Sol Sheet 3 - Du.edu.eg

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DAMEITTA UNIVERSITYFaculty of ENGINEERINGProgram/YearFirst Year Mechanical & Electrical Depts.2019-20semesterFirstCourse title:Engineering EconomySheet No.31. A manufacturer of off-road vehicles is considering the purchase of dual-axisinclinometers for installation in a new line of tractors. The distributor of theinclinometers is temporarily overstocked and is offering them at a 40%discount from the regular cost of 142. If the purchaser gets them nowinstead of 2 years from now, which is when they will be needed, what is thepresent worth of the savings per unit? The company would pay the regularprice, if purchased in 2 years. Assume the interest rate is 10% per year.Cost now 142(0.60) 85.20ଵPresent worth at regular cost 142 ሺܲ ോ ܨ ǡͳͲΨ ǡʹሻ ൌ ͳͶʹቂ(ଵା ) ቃ142(P/F,10%,2) 142(0.8264) 117.35Present worth of savings 117.35 – 85.20 32.152. The Moller Skycar M400 is a flying car known as a personal air vehicle(PAV) that is expected to be FAA-certified by December 31, 2011. The costis 985,000, and a 100,000 deposit will hold one of the first 100 “cars.”Assume a buyer pays the 885,000 balance 3 years after making the 100,000 deposit. At an interest rate of 10% per year, what is the effectivetotal cost of the PAV in year 3?F P (1 i) nF 100,000(F/P,10%,3) 885,000 100,000(1.3310) 885,000 1,018,1003. A family that won a 100,000 prize on America’s Funniest Home Videosdecided to put one-half of the money in a college fund for their child who1

was responsible for the prize. If the fund earned interest at 6% per year, howmuch was in the account 14 years after it was started?F 50,000(F/P,6%,14) 50,000(2.2609) 113,0454. One of the biggest vulnerabilities in a control system is network devices,such as Ethernet-based network switches that are located in unsecuredlocations and accessible to everyone. DeltaX switches, manufactured byDahne Security, allow the user to automatically lock and unlock the portaccess to all switches in the network. The company is considering expandingits manufacturing lines now or doing it in 3 years. If the cost nowwould be 1.9 million, what equivalent amount could the company afford to spend in3 years? The interest rate is 15% per year.F 1,900,000(F/P,15%,3)F 1,900,000(1.5209) 2,889,7105. A company that sells high-purity laboratory chemicals is consideringinvesting in new equipment that will reduce cardboard costs by bettermatching the size of the products to be shipped to the size of the shippingcontainer. If the new equipment will cost 220,000 to purchase and install،how much must the company save each year for 3years in order to justifythe investment, if the interest rate is 10% per year?A 220,000(A/P,10%,3) 220,000(0.40211) 88,4646. Red Valve Co. of Carnegie, Pennsylvania, makes a control pinch valve thatprovides accurate, repeatable control of abrasive and corrosive slurries,outlasting gate, plug, ball, and even satellite coated valves. How much canthe company afford to spend now on new equipment in lieu of spending75,000 four years from now? The company’s rate of return is 12% per year.P 75,000(P/F,12%,4) 75,000(0.6355)2

47,6637. If GHD Plastics purchases a new building now for 1.3 million for itscorporate headquarters, what must the building be worth in 10 years? Thecompany expects all expenditures to earn a rate of return of at least 18% peryear.F 1.3(F/P,18%,10) 1.3(5.2338) 6.80394( 6,803,940)8. CGK Rheosystems makes high-performance rotational viscometers capableof steady shear and yield stress testing in a rugged, compact footprint. Howmuch could the company afford to spend now on new equipment in lieu ofspending 200,000 one year from now and 300,000 three years from now,if the company uses an interest rate of 15% per year?P 200,000(P/F,15%,1) 300,000(P/F,15%3) 200,000(0.8696) 300,000(0.6575) 371,1709. Five years ago a consulting engineer purchased a building for companyoffices constructed of bricks that were not properly fired. As a result, someof the bricks were deteriorated from their exposure to rain and snow.Because of the problem with the bricks, the selling price of the building was25% below the price of comparable, structurally sound buildings. Theengineer repaired the damaged bricks and arrested further deterioration byapplying an extra-strength solvent-based RTV elastomeric sealant. Thisresulted in restoring the building to its fair market value. If the depressedpurchase price of the building was 600,000 and the cost of getting itrepaired was 25,000, what is the equivalent value of the “forcedappreciation” today, if the interest rate is 8% per year?Gain in worth of building after repairs (600,000/0.75 – 600,000) - 25,000 175,000F 175,000(F/P,8%,5) 175,000(1.4693) 257,1283

