Question: To attract new customers, EP Employees Credit

> 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

> Identify the following as cash inflows or outflows to a privately-owned water company: well drilling, maintenance, water sales, accounting, government grants, issuance of bonds, energy cost, pension plan contributions, heavy equipment purchases, used eq

> Find the numerical value of the following factors using (a) linear interpolation and (b) the appropriate formula. 1. (F∕P,18%,33) 2. (A∕G,12%,54)

> Find the numerical value of the following factors by (a) linear interpolation, (b) using the appropriate formula, and (c) a spreadsheet function. 1. (F∕A,19%,20) 2. (P∕A,26%,15)

> 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. Year Cash Flow, $ x 300 300 300 0123 Year 4567 Cash Flow, $ 300 300 300 X

> Claude is a fourth-year engineering university student who has just been informed by his instructor that he made a very low grade on his Spanish language final test for the year. Though he had a passing score prior to the final, his final grade was so lo

> After starting the wall and roof construction on a custom-designed home, FD, the prime contractor, realized he was not going to make the big profit that he had anticipated due to the many unique features of the home for which he had not correctly estimat

> You are a well-paid engineer with a well-established international corporation. In planning for your retirement, you are optimistic and expect to make an investment of $10,000 in year 1 and increase this amount by 10% each year. How long will it take for

> A systems engineer who invested wisely can retire now because she has $2,000,000 in her self-directed retirement account. Determine how many years she can withdraw (a) $100,000 per year, or (b) $150,000 per year (beginning 1 year from now) provided her a

> McCarthy Construction is trying to bring the company-funded portion of its employee retirement fund into compliance with HB-301. The company has already deposited $500,000 in each of the last 5 years. If the company increases its deposits beginning in ye

> United Fruits now offers volume discounts by the 10-kilogram (10-kilo) pack to small, as well as large, supermarket chains for organically grown in-season fruit shipped directly from the orchard. Over the last 8 years, the food market chain Coop- For All

> Southwestern Moving and Storage wants to have enough money to purchase a new tractor-trailer in 3 years. If the unit will cost $250,000, how much should the company set aside each year provided the account earns 9% per year?

> The annual worth for years 1 through 8 of the cash flows shown is $30,000. What is the amount of x, the cash flow in year 3, at i = 10% per year? Solve using (a) tabulated factors, and (b) a spreadsheet. 0 ㅏ 2000 2 2200 3 4 2x 5 2800 6 3000 7 3200 8

> The future worth in year 8 for the cash flows shown is $20,000. At an interest rate of 10% per year, what is the value, x, of the cash flow in year 4? 0 1 1000 2 1200 3 1400 4 5 1800 6 2000 7 2200 8 2400

> The Pedernales Electric Cooperative estimates that the present worth now of increased revenue from an investment in renewable energy sources is $12,475,000. There will be no new revenue in years 1 or 2, but in year 3 revenue will be $250,000, and thereaf

> A company that manufactures general-purpose transducers invested $2 million 4 years ago in high-yield junk bonds. If the bonds are now worth $2.8 million, what rate of return per year did the company make on the basis of (a) simple interest, and (b) com

> A build-to-operate (BTO) company signed a contract to operate Alamosa County industrial wastewater treatment plants for the next 20 years. The contract will pay the company $2.5 million now and amounts increasing by $200,000 each year through year 20. At

> In order to make CDs look more attractive as an investment than they really are, some banks advertise that their rates are higher than their competitors’ rates; however, the fine print says that the rate is based on simple interest. If you were to deposi

> A 5-year plan to raise extra funds for public schools involves an “enrichment tax” that will raise $56 for every student the first year, increasing by $1 per student per year thereafter. There are 50,000 students in the district in year one, 51,000 in ye

> El Paso Water is planning to install wind turbines to provide enhanced evaporation of reverse osmosis concentrate from its inland desalting plant. The company will spend $1.5 million in year 1 and $2 million in year 2. Annual maintenance is expected to c

> Determine the numerical value of the following factors using (a) linear interpolation, (b) the formula, and (c) the spreadsheet function from Figure 2-9. Figure 2-9 1. (P∕F,8.4%,15) 2. (A∕F,17%,10) 1 2 3 4 5 6 7 8

> List three evaluation criteria besides the economic ones for selecting the best automobile to purchase. Answer: The color I like, best fuel rating, roomiest, safest, most stylish, fastest, etc.

> A capital investment firm placed $1.5 million 2 years ago to acquire part-ownership in an innovative chip making company. How long will it take from the date of their initial investment for their share of the chip company to be worth $3 million, if the c

> Identify at least three noneconomic attributes that may be used as evaluation criteria in the decision making process.

> Define the term measure of worth. Identify three different commonly-applied measures.

> When faced with different alternatives, there are many criteria that can be used to identify the best one. What is the tangible criterion that is usually used in an engineering economic analysis?

> AutomationDirect, which makes 6-inch TFT color touch screen HMI panels, is examining its cash flow requirements for the next 5 years. The company expects to replace office machines and computer equipment at various times over the 5-year planning period.

> Determine the equivalent annual worth for years 1 through 10 of a uniform series of payments of $20,000 that begins in year 3 and ends in year 10. Use an interest rate of 10% per year. Also, write the single-cell spreadsheet function to find A.

