IEEN 5329 Advanced Engineering Economy Analysis Fall 2020 Test 1 Name ________________________________ Score _____________________________ Please use only use the given space and show all the work leading to your answer in proper organized format. (20 points) If you want to have $300,000 in your saving account in ten years, how much do you need to deposit now if the interest rate is 12% a year compounded quarterly? the interest rate is 12% a year compounded continuously? (20 points) Consider the following two mutually exclusive projects: n Project A Project B 0 -$10,000 -$12,000 1 $4000 $X 2 $4000 * 1.1 $X 3 $4000 * 1.1 *1.1 $(X-1000) 4 $4000 *1.1 *1.1 *1.1 $(X-1500) 5 $4000 * 1.1 *1.1 *1.1 *1.1 $(X-2000) 6 $2000 $(X-2500) The life cycle of project A and B is the same as 6 years. What value of X would make the decision maker indifferent between A and B at an interest rate of 10%? (20 points) The maintenance cost for an equipment has been $1,000 per year for the past seven years. The

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IEEN 5329 Advanced Engineering Economy Analysis Fall 2020 Test 1 Name ____ Score _ Please use only use the given space and show all the work leading to your answer in proper organized format

Economics Sep 29, 2020

IEEN 5329 Advanced Engineering Economy Analysis

Fall 2020

Test 1

Name ________________________________ Score _____________________________

Please use only use the given space and show all the work leading to your answer in proper organized format.

(20 points) If you want to have $300,000 in your saving account in ten years, how much do you need to deposit now if

the interest rate is 12% a year compounded quarterly?
the interest rate is 12% a year compounded continuously?

(20 points) Consider the following two mutually exclusive projects:

n	Project A	Project B
0	-$10,000	-$12,000
1	$4000	$X
2	$4000 * 1.1	$X
3	$4000 * 1.1 *1.1	$(X-1000)
4	$4000 1.1 1.1 *1.1	$(X-1500)
5	$4000 * 1.1 1.1 1.1 *1.1	$(X-2000)
6	$2000	$(X-2500)

The life cycle of project A and B is the same as 6 years. What value of X would make the decision maker indifferent between A and B at an interest rate of 10%?

(20 points) The maintenance cost for an equipment has been $1,000 per year for the past seven years. The interest rate was 5% for the first three years, 6% for the fourth and fifth years, and 7% for the last two years. What is the equivalent maintenance cost at now?
(20 points) Calculate the present worth of the following cash flow, if the interest rate is 8% per year.

Year	Cash Flow, $
0	-6,000
1-4	0
5-8	2000
9-11	0
12	-1000
13	-600
14	-200
15	200
16	600

(20 points) Someone who is saving for his retirement plans to deposit $1500 every quarter, starting one quarter from now, into an investment account. If the account pays interest at 6% per year, compounded semiannually, what is the total she will have at the end of 25 years?

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