospital emergency room during a weekday are exponentially distributed, with an average inter arrival time of 9 minutes. If the arrivals are Poisson distributed, what would the average number of arrivals per hour be? What
> According to Bureau of Labor Statistics data, the average income for a worker in the metropolitan Boston area is $65,420. Suppose average income for a worker in the metropolitan Boston area is normally distributed with a standard deviation of $4,246. A m
> According to The Wirthlin Report, 24% of all workers say that their job is very stressful. If 60 workers are randomly selected, a) What is the probability that 17 or more say that their job is very stressful? b) What is the probability that more than 22
> The Zumper National Rent Report lists the average monthly apartment rent in various locations in the United States. According to the report, the average cost of renting a one-bedroom apartment in Houston is $1,082. Suppose that the standard deviation of
> A business convention holds its registration on Wednesday morning from 9:00 a.m. until 12:00 noon. Past history has shown that registrant arrivals follow a Poisson distribution at an average rate of 1.8 every 15 seconds. Fortunately, several facilities a
> The U.S. Bureau of Labor Statistics releases figures on the number of full-time wage and salary workers with flexible schedules. The numbers of full-time wage and salary workers in each age category are almost uniformly distributed by age, with ages rang
> According to the U.S. Department of Agriculture, Alabama egg farmers produce millions of eggs every year. Suppose egg production per year in Alabama is normally distributed, with a standard deviation of 83 million eggs. If during only 3% of the years Ala
> According to a recent survey, the average family spends about $229 on electronics (computers, cell phones, etc.) in back-to-college spending per student. Suppose back-to- college family spending on electronics is normally distributed with a standard devi
> Shown here is a graph of a binomial distribution for n = 12. Study the graph and from the graph, estimate what you think is the mean of this distribution. Approximately what do you think is the value of p and why? 0.3 0.25 0.2 0.15 0.1 0.05 0 1 2 3 4
> Determine the mean, the variance, and the standard deviation of the following discrete distribution. x _____________ P(x) 1 …………………………. .238 2 …………………………. .290 3 …………………………. .177 4 …………………………. .158 5 …………………………. .137
> For the cash flows shown (in $1000 units), calculate the value of x that makes the present worth in year 0 equal to $300,000 at an interest rate of 10% per year. Year Cash Flow, $1000 0 1 2 3 4 5 6 40 x 40 40 x 40 40
> For the diagram shown below, the respective values of n to calculate the present worth in year 0 by the equation P0 = 100(P∕A,10%,n1)(P∕F,10%,n2) are: (a) n1 = 6, n2 = 1 (b) n1 = 5, n2 = 2 (c) n1 = 7, n2 = 1 (d) n1 = 7
> The winner of a multistate mega millions lottery jackpot worth $175 million was given the option of taking payments of $7 million per year for 25 years, beginning 1 year from now, or taking $109.355 million now. The interest rate that renders the two opt
> Consider the common moral that stealing is wrong. Hector is with a group of friends in a local supermarket. One of Hector’s buddies takes a high energy drink from a 6-pack on the shelf, opens it, drinks it, and returns the empty can to the package, with
> Chemical costs associated with a packed-bed flue gas incinerator for odor control have been decreasing uniformly for 5 years because of increases in efficiency. If the cost in year 1 was $100,000 and it decreased by $5,000 per year through year 5, the pr
> At i = 8% per year, the annual worth for years 1 through 6 of the cash flows shown is closest to: (a) $302 (b) $421 (c) $572 (d) $824 0 1 800 2 700 3 نما 600 4 500 5 400 6 Years 300
> The present worth of an increasing geometric gradient is $23,632. The interest rate is 6% per year and the rate of change series is 4% per year. If the cash flow in year 1 is $3,000, the year in which the gradient ends is: (a) 7 (b) 9 (c) 11 (d) 12
> Adams Manufacturing spent $30,000 on a new sterilization conveyor belt, which resulted in a cost savings of $4202 per year. The length of time it should take to recover the investment at 8% per year is closest to: (a) Less than 6 years (b) 7 years (c) 9
> For the cash flows shown, find the value of x that makes the equivalent annual worth in years 1 through 7 equal to $300 per year. Use an interest rate of 10% per year. Start the analysis at x = $300 and use Goal Seek to solve. Year 0 1 2 3 Cash Flow,
> Hansus Enterprises is a start-up small business specializing in software systems for machine based high-school student tutoring in science and math. Sheryl Hansus, the owner, has spoken with lenders to obtain a loan of $50,000 now (year 0), and the same
> The operating cost of a pulverized coal cyclone furnace is expected to be $80,000 per year. The steam produced will be needed for 6 years—now through year 5. Determine the equivalent annual worth, A, in years 1 through 5 of the operating costs at an inte
> A large water utility is planning to upgrade its SCADA system for controlling well pumps, booster pumps, and disinfection equipment so that everything can be centrally controlled. Phase I will reduce labor and travel costs by $28,000 per year. Phase II w
> Calculate the present worth of 10 uniform payments of $8000 that begin 1 year from now at an interest rate of 10% per year.
