Engineering Economy 17th. Edition by William G. Sullivan, Elin M. Wicks, C. Patrick Koelling | 9780134870069 | 0134870069 | Holooly

Engineering Economy [EXP-20136]

408 SOLVED PROBLEMS

Question: 5.A

“The higher the MARR, the higher the price that a company should be willing to pay for equipment that reduces annual operating expenses.” Do you agree with this statement? Explain your answer.

Verified Answer:

No. A higher MARR reduces the present worth of fut...

Question: 7.M

A $125,000 tractor-trailer is being depreciated by the SL method over five years to a final BV of zero. Half year convention does not apply to this asset. After three years, the rig is sold for (a) $70,000 or (b) $20,000. If the effective income tax rate is 40%, what is the net cash inflow from

Verified Answer:

BV_{3}

= $125,000 – (3)($125,000/5...

Question: 4.H

A 12-cylinder heavy-duty diesel engine will have a guaranteed residual value of $1,000 in five years. Today (year 0) the equivalent worth of this engine is how much if the interest rate is 9% per year? (4.6)

Verified Answer:

We are given F ($1,000), N (5 years) and i (9%) an...

Question: 6.PP

A 30-year fixed rate–mortgage is available now at 7% APR. Monthly payments (360 of them) will be made on a $200,000 loan. The realtor says that if you wait several months to obtain a mortgage, the APR could be as high as 8%, “and the monthly payments will jump by 14%.” Is the realtor’s claim true?

Verified Answer:

A = $200,000(A/P, 7%/12, 360) = $1,330.60 per mont...

Question: 4.G.G

A 45-year-old person wants to accumulate $750,000 by age 70. How much will she need to save each month, starting one month from now, if the interest rate is 0.5% per month? (4.7)

Verified Answer:

N = 12 × 25 = 300 months A = $750,000 (A/F, 0.5%, ...

Question: 4.VVV

A bank offers a nominal interest rate (APR) of 6%, continuously compounded. What is the effective interest rate?

Verified Answer:

i = e

^{0.06}

− 1 = 0.0618 or 6.18...

Question: 3.G

A biotech firm is considering abandoning its old plant, built 23 years ago, and constructing a new facility that has 50% more square footage. The original cost of the old facility was $300,000, and its capacity in terms of standardized production units is 250,000 units per year. The capacity of the

Verified Answer:

The construction cost of the original laboratory a...

Question: 4.Z

A certain college graduate, Sallie Evans, has $24,000 in student-loan debt at the end of her college career. The interest rate on this debt is 0.75% per month. If monthly payments on this loan are $432.61, how many months will it take for Sallie to repay the entire loan? (4.6)

Verified Answer:

Here we are given P = $24,000, A = $432.61 per mon...

Question: 4.UU

A certain fluidized-bed combustion vessel has an investment cost of $100,000, a life of 10 years, and negligible market (resale) value. Annual costs of materials, maintenance, and electric power for the vessel are expected to total $10,000. A major relining of the combustion vessel will occur

Verified Answer:

P_{0}

= − $100,000 – $10,000 (P/A,...

Question: 6.RR

A certain U.S. government savings bond can be purchased for $7,500. This bond will be worth $10,000 when it matures in 5 years. As an alternative, a 60-month certificate of deposit (CD) can be purchased for $7,500 from a local bank, and the CD yields 6.25% per year. Which is the better investment

Verified Answer:

Bond : FW = $10,000 with certainty (IRR = 5.922%) ...

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