Assignment#2(EngineeringEconomy)

1.Standby power for water utility pumps and other electrical devices are
provided by dieselpowered generators. As an alternative, the utility can use
naturalgastopowerthegenerators,butitwillbeafewyearsbeforethegasis
available at remote sites. The utility estimates that by switching to gas, it will
save$22,000peryear,starting3yearsfromnow.Ataninterestrateof8%per
year, determine the present worth in year 0 of the projected savings that will
occurinyears3through10.

2.Two engineering graduates who recently got married are planning for their
earlyretirement20yearsfromnow.Theybelievethattheywillneed$2,000,000
inyear20.Theirplanistoliveononeoftheirsalariesandinvesttheother.They
alreadyhave$25,000intheirinvestmentaccount.
(a)Howmuchwilltheyhavetoinvesteachyeariftheaccountgrowsatarateof
10%peryear?
(b)Ifthemaximumtheyhaveavailabletoinvesteachyearis$40,000,willthey
reachtheirgoalof$2millionbyyear20?

3.Assumeyouplantostartanannuityplanbymakingyourfirstdepositnow.If
you make annual deposits of a uniform amount A into the account that earns
interestatarateof7%peryear,howmanyyearsfromnowwillitbeuntilthe
valueoftheaccountisequalto10timesthevalueofasingledeposit?

4.A company that manufactures airoperated drain valve assemblies budgeted

$74,000 per year to pay for plastic components over a 5year period. If the
companyspentonly$42,000inyear1,whatuniformannualamountshouldthe
companyexpecttospendineachofthenext4yearstoexpendtheentirebudget?
Assumethecompanyusesaninterestrateof10%peryear.

5.Calculate the annual cost in years 1 through 9 of the following series of

disbursements.Useaninterestrateof10%peryear.

Year
Disbursement,$
Year
Disbursement,$
0
5000
5
7500
1
5500
6
8000
2
6000
7
8500
3
6500
9
9000
4
7000
9500