> An arithmetic gradient has cash flows of $1000 in year 4, $1200 in year 5, and amounts increasing by $200 per year through year 10. If you use the factor 200(P∕G,10%,n) to find PG in year 3, the value of n you have to use in the P∕G factor is: (a) 10 (b)
> The negative arithmetic gradient series in Problem 3.44 is missing the value in year 4. Solve for this value on a spreadsheet. In doing so, display both the full amount of the missing payment and the extra amount over the expected amount of $−1600.
> An engineer who believes in “save now; play later” wants to retire in 30 years with $2.0 million. At 8% per year interest, the amount the engineer will have to invest each year (starting in year 1) to reach the $2 million goal is closest to: (a) $17,660
> A chip manufacturing company wants to have $10 million available 5 years from now in order to build new warehouse and shipping facilities. If the company can invest money at 10% per year, the amount that it must deposit each year in years 1 through 5 to
> A single deposit of $25,000 was made by your grandparents on the day you were born 25 years ago. The balance in the account today if it grew at 10% per year is closest to: (a) $201,667 (b) $241,224 (c) $270,870 (d) $296,454
> The cost of updating an outdated production process is expected to be $81,000 four years from now. The equivalent present worth of the update at 6% per year interest is closest to: (a) $51,230 (b) $55,160 (c) $60,320 (d) $64,160
> The amount of money the Teachers Credit Union should be willing to loan a developer who will repay the loan in a lump sum amount of $840,000 two years from now at the bank’s interest rate of 10% per year is: (a) $694,180 (b) $99,170 (c) $1,106,400 (d)
> A manufacturer of prototyping equipment wants to have $3,000,000 available 10 years from now so that a new product line can be initiated. If the company plans to deposit money each year, starting 1 year from now, the equation that represents how much the
> Aero Serve, Inc. manufactures cleaning nozzles for reverse pulse jet dust collectors. The company spent $40,000 on a production control system that will increase profits by $11,096 per year for 5 years. The rate of return per year on the investment is cl
> Jowel Smithers and Sonda Richards merged all of their financial resources and opened a mobile phone sales and repair business in the upscale Domain Mall in Los Angeles 10 years ago with an initial investment of $2.5 million. As revenues increased signifi
> Maintenance costs for a regenerative thermal oxidizer increased according to an arithmetic gradient for 5 years. The cost in year 1 was $7000. If the interest rate is 10% per year and the present worth of the costs for a 5-year period was $28,800, the am
> Detrich Products is planning to upgrade an aging manufacturing operation 5 years from now at a cost of $100,000. If the company plans to deposit money into an account each year for 4 years beginning 2 years from now (first deposit is in year 2) to pay fo
> A uniform series of payments begins in year 4 and ends in year 11. If you use the P∕A factor with n = 8, the P value you get will be located in year: (a) 0 (b) 3 (c) 4 (d) 5
> If you borrow $24,000 now at an interest rate of 10% per year and promise to repay the loan with payments of $3695 per year starting 1 year from now, the number of payments that you will have to make is closest to: (a) 7 (b) 8 (c) 11 (d) 14
> You found a report stating that the equivalent annual worth of chemical costs associated with a water treatment process were $125,000 per year for a 5-year period. The report stated that the cost in year 1 was $190,000 and the cost decreased by a unifor
> Stefanie is a design engineer with an international railroad locomotive manufacturing company in the state of Illinois. Management wants to return some of the engineering design work to the United States rather than export all of it to India, where their
> At a return rate of 20% per year, the amount of money you must deposit for five consecutive years starting 3 years from now for the account to contain $50,000 fifteen years from now is closest to: (a) $1565 (b) $1759 (c) $1893 (d) $2093
> You plan to pay $38,000 cash for the new truck you want to buy 5 years from now. You are a very astute investor; all your money earns at 20% per year. If you have already saved $9500, the amount your rich aunt has to give you 2 years from now (as a gradu
> In order to establish a contingency fund to replace equipment after unexpected breakdowns, a manufacturer of thin-wall plastic bottles plans to deposit $100,000 now and $150,000 two years from now into an investment account. Assuming the account grows at
