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2.1)
2.2)
Simple interest:
F = P (1 + iN )
$4, 000 = $2, 000(1 + 0.08 N )
N = 12.5 years (or 13 years)
Compound interest:
Simple interest:
I = iPN = (0.07)($10, 000)(20)
= $14, 000
Compound interest:
I = P (1 + i) N 1 = $10,000 (1.07)20 1
= $28,696.84
2.4)
Compound interest:
F = $1, 000(1 + 0.06)5
= $1,338.23
Simple interest:
2
2.5)
Principal
Payment
$0.00
$835.46
$910.65
$992.61
$1,081.94
$1,179.32
Interest
Payment
$0.00
$450.00
$374.81
$292.85
$203.52
$106.14
2.6)
2.7)
2.8)
Remaining
Balance
$5,000.00
$4,164.54
$3,253.89
$2,261.28
$1,179.33
$0.00
Alternative 1
P = $100
Alternative 2
P = $120( P / F ,8%,2) = $120(0.8573) = $102.88
2.9)
Alternative 2 is preferred
(a)
(b)
(c)
(d)
2.10) (a)
(b)
(c)
(d)
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
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in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
3
P = $6,000( P / F ,8%,5) = $6,000(0.6806) = $4,083.6
2.11) (a)
(b)
2.12)
F = 3P = P(1 + 0.07) N
log 3 = N log 1.07
N = 16.24 years (or 17 years)
2.13)
F = 2 P = P(1 + 0.12) N
log 2 = N log 1.12
N = 6.12 years
Rule of 72:
2.14)
72 /12 = 6 years
2.15)
Simple interest:
I = iPN = (0.1)($1, 000)(3) = $300
Compound interest:
I = P (1 + i) N 1 = $1,000 (1 + .095)3 1
= $312.93
2.16)
2.17)
P=
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
2.18)
P = $3, 000, 000 + $2, 400, 000( P / A,8%,5)
+ $3, 000, 000( P / A,8%,5)( P / F ,8%,5)
= $20, 734, 774.86
2.19)
2.20)
Method 1:
F = $2,000(1.05)(1.1)(1.15) + $3,000(1.1)(1.15) + $5,000
= $11,451.5
Method 2:
$6,451.50
F = ( $2, 000(1.05) + $3, 000 ) (1.10)(1.15) + $5, 000
$5,100
= $11, 451.50
2.21)
2.22)
F = $80,000 = $10,000(1.08)5 + $12,000(1.08)3 + X (1.08)2
X = $43,029.99
2.23)
100(1.08)4 = 8(1.08)3 + 9(1.08)2 + 10(1.08) + 11 + X
X = $93.67
This is the minimum selling price. So if John can sell the stock for a higher price
than $93.67, his return on investment will be higher than 8%.
2.24) (a)
(b)
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
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in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
2.25) (a)
(b)
(c)
(d)
F
F
F
F
2.26) (a)
(b)
(c)
(d)
2.27)
(1 + 0.06 )
= 11.6666
0.06
N log(1.06) = log(1.7)
N = 9.11 years
2.28)
$10,000 = A( F / A,7%,5)
A = $1,738.92
2.29)
2.30) (a)
(b)
(c)
(d)
2.31)
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
5
in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
End of period
0
1
2
3
Principal
Payment
$0.00
$6,042.00
$6,646.20
$7,310.82
Interest
Payment
$0.00
$2,000.00
$1,395.80
$731.18
Remaining
Balance
$20,000.00
$13,958.00
$7,311.80
$0
2.32) (a)
(b)
(c)
(d)
( A / P,6.25%,36) =
2.33) (a)
0.0625 1 + 0.0625
1 + 0.0625
36
36
= 0.07044
(1 + 0.0925) 1
( P / A,9.25%,125) =
125
0.0925 (1 + 0.0925 )
125
(b)
2.34)
= 10.81064
2.35)
F = F1 + F2
= $5,000(F / A,8%,5) + $2,000( F / G,8%,5)
= $5,000(F / A,8%,5) + $2,000( A / G,8%,5)(F / A,8%,5)
