IE 492
Homework- Engineering Economy
Part 11
| 1.) A credit card company charges 18% interest a year.
What is the effective interest rate if 1.5% is charged monthly on the outstanding balance? |
| 2.) The following data has been compiled for a prospective
capital investment. Initial cost $30,000 Usage period 5 years Salvage value $5,000 Annual receipts $24,000 Annual expense $12,000 a.) If the company wants 10% a year rate of return should it proceed? b.) What approximate rate of return does this project make? |
| 3.) A machine costing $ 100,000 is being considered to
be used to package a product for the next 6 years. Expected is that it will have a salvage
value of $ 10,000 and annual operating costs of $25,000 a year. Another machine costing
$150,000 can also be used. It is anticipated to have a $40,000 salvage value at the end of
six years and cost $8,000 a year to run. If the cost of money is 12% a year. a.) What would be the annual cost to use each of those machines? b.) Which would be cheaper to use? |
| 4.) An individual approaches the ABC Loan Company for a
$1,000 loan to be repaid in 24 monthly payments. It states that the interest charge is
1.5% a month. The monthly payment is figured to be: Loan $1,000 Administrative Cost 25 Insurance 5 To be repaid 1030 Interest: 1030 (24) (.015)= 371 Total: 1030 + 371 = 1401 1401/24 = $58.50 What is the effective annual interest rate being paid? |
5.) Design I Design 2 Design 3 Capital Investment 28000 16000 23500 Annual Income 5500 3300 4800 Market Value 1500 0 500 Usage Period Years 10 10 10 Which would be the most economical alternative if the cost of money is 15% |
6.) There is a vacant lot that can be utilized in the following manner. Build Gas Station Build Ice Crearn Stand Initial Required Investment 80,000 12,000 Annual Income 11,000 16,000 Annual Expense 3,000 5,000 Usage Period -Years 20 20 Salvage Value 0 0 If a minimum of 6% rate of return is desired, which alternative should be selected? |