> For the cash flows shown, you have been asked to calculate the present worth (in year 0) using i = 10% per year. Which of the following solutions is not correct? (a) P = 200 + 200(P∕A,10%,3) + 300(P∕A,10%,3)(Pâ&
> Assume you borrow $10,000 today and promise to repay the loan in two payments, one in year 2 and the other in year 4, with the one in year 4 being only half as large as the one in year 2. At an interest rate of 10% per year, the size of the payment in ye
> The maker of a motion-sensing towel dispenser is considering adding new products to enhance offerings in the area of touchless technology. If the company does not expand its product line now, it will definitely do so in 2 years. Assume the interest rate
> The cost of tuition at a large public university was $390 per credit hour 5 years ago. The cost today (exactly 5 years later) is $585. The annual rate of increase is closest to: (a) 5% (b) 7% (c) 9% (d) 11%
> For the cash flows shown, find the future worth in (a) year 5, and (b) year 4. Assume an i of 10% per year. Year 2 sto Cash Flow, $ 0 0 3000 01 3 4 3000 3000 5 3000
> The SEWA (Southwestern Electricity and Water Authority) authorized construction projects totaling $1.07 million to improve desalinization plant efficiency and salinity-reduction technology for reject chemicals. Three bids from potential vendors were rece
> For the data in Problem 2.60, find the year that your retirement account first exceeds (a) $2 million, and (b) then $3 million. In setting up the spreadsheet you wish to know the amount that must be deposited each year. Data from problem 2.60 You are a
> You expect to contribute to an investment fund for your retirement over the next 30 years with an annual deposit of a yet-to-be determined amount. Assume your goal is to have $2 million available when you stop the annual desposits and that the fund is ab
> A company that utilizes carbon fiber 3-D printing wants to have money available 2 years from now to add new equipment. The company currently has $650,000 in a capital account and it plans to deposit $200,000 now and another $200,000 one year from now. Th
> In order to finance a new project costing $30 million, a company borrowed $21 million at 16% per year interest and used retained earnings valued at 12% per year for the remainder of the financing. The company’s weighted average cost of capital for the pr
> Identify at least five areas of personal finances in which engineering economic analysis can be used by you in the future. Answer: Examples are: house purchase; car purchase, credit card (which ones to use); personal loans (and their rate of interest
> The simple interest rate per year that will accumulate the same amount of money in 2 years as a compound interest rate of 20% per year is closest to: (a) 20.5% (b) 21% (c) 22% (d ) 23%
> The compound interest rate per year that amounts of $1000 one year ago and $1345.60 one year hence are equivalent to is closest to: (a) 8.5% per year (b) 10.8% per year (c) 20.2% per year (d) None of the above
> At a compound interest rate of 10% per year, the amount that $10,000 one year ago is equivalent to now is closest to: (a) $8264 (b) $9091 (c) $11,000 (d) $12,100
> The time it would take for money to double at a simple interest rate of 5% per year is closest to: (a) 10 years (b) 12 years (c) 15 years (d) 20 years
> All of the following mean the same as Minimum Attractive Rate of Return except: (a) Hurdle rate (b) Inflation rate (c) Benchmark rate (d) Cutoff rate
> All of the following are noneconomic attributes except: (a) Sustainability (b) Morale (c) Taxes (d) Environmental acceptability
> Another name for noneconomic attributes is: (a) Sustainability (b) Intangible factors (c) Equivalence (d) Evaluation criterias
> All of the following are examples of noneconomic factors except: (a) Availability of resources (b) Goodwill (c) Customer acceptance (d) Profit
> Emily and Madison both invest $1000 at 10% per year for 4 years. Emily receives simple interest and Madison gets compound interest. Use a spreadsheet and cell reference formats to develop relations that show a total of $64 more interest for Madison at th
> For the following five spreadsheet functions, (a) Write the values of the engineering economy symbols P, F, A, i, and n, using a ? for the symbol that is to be determined, and (b) State whether the displayed answer will have a positive sign, a negative s
> Identify the following factors as either tangible or intangible: sustainability, installation cost, transportation cost, simplicity, taxes, resale value, morale, rate of return, dependability, inflation, acceptance by others, and ethics.
