Mapua Institute of Technology

School of Electrical, Electronics and Computer Engineering

EE40

Engineering Economy
Assignment#1

Chapter 1
May 2, 2016
Date Submitted

Name: Yambao, Karen Alyssa M.

Class #
Course &Sec: EE40/B7

GRADE

Dr. Catherine S. Salvador

Professor

Group#6

Members:
Class #

Names
ANDAYA, Florence
BACASNOT, Mark Cavin
MENDOZA, ARVIN

1.13 When the inflation rate is expected to be 8% per year, what is the market
interest rate likely to be?

 The market interest rate is usually 3-4% above the expected inflation rate.
Therefore,
Market rate range=3+8 to 4+8= 11% to 12% per year
1.22 For a company that uses a year as its interest period, determine the net cash
flow that will be recorded at the end of the year from the cash flows shown.
Month
Receipts ($1000)
Disbursements ($1000)
Net CF ($1000)
Jan
500
Feb
800
Mar
200
Apr
120
May
600
June
900
July
800
Aug
700
Sept
900
Oct
500
Nov
400
Dec
1800
Net Cash Flow = $2, 920

300
500
400
400
500
600
300
300
500
400
400
700

+200
+300
-200
-280
+100
+300
+500
+400
+400
+100
0
+1100

($2,920,000)

1.35 A solid waste disposal company borrowed money at 10% per year interest to
purchase new haulers and other equipment needed at the company owned landfill
site. If the company got the loan 2 years ago and paid it off with a single payment
of $4,600,000, what was the principal amount P of the loan?
$4,600,000 = P(1+0.10)(1+0.10)
P = $3, 801,653
1.54 The time it would take for a given sum of money to double at 4% per year
simple interest is closest to:
( a ) 30 years ( b ) 25 years
( c ) 20 years ( d ) 10 years
2P = P+P(n)(0.4)

1=0.04n
n = 25
answer: b
CASE STUDY (RENEWABLE ENERGY)
1. If you wanted to know more about the new arrangement with the wind farm
in south Texas for the additional 60 MW per year, what types of questions
would you ask of a staff member in your first meeting with him or her?
How much of PECs generation capacity should be from renewable
sources, especially given the environmental issues with coal-generated
electricity and the rising costs of hydrocarbon fuels?
Could the additional 60 MW be enough to sustain the electricity needs
of people within its vicinity? If so, for how long?
Wind energy as we know, is seasonal it varies with the changes of
weather how reliable is your additional power if it comes from the
wind?
Renewable source of energy is expensive and in this case you are
using the wind energy, how many windmill equipment will be needed
to acquire the additional 60 MW per year? And how much will the
consumer have to pay for these?
2. Much of the current generation capacity of PEC facilities utilizes coal and
natural gas as the primary fuel source. What about the ethical aspects of the
governments allowance for these plants to continue polluting the
atmosphere with the emissions that may cause health problems for citizens
and further the effects of global warming? What types of regulations, if any,
should be developed for PEC (and other generators) to follow in the future?
Currently, there are improvements on the use of coal. The government
introduce the clean coal technology, with this the effects of coal in the
environment can be minimized with having still its efficiency.

 The government has issued some guidelines in terms of the health and
safety procedures with the utilization of the coal and natural gas.
According to Bed Circular No.1, Series of 1978 COAL MINE
SAFETY RULES AND REGULATIONS, there are guidelines to be
followed by the mining industry such as ventilation, escape ways,
allowable limits of toxic and explosive gases as well as health and
sanitation facilities.

3. You developed an interest in the LEC relation and the publicized cost of
electricity of 10.27/kWh for this year. You wonder if the addition of 60
MW of wind-sourced electricity will make any difference in the LEC value
for this next year. You did learn the
Following: This is year t _ 11 for LEC computation purposes
n _ 25 years
i _ 5% per year
E11 _ 5.052 billion kWh
LEC last year was 10.22 /kWh (last years breakeven cost to customers)
From these sketchy data, can you determine the value of unknowns in the
LEC relation for this year? Is it possible to determine if the wind farm
addition of 60 MW makes any difference in the electricity rate charged to
customers? If not, what additional information is necessary to determine the
LEC with the wind source included?
11
P + A +C
LEC approximation uses (1.05) = 0.5847, X = 11 11 11 and
LEC last year = 0.1022

X (0.5847)

0.1027 = 0.1022+ (5.052 B)(0.5847)

X = $2.526 million