Homework answers / question archive / Please do hand calculations for all problems unless stated otherwise

Please do hand calculations for all problems unless stated otherwise

Economics

Share With

Please do hand calculations for all problems unless stated otherwise.
Exam # 1 ISEN 667 8 th July 2022 Summer 2022 Dear all: Enclosed is the ISEN 667, Exam 1, for your review. Please upload your solutions to CANVAS by 12:00 PM (noon, CDT) on Friday, 15th July 2022. Please note that all calculations must clearly be stated and legibly shown. This exam consists of 7 problems, and the total points for each problem are stated in parentheses. Please note that partial credits are given to correct partial steps. No late submissions are graded. Please do not hesitate to contact us should you need any assistance. Problem 1 (10 Points): "Your Engine or Mine" is a local manufacturer of four-stroke single-cylinder engines in College Station. This year (year 1), the cost for machining the engine block is $600. The company expects this cost to decrease based on a new law passed by the US Congress. If the cost in year two and each year thereafter decreases by $50, what is the equivalent annual cost for four years at an interest rate of 10% per year compounded quarterly? Problem 2 (10 Points): At i = 12% per year compounded semiannually, determine the present worth of the cash flows shown below. Problem 3 (10 Points): The "Hot Air Balloon" is a manufacturer of high-altitude balloons in Waco, Texas. The company is planning to expand its operations in 2023 and interested in securing a loan for Tex-Mex National Bank of Waco. Four banks were visited, and their interest rates for the 15-year loan were recorded. As someone knowledgeable about the engineering economy and capital investment justification, which bank would you recommend to Hot Air Balloon corporation? Bank A) 1% per month compounded monthly Bank B) 11.58% per year compounded continuously Bank C) 2.95% pe quarter compounded monthly Bank D) 5.92% per six months compounded semiannually Problem 4 (10 Points): Calculate a) the present worth (P) b) The future value (F) of the below diagram. All deposits are made quarterly, and the interest rate is 0.5% per month compounded monthly. (Each part carries 5 points) Problem 5 (20 Points): Five years ago, a person borrowed $100,000 at an interest rate of 8% per year compounded semiannually. When the money was borrowed, he stated that he would pay it over ten years by semi-annual payments. He made his sixth payment today and has decided to refinance the balance and pay it over the next two years. If his new interest rate is 5% per year compounded monthly, what will be his new monthly payment? Problem 6 (20 points): Product A has a first cost of $30,000, an operating cost of $8,000 per year, and a $2,000 salvage value after 10 years. Alternative B will cost $55,000 with an operating cost of $6,000 per year and a salvage value of $10,000 after 10 years. At a MARR of 10% per year, which product should be selected? Problem 7 (20 Points): Compare the machines below using present worth analysis at i = 8% per year. Assume the study period is 15 years. Machine A Machine B First cost, $ −50,000 −40,000 Annual cost, $/year −7,000 −4,000 Salvage value, $ 8,000 5,000 Life, years 5 15