> State the purpose for each of the following six built-in spreadsheet functions. (a) PV(i%, n, A, F) (b) FV(i%, n, A, P) (c) RATE(n, A, P, F) (d) IRR(first_cell:last_cell) (e) PMT(i%, n, P, F) (f) NPER(i%, A, P, F)
> Write the engineering economy symbol that corresponds to each of the following spreadsheet functions. (a) PV (b) PMT (c) NPER (d) IRR (e) FV (f) RATE
> Last month you lent a work colleague $5000 to cover some overdue bills. He agreed to pay you in 1 month with interest at 2% for the month, thus owing you $5100. Today, when the repayment is due, he asked you to extend the loan for another month and he wo
> Your boss, whose background is in financial planning, is concerned about the company’s high weighted average cost of capital of 21%. He has asked you to determine what combination of debt equity financing would lower the company’s WACC to 13%. If the cos
> Managers from different departments in Bensen Systems, a large multinational corporation, have offered seven projects for consideration by the corporate office. A staff member for the chief financial officer used key words to identify the projects and th
> What is the weighted average cost of capital for a corporation that finances an expansion project using 40% retained earnings and 60% venture capital? Assume the interest rates are 10% for equity financing and 16% for debt financing.
> Identify the following as either equity or debt financing: bonds, stock sales, retained earnings, venture capital, short term loan, capital advance from friend, cash on hand, credit card, home equity loan. Answer: Bonds - debt; stock sales – equity; r
> To improve crack detection in military aircraft, the Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair costs by as much as $200,000 per year. If the savings sta
> Fill in the missing values (A through D) for a loan of $10,000 if the interest rate is compounded at 10% per year
> A company that manufactures purgable hydrogen sulfide monitors will make deposits such that each one is 7% larger than the preceding one. How large must the first deposit at the end of year 1 be if the deposits extend through year 10 and the fourth depos
> Last week, your friend Jeremy borrowed $200 from a pawn shop operator because he was totally broke. He was to pay the operator $230 after 1 week, but missed the payment. At first, you thought this was “no big deal,” but then started to realize that the i
> Iselt Welding has extra funds to invest for future capital expansion. If the selected investment pays simple interest, what annual interest rate would be required for the amount to grow from $60,000 to $90,000 in 5 years?
> Valley Rendering, Inc. is considering purchasing a new flotation system for grease recovery. The company can finance a $150,000 system at 5% per year compound interest or 5.5% per year simple interest. If the total amount owed is due in a single payment
> (a) At a simple interest rate of 12% per year, determine how long it will take $5000 to increase to twice as much. (b) Compare the time it will take to double if the rate is 20% per year simple interest.
