CE 303 ~ Introduction to Construction Engineering
University of Kentucky
ASSIGNMENT No. 10: Engineering Economics 2
Due Date: 04/26/2011
- Assume that you are planning to invest money at 7% per year as shown by the increasing gradient below. Further, you expect to withdraw according to the decreasing gradient shown. Find the net present worth and equivalent annual series for the entire cash flow sequence and interpret the results.
- The effective interest rate is 19.56%. If there were 12 compounding periods per year, what is the nominal interest rate?
- An individual makes five annual deposits of $2,000 in a savings account that pays interest as at a rate of 4% per year. One year after making the last deposit, the interest rate changes to 6% per year. Five years after the last deposit, the accumulated money is withdrawn from the account. How much is withdrawn?
- An industrial firm must pay a local jurisdiction the cost to expand its sewage treatment plant. In addition, the firm must pay $12,000 annually toward the plant operating costs. The industrial firm will pay money into a fund, which earns 5% per year, to pay its share of the plant operating costs forever. What is the amount to be paid into the fund?
- A manufacturer purchased $15,000 worth of equipment with a useful life of six years and a $2,000 salvage life at the end of the six years. Assuming a 12% interest rate, what is the equivalent uniform annual cost (EUAC)?
- Two alternatives are being considered:
A / B
Initial Cost / $500 / $800
Uniform Annual Benefit / $140 / $200
Useful Life / 8 / 8
What is the Benefit Cost Ratio of the difference between the alternatives, based on 12% interest rate?
- A former student of an engineering department wishes to donate to the department’s scholarship fund. Three options are available:
Plan A: $60,000 now
Plan B: $15,000 per year for 8 years beginning year 1 from now
Plan C: $50,000 three years from now and another $80,000, five years from now.
From the department’s perspective, it wants to select the plan that maximizes the buying power of the dollars received. The department head asked the engineering professor evaluating the plans to account for inflation in the calculations. If the donation earns a real 10% per year and the inflation rate is expected to average 3% per year, which plan should be accepted?
- Special tools for the manufacture of finished plastic products cost $15,000 and have an estimated $10000 salvage value at the end of an estimated three-year useful life and recovery period. What is the value of the third-year straight-line depreciation?
- With the information of #8. What is the value of the first year Modified-Accelerated-Cost-Recovery-system (MACRS) depreciation?
- An engineer is considering the purchase of an annuity that will pay $1000 per year for ten years. The engineer feels he should obtain a 5% rate of return on the annuity after considering the effect of an estimated 6% inflation per year. What should he be willing to pay to purchase the annuity?
Spring 2011