CHAPTER 2 2.

57 The F_G factor values can be derived by

multiplying:
2.54 The amount of money that Diamond Systems can (a) ( P_F ) and ( A_G ) factor values
spend now for improving productivity in lieu of (b) ( F_P ) and ( A_G ) factor values
spending $30,000 three years from now at an interest (c) ( P_F ) and ( P_G ) factor values
rate of 12% per year is closest to:
(d ) ( F_P ) and ( P_G ) factor values
(a) $15,700
(b) $17,800 Ans: (D)
(c) $19,300
(d ) $21,350

Ans: 2.58 At i = 4% per year, A for years 1 through 6 of the

cash flows shown below is closest to:
𝑃 = 30,000(𝑃/𝐹, 3,12%) = $21,354 (D) (a) $300
(b) $560
(c) $800
2.55 A manufacturing company spent $30,000 on a (d ) $1040
new conveyor belt. If the conveyor belt resulted in cost
savings of $4200 per year, the length of time it would
take for the company to recover its investment at 8%
per year is closest to:
(a) Less than 9 years
(b) 9 to 10 years
(c) 11 to 12 years
(d ) Over 12 years

Ans:

30,000 = (4,200)(𝑃/𝐴, 𝑛, 8%)

(𝑃/𝐴, 𝑛, 8%) = 7.1429~Based on Table 8%, n=11
(C) Ans:

𝐴 = 800 − 100(𝐴/𝐺, 6,4%)

2.56 Levi Strauss has some of its jeans stone-washed 𝐴 = 800 − 100(2.3857) = 561.43 (B)
under a contract with independent U.S. Garment Corp.
If U.S. Garment’s operating cost per machine is
$22,000 for year 1 and increases by a constant $1000
2.59 The value of the factor ( P/F , i ,10) can be found
per year through year 5, what is the equivalent uniform
by getting the factor values for (P/F,i,4) and ( P/F ,
annual cost per machine for the 5 years at an interest
i ,6) and:
rate of 8% per year?
(a) Adding the values for ( P/F , i ,4) and ( P/F , i ,6)
(a) $23,850
(b) $24,650 (b) Multiplying the values for ( P/F , i ,4) and
(c) $25,930 ( P/F , i ,6)
(d ) Over $26,000 (c) Dividing the value for ( P/F , i ,6) by the value
for ( P/F , i ,4)
Ans: (d ) None of the above
P: 22,000 Ans: B
G: 1,000

n: 5, i:8% 2.60 A small construction company is considering the

𝐴 = 22,000 + (1000)(𝐴/𝐺, 5,8%)
𝐴 = 22,000 + (1000)(1.8465) = 23,846.5 (A)
purchase of a used bulldozer for $61,000. If the
company purchases the dozer now, the equivalent
future amount in year 4 that the company is paying for
the dozer at 4% per year interest is closest to:
(a) $52,143 𝐴 = 1.5𝑀(𝐴/𝐹, 20,10%)
(b) $65,461
(c) $71,365 𝐴 = 1.5𝑀(0.01746) = 26,190 (A)
(d ) Over $72,000

Ans:
2.64 The cost of a border fence is $3 million per mile.
𝐹 = 61,000(𝐹/𝑃, 4,4%) If the life of such a fence is assumed to be 10 years,
the equivalent annual cost of a 10-mile-long fence at
𝐹 = 61,000(1.1699) = 71,363.9 (C) an interest rate of 10% per year is closest to:
(a) $3.6 million
(b) $4.2 million
(c) $4.9 million
2.61 The cost of lighting and maintaining the tallest
(d ) Over $5.0 million
smokestack in the United States (at a shuttered
ASARCO refi nery) is $90,000 per year. At an interest Ans:
rate of 10% per year, the present worth of maintaining
the smokestack for 10 years is closest to: P=30M
(a) $1,015,000
(b) $894,000 𝐴 = 30𝑀(𝐴/𝑃, 10,10%)
(c) $712,000
(d ) $553,000 𝐴 = 30𝑀(0.16275) = 4.9𝑀 (C)

Ans:

𝑃 = 90,000(𝑃/𝐴, 10,10%) 2.65 An investment of $75,000 in equipment that will

reduce the time for machining self-locking fasteners
𝑃 = 90,000(6.1446) = 553,014 (D) will save $20,000 per year. At an interest rate of 10%
per year, the number of years required to recover the
initial investment is
closest to:
2.62 An enthusiastic new engineering graduate plans (a) 6 years
to start a consulting firm by borrowing $100,000 at 10% (b) 5 years
per year interest. The loan payment each year to pay (c) 4 years
off the loan in 7 years is closest to: (d) 3 years
(a) $18,745
(b) $20,540 Ans:
(c) $22,960
(d ) $23,450 75,000 = 20,000(𝑃/𝐴, 𝑛, 10%)

Ans: (𝑃/𝐴, 𝑛, 10%) = 3.75~𝑛 = 5 (B)

𝐴 = 100,000(𝐴/𝑃, 7,10%)

𝐴 = 100,000(0.20541) = 20,540 (B) 2.66 The number of years required for an account to
accumulate $650,000 if Ralph deposits $50,000 each
year and the account earns interest at a rate of 6% per
year is closest to:
2.63 An engineer who believed in “save now and play (a) 13 years
later” wanted to retire in 20 years with $1.5 million. (b) 12 years
At 10% per year interest, to reach the $1.5 million goal, (c) 11 years
starting 1 year from now, the engineer must annually (d) 10 years
invest:
(a) $26,190 Ans:
(b) $28,190
(c) $49,350 650,000 = 50,000(𝐹/𝐴, 𝑛, 6%)
(d ) $89,680 (𝐹/𝐴, 𝑛, 6%) = 13.0~𝑛 = 10 (D)

Ans:
2.67 Aero Serve, Inc., manufactures cleaning nozzles
for reverse-pulse jet dust collectors. The company
spent $40,000 on a production control system that will
increase profits by $13,400 per year for 5 years. The
rate of return per year on the investment is closest to:
(a) 20%
(b) 18%
(c) 16%
(d) Less than 15%
2.70 Income from a precious metals mining operation
has been decreasing uniformly for 5 years. If income
in year 1 was $300,000 and it decreased by $30,000
per year through year 4, the annual worth of the
income at 10% per year is closest to:
(a) $310,500
(b) $258,600
(c) $203,900
(d) $164,800

Ans: Ans:

40,000 = 13,400(𝑃/𝐴, 5, 𝑖) 𝐴 = 300,000 − 30,000(𝐴/𝐺. 4,10%) = 258,564 (B)

(1+𝑖)5 −1
(𝑃/𝐴, 5, 𝑖) = 2.9851 =
𝑖(1+𝑖)5
2.71 If you are able to save $5000 in year 1, $5150 in
~i=20% (A) year 2, and amounts increasing by 3% each year
through year 20, the amount you will have at the end
of year 20 at 10% per year interest is closest to:
2.68 Energy costs for a green chemical treatment have (a) $60,810
been increasing uniformly for 5 years. If the cost in (b) $102,250
year 1 was $26,000 and it increased by $2000 per year (c) $351,500
through year 5, the present worth of the costs at an (d) Over $410,000
interest rate of 10% per year is closest to:
Ans:
(a) $102,900
(b) $112,300 1+0.03 20
5000(1−( 1+0.1 ) )
(c) $122,100 𝑃= = 52,252.36
0.1−0.03
(d) $195,800
𝐹
Ans: 𝐹 = 52,252.36 ( , 20,10%) = 351,527.77 (C)
𝑃

𝑃 = 26,000(𝑃/𝐴, 5,10%) + 2000(𝑃/𝐺, 5,10%) =

112,284.4 (B)

2.69 In planning for your retirement, you expect to

save $5000 in year 1, $6000 in year 2, and amounts
increasing by $1000 each year through year 20. If your
investments earn 10% per year, the amount you will
have at the end of year 20 is closest to:
(a) $242,568
(b) $355,407
(c) $597,975
(d) $659,125

Ans:

𝑃 = 5000(𝑃/𝐴, 20,10%) + 1000(𝑃/𝐺, 20,10%) =

97,974.9

𝐹 = 97,974.9(𝐹/𝑃, 20,10%) = 659,126.14 (D)