Engineering Economy |
Practice Problems-Set I |
| 1.What is the
present value of a $5000 note due 10 years from today? Assume 10% per year interest.
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| 2 What amount
diposited today is equivalent to $25,000 in 3 years if interest is 10% per year?
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| 3.If a person
borrows $8000 from his bank at 12% per year for three years how much must he repayat that
time if the a) Interest is Compounded b)Interest is compounded quarterly Suppose the bank wanted three equal repayments at the end of each year. Assume interest is compounded annually.
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| 4. If Sears
Roebuck charges 1% interest a month on a customer's outstanding balance and this amounts
to $10,000 on the average for the year a) What is the simple Interest being charged? b) What is the effective interest rate? c) How much would the customer's annual interest cost be?
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| 5. If an
individual deosits $1500 a year for 25 years into a savings account paying 6% per year,
how much would be accumulated?
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| 6. If the
person took the accumulated funds (calculated in problem 5 above ) and bought a 20 year
annuity paying 10% per year, how much would he receive each year?
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| 7. A company
is planning to purchase a machine for $75,000 which is expected to last 10 years,cost
$4000 a year to run and have a zero salvage value at that time. Assume capital cost to be
10% per year. What would it cost to operate the machinefor a year? Suppose there was a $20,000 salvage value assumed, what would the annual operating cost then be?
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| 8. If a
product required an outlay of $5000 initially, $2000 at the end of the first year, $4000
at the end of the second year and $4000 at the end of the 5th year. a) How much would have to be set aside initially(capitalized cost) to fund this? b) What would be the equivalent annual cost if the project lasts for 10 years? |