> Costs associated with the manufacture of miniature high-sensitivity piezoresistive pressure transducers is, $73,000 per year. A clever industrial engineer found that by spending $16,000 now to reconfigure the production line and reprogram two of the robo

> A commercial real estate developer plans to borrow money to finance an upscale mall in an exclusive area of the city. The developer plans to get a loan that will be repaid with uniform payments of $400,000 over a 15-year period beginning in year 2 and en

> Determine the size of your investment account 30 years from now (when you plan to retire) if you deposit $12,000 each year, beginning 1 year from now, and the account earns interest at a rate of 10% per year.

> Atlas Long-Haul Transportation is considering installing Valutemp temperature loggers in all of its refrigerated trucks for monitoring temperatures during transit. If the systems will reduce insurance claims by $100,000 in each of the next 2 years, how m

> What is the present worth of an expenditure of $25,000 in year 8 if the interest rate is 10% per year?

> A rotary engine is the essence of a vertical takeoff and landing (VTOL) personal aircraft known as the Moller Skycar M400. It is a flying car known as a personal air vehicle (PAV) and it is expected to make its first untethered flight in 2020. The PAV ha

> Dubai Works manufactures angular contact ball bearings for pumps that operate in harsh environments. The company invested $2.4 million in a process that resulted in net profits of $760,000 per year for five consecutive years. What rate of return did the

> A start-up company that makes robotic hardware for CIM (computer integrated manufacturing) systems borrowed $1 million to expand its packaging and shipping facility. The contract required the company to repay the lender through an innovative mechanism ca

> A northern California consulting firm wants to start saving money for replacement of network servers. If the company invests $5000 at the end of year 1 but decreases the amount invested by 5% each year, how much will be available 5 years from now at an e

> Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million t

> El Paso Water (EPW) purchases surface water for treatment and distribution to EPW customers from the County Water Improvement District during the irrigation season. A new contract between the two entities resulted in a reduction in future price increases

> A civil engineer planning for her retirement places 10% of her salary each year into a high-technology stock fund. If her salary this year (end of year 1) is $160,000 and she expects her salary to increase by 3% each year, what will be the future worth o

> Calculate the present worth of a geometric gradient series with a cash flow of $35,000 in year 1 and increases of 5% each year through year 6. The interest rate is 10% per year.

> How much money should a bank be willing to loan a real estate developer who will repay the loan by selling seven lakefront lots at $120,000 each 2 years from now? Assume the bank’s interest rate is 10% per year. Answer: P = 7(120,000)(P/F,10%,2) =

> Assume you were asked to prepare a table of compound interest factor values (like those in the back of this book) used in calculating the present worth of a geometric gradient series. Determine the two values for n = 1 and 2 for an interest rate of 10% p

> The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $500,000. If the gradient increase each year, G, is $3,000, determine the cash flow in year 1 at an interest rate of 10% per year.

> Tacozza Electric, which manufactures brush dc servo motors, budgeted $95,000 per year to pay for specific components over the next 5 years. If the company expects to spend $55,000 in year 1, how much of a uniform (arithmetic) increase each year is the co

> Bodine Electric, based in Des Moines, Iowa, USA, makes gear motors with a three-stage, selectively hardened gearing cluster that is permanently lubricated. If the company borrows $20 million for a new distribution facility in Europe, how much must it pay

> Apple Computer wants to have $2.1 billion available 5 years from now in order to finance initial production of a device that, based on your behavior, will learn how to monitor and control nearly all of the electronic devices in your home, such as thermos

> For the cash flows below determine the amount in year 1, if the annual worth in years 1 through 9 is $3500 and the interest rate is 10% per year. Year 1 2 3 4 5 6 7 8 9 Cost, A A+40 A+80 A+120 A+160 A+200 A+240 A+280 A+320 $1000

> A low-cost noncontact temperature measuring tool may be able to identify railroad car wheels that are in need of repair long before a costly structural failure occurs. If the BNF railroad saves $100,000 in year 1, $110,000 in year 2, and amounts increasi

> For the cash flow revenues shown below, find the value of G that makes the equivalent annual worth in years 1 through 7 equal to $500. The interest rate is 10% per year. Year Cash Flow, $ 0 1 2 3 200 200 + G 200+ 2G Year 4 5 6 7 Cash Flow, $ 200 + 3G

> Solar Hydro manufactures a revolutionary aeration system that combines coarse and fine bubble aeration components. This year (year 1) the cost for check valve components is $9,000. Based on closure of a new contract with a distributor in China and volume

> NMTeX Oil owns several gas wells in Carlsbad, NM. Revenue from the wells has been increasing according to an arithmetic gradient for the past 5 years. The revenue in year 1 from well no. 24 was $390,000 and it increased by $15,000 each year thereafter. D

> An arithmetic cash flow gradient series equals $500 in year 1, $600 in year 2, and amounts increasing by $100 per year through year 9. At i = 10% per year, determine the present worth of the cash flow series in year 0.

> Pressure Systems, Inc. manufactures high-accuracy liquid level transducers. It is investigating whether it should update in-place equipment now or wait and do it later. If the cost now is $200,000, what will be the equivalent amount 3 years from now at a

> A cash flow sequence starts in year 1 at $4000 and decreases by $300 each year through year 9. Determine (a) the value of the gradient G; (b) the amount of cash flow in year 5; and (c) the value of n for the (P∕G,i%,n) factor.