> The Nicor family is planning to purchase a new home 3 years from now. If they have $240,000 now, how much will be available 3 years from now? The fund grows at a compound rate of 12% per year. Answer: F = 240,000(1+ 0.12)3 = $337,183
> TMI Systems, a company that customizes software for construction cost estimates, repaid a loan obtained 3 years ago at 7% per year simple interest. If the amount that TMI repaid was $120,000, calculate the principal of the loan.
> Durco Automotive needs a $1 million balance in its contingency fund 3 years from now. The CFO (chief financial officer) wants to know how much to deposit now into Durco’s high-yield investment account. Determine the amount if it grows at a rate of 20% pe
> State University tuition and fees can be paid using one of two plans. Early-bird: Pay total amount due one year in advance and get a 10% discount. On-time: Pay total amount due when classes start. If the cost of tuition and fees is $20,000 per year, (a)
> Bull Built, a design/build engineering company that has always given year-end bonuses in the amount of $4,000 to each of its engineers, is having cash flow problems. The president said that although Bull Built couldn’t give bonuses this year, next year’s
> 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
> A publicly traded construction company reported that it just paid off a loan that it received 1 year earlier. If the total amount of money the company paid was $1.6 million and the interest rate on the loan was 10% per year, how much money had the compan
> You developed an interest in the LCOE relation and the publicized cost of electricity of 10.27¢/kWh for this year. You wonder if the addition of 60 MW of wind-sourced electricity will make any difference in the LCOE value for this next year. You did lear
> Vebco Water and Gas received a contract for a seawater desalination plant wherein the company expected to make a 28% rate of return on its investment. (a) If Vebco invested $8 million the first year, what was the amount of its profit in that year? (b) Wh
> For the factor (F∕P,10%,43), find the percent difference between the interpolated and formula-calculated values, assuming the formula-calculated value is the correct one.
> Construct a cash flow diagram to find the present worth in year 0 of a $400 expenditure in year 3, a $900 receipt in year 4, and $100 expenses in each of years 5 and 6 at an interest rate of 15% per year.
> Construct a cash flow diagram that represents the amount of money that will be accumulated in 7 years from an initial investment of $20,000 now and $3,500 per year for 7 years at an interest rate of 8% per year.
> Look up the numerical value for the following factors from the compound interest factor tables. 1. (F∕P,10%,7) 2. (A∕P,12%,10) 3. (P∕G,15%,20) 4. (F∕A,2%,50) 5. (P∕G,35%,15)
> Bucknell, Inc. uses the calendar year as its fiscal year. Determine the total net cash flow recorded at the end of the fiscal year. Month Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Receipts, $1000 Disbursements, $1000 500 500 400 400 500 600
> The annual cash flows (in $1000 units) for Browning Brothers Glass Works are summarized. (a) Determine the total net cash flow over the 5 years. (b) Calculate the percentage of revenues represented by expenses for each year. Answer: Let Rev = Revenue
> The purchase price of Manhattan Island, where much of the city of New York is concentrated, in the year 1626 was $24. After 391 years in 2017, you wonder what the value of the land might be, provided it has appreciated in value at a rate of 6% per year,
> For each of the 2 years, what is the equivalent annual amount necessary to supply the remaining project funds?
> A solar-powered personal aircraft with VTOL capability has been under development for the past 30 years by a group of engineers and physicists. SPPAV, as the plane will be termed, is expected to be available for its final test flight in exactly 3 years f
> Assume that when your great-grandmother was 25 years old, she received an engagement ring from her husband-to-be. He paid $50 for the ring containing a single, high-quality diamond. When she passed away at the age of 90, the ring went to your grandmother
> In 1939, two people teamed up to manufacture and market electronic test equipment. By 1957, the initial capital investment from themselves and a few friends that amounted to only $80,805.12 in 1939 had increased in value to an equivalent of $1 million. A
> If the TPL did agree to fund all costs except the $3 million bond proceeds now available, determine the equivalent annual amount that must be raised in years 4 through 6 to supply all remaining project funds. Assume the TPL will not charge any extra inte
> Use economic equivalence to determine the amount of money or value of i that makes the following statements correct. $5000 today is equivalent to $4275 exactly 1 year ago at i = ___% per year. A car that costs $28,000 today will cost $____ a year from n
