Contemporary Engineering Economics 6th. Edition by Chan S. Park | 9781292109091 | 1292109092 | Holooly

Contemporary Engineering Economics [EXP-19776]

197 SOLVED PROBLEMS

Question: 3.2

$24 for Manhattan a Good Deal? Peter Minuit of the Dutch West India Company purchased the island of Manhattan from Native Americans on May 26, 1626 for goods valued at 60 Dutch guilders, which was estimated to be the equivalent of $24 (or $680 today). Instead of purchasing the island,

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Given: P = $24, i = 8% per year, and N = 389 years...

Question: 4.20

A 5/1 Hybrid Adjustable Mortgage Plan. Suppose that you finance a home on the basis of a 5/1 hybrid mortgage (five-year fixed/adjustable) plan over 30 years. The $100,000 hybrid loan plan offers an initial rate of 6.02% fixed for 60 months. The loan rate would be adjusted thereafter every 12

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Given: Varying annual mortgage rates and N = 30 ye...

Question: 13.8

A Conceptual Real-Options Decision Framework When You Can Resolve Uncertainty by Waiting Consider a project that requires a $200 million investment and expects to last three years with the following cash flows: Demand Probability Annual Cash Flow Good 0.25 $250 million Moderate 0.30 $100 million

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Given: Three demand scenarios, required investment...

Question: 5.2

A Conventional Payback Period for the Computer Process-Control System Project. Consider the cash flows given in Example 5.1. Determine the payback period for this computer process-control system project.

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Given: Initial cost = $650,000 and annual net bene...

Question: 10.6

A Project Requiring Multiple Assets. Langley Manufacturing Company (LMC), a manufacturer of fabricated metal products, is considering purchasing a new computer-controlled milling machine to produce a custom-ordered metal product. The following summarizes the relevant financial data

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Given: Preceding cash flow elements,

t_{m}[...

Question: 13.5

A Put-Option Valuation. Suppose the value of an asset today is $50, and it is known that in one year the asset price will go up by u = 1.2 or down by d = 0.8 (i.e., uS = $60 and dS = $40, respectively). What is the value of a European put option with an exercise price of $55 that expires in T = 1

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Given: u = 1.2, d = 0.8, T = 1, r = 6%,

S_{...

Question: 4.11

A Ramp Cash Flow Function with Continuous Compounding. Consider a situation in which money flows according to the diagram shown below (Figure 4.13). Here, a cash flow increases uniformly over two years to accumulate $10,000. (a) What is the expression for the present worth at 10% interest

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Given: C = $10,000 over 2 years, r = 6% per year, ...

Question: 13.13

A Real-World Way to Manage Real Options^5 Suppose a firm is considering building a new chemical plant. Permits and preparation for the plant cost $60 million. At the end of year 1, the firm has the right to invest $400 million on the design phase. Upon completion of the design, the firm has

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(a) Traditional NPW calculation: Using a tradition...

Question: 5.6

A Robot Development Project and Its Evaluation. Higgins Corporation (HC), a Detroit-based robot-manufacturing company, has developed a new robot called Helpmate, which incorporates advanced technology, such as vision systems, tactile sensing, and voice recognition. These features allow the robot

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Given: Preceding cash flows and MARR = 15% per yea...

Question: 13.12

A Scale-Up Option Valuation Using the Binomial Lattice Approach A firm has undertaken a project in which the firm has the option to invest in additional manufacturing and distribution resources (or scale up). The project’s current value is V0 = $10M. Anytime over the next three years, the firm

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We will solve the problem in two steps, the first ...

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