10. Metso Automation, which manufactures addressable quarter-turn electricactuators, is planning to set aside 100,000 now and 150,000 one year fromnow for possible replacement of the heating and cooling systems in three ofits larger manufacturing plants. If the replacement won’t be needed for 4years, how much will the company have in the account, if it earns interest ata rate of 8% per year?F 100,000(F/P,8%,4) 150,000(F/P,8%,3) 100,000(1.3605) 150,000(1.2597) 325,00511. Syringe pumps often fail because reagents adhere to the ceramic piston anddeteriorate the seal. Trident Chemical developed an integrated polymerdynamic seal that provides a higher sealing force on the sealing lip, resultingin extended seal life. One of Trident’s customers expects to reduce downtimeby 30% as a result of the new seal design. If lost production would have costthe company 110,000 per year for the next 4 years, how much could thecompany afford to spend now on the new seals, if it uses an interest rate of12% per year?P (110,000* 0.3)(P/A,12%,4) (33,000)(3.0373) 100,23112. China spends an estimated 100,000 per year on cloud seeding efforts, whichincludes using antiaircraft guns and rocket launchers to fill the sky withsilver iodide. In the United States, utilities that run hydroelectric dams areamong the most active cloud seeders, because they believe it is a costeffective way to increase limited water supplies by 10% or more. If the yieldsof cash crops will increase by 4% each year for the next 3 years because ofextra irrigation water captured behind dams during cloud seeding, what isthe maximum amount the farmers should spend now on the cloud seedingactivity? The value of the cash crops without the extra irrigation water wouldbe 600,000 per year. Use an interest rate of 10% per year.P 600,000(0.04)(P/A,10%,3) 24,000(2.4869)4

59,68613. The Public Service Board (PSB) awarded two contracts worth a combined 1.07 million to improve (i.e., deepen) a retention basin and reconstruct thespillway that was severely damaged in a flood 2years ago. The PSB saidthat, because of the weak economy, the bids came in 950,000 lower thanengineers expected. If the projects are assumed to have a 20-year life, whatis the annual worth of the savings at an interest rate of 6% per year?A 950,000(A/P,6%,20) 950,000(0.08718) 82,82114. The National Highway Traffic Safety Administration raised the average fuelefficiency standard to 35.5miles per gallon for cars and light trucks by theyear 2016. The rules will cost consumers an average of 434 extra pervehicle in the 2012 model year. If a person purchases a new car in 2012andkeeps it for 5 years, how much must be saved in fuel costs each year to justifythe extra cost? Use an interest rate of 8% per year.A 434(A/P,8%,5) 434(0.25046) 108.7015. In an effort to reduce childhood obesity by reducing the consumption ofsugared beverages، some states have imposed taxes on soda and other softdrinks. A survey by Roland Sturm of 7300fifth-graders revealed that if taxesaveraged 4cents on each dollar’s worth of soda, no real difference in overallconsumption was noticed. However, if taxes were increased to 18 cents onthe dollar, Sturm calculated they would make a significant difference. For astudent who consumes 100sodas per year, what is the future worth of theextra cost from 4 cents to 18 cents per soda? Assume the student consumessodas from grade 5 through graduation in grade 12. Use an interest rate of6% per year.F (0.18 – 0.04)(100)(F/A,6%,8) 14(9.8975) 138.575

16. Henry Mueller Supply Co. sells tamperproof، normally open thermostats(i.e., thermostat closes as temperature rises). Annual cash flows are shownin the table below. Determine the future worth of the net cash flows at aninterest rate of 10% per year.F (200 – 90)(F/A,10%,8) 110(11.4359) 1,257,94917. The Texas Tomorrow Fund (TTF) is a program started in 1996 in Texaswherein parents could prepay their child's college tuition when the child wasyoung. Actuaries set the price based on costs and investment earnings at thattime. Later, the Texas legislature allowed universities to set their own tuitionrates; tuition costs jumped dramatically. The cost for entering a newborn in1996 was 10,500. If the TTF fund grew at a rate of 4% per year, whiletuition costs increased at 7% per year, determine the state’s shortfall when anewborn enters college 18 years later.Fdifference 10,500(F/P,7%,18) - 10,500(F/P,4%,18) 10,500(3.3799) - 10,500(2.2058) 12,32818. A company that makes self-clinching fasteners expects to purchase newproduction-line equipment in 3 years. If the new units will cost 350,000,how much should the company set aside each year, if the account earns 10%per year?A 350,000(A/F,10%,3) 350,000(0.30211) 105,7396

2. The Moller Skycar M400 is a flying car known as a personal air vehicle (PAV) that is expected to be FAA-certified by December 31, 2011. The cost is 985,000, and a 100,000 deposit will hold one of the first 100 “cars.” Assume a buyer pays the 8

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