= $5,000(5.8666) + $2,000(1.8465)(5.8666)
= $50,998.35
2.36)
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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2.37)
2.38)
2.39)
2.40)
2.41) (a)
P = $3, 000, 000( P / A1, 10%,12%, 7)
1 (1 0.1) (1 + 0.12 )
= $3, 000, 000
0.12 ( 0.1)
7
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
N
1
2
3
4
5
An
$3,000,000
$2,835,000
$2,679,075
$2,531,726
$2,392,481
$2,260,894
$2,136,545
6
7
= $11,923,948.35
= $7,134,825.54
2.42)
20
P = An (1 + i) n
n=1
20
= (2,000,000)n(1.06) n1 (1.06) n
n=1
20
= (2,000,000 / 1.06) n(
n=1
1.06 n
)
1.06
20
= (2,000,000 / 1.06) n
n=1
= (2,000,000 / 1.06)
20(21)
2
= $396,226,415.1
9
Period
11
Withdrawal
$3,000
12
13
$3,000(1.06)
$3,000(1.06) 2
14
$3, 000(1.06)3
15
$3, 000(1.06) 4
Equivalent worth of the withdrawal series at period 10, using i = 8%:
P = $3,000(P / A1 ,6%,8%,5)
= $3,000
) (1 + 0.08)
0.08 (0.06 )
1 1 + 0.06
= $13,383.92
$13,384 = A( F / A,8%,10)
= 14.4866 A
A = $923.88
(b) Equivalent present worth of the withdrawal series at 6%
P = $3, 000( P / A1 , 6%, 6%,5) = $3, 000
5
= $14,150.94
1 + 0.06
= 13.1808A
A = $1,073.60
2.44)
10
2.46)
2.47)
Computing the equivalent worth at period 3 will require only two different
types of interest factors.
V1,3 = $120( P / A,10%,5)( F / P,10%,3)
= $120(3.7908)(1.3310)
= $605.466
V2,3 = A(P / A,10%,2)(F / P,10%,3) + A( P / A,10%,2)
= A(1.7355)(1.3310) + A(1.7355)
= 4.04545A
A = $605.466 / 4.04545
= $149.67
2.48)
P1,1 = $200(P / A,10%,4) 100(P / A,10%,2)
= $200(3.1699) 100(1.7355)
= 460.43
P2,1 = X + X ( P / A,10%, 4)
= X + X (3.1699)
= 4.1699 X
P1,1 = P2,1
$460.43 = 4.1699 X
X = $110.42
2.49)
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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P1 = $50( P / A,10%, 4) + $35( P / A,10%, 2)( P / F ,10%, 2)
= $50(3.1699) + $35(1.7355)(0.8264)
= 208.6926
P2 = C ( P / A,10%, 4) + C ( P / A,10%, 2)( P / F ,10%,1)
= C (3.1699) + C (1.7355)(0.9091)
= 4.7476C
P1 = P2
C = $43.96
2.50)
n
0
1
2
3
4
5
6
7
8
9
10
2.52)
An
$0
$800
$820
$840
$860
$880
$900
$920
$300
$300
$300 - $500
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
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6.075C = $4,746.20
C = $781.27
2.53)
200(1.06)(1.08)(1.12)(1.15)
+ X (1.08)(1.12)(1.15)
+ $300(1.15)
= $1000
247.9 + 1.39104 X + 345 = 1000
1.39104 X = 360.1
X = $258.87
2.54) Computing the equivalent worth at n = 5,
X = $5,000( F / A,10%,5) + $5,000(P / A,10%,5)
= $5,000(6.1051) + $5,000(3.7908)
= $49,475.5
2.55)
2.56)
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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2.57)
P1,2 = X (P / F,8%,3)
= X (0.7938)
P2,2 = 800(P / A,8%,10)
= 800(6.7101)
= 5368.08
X = 6,762.51
2.58)
C ( P / A,9%,5)( P / F ,9%,1) = $4, 000
C (3.8897)(0.9174) = $4, 000
C = $1,120.95
2.59)
P (1.05)(1.08)(1.1)(1.06)
= $1, 000(1.08)(1.1)(1.06) + $1,500(1.1)(1.06)
+$1, 000(1.06) + $1000
P (1.322244) = $5, 068.28
P = $3,833.09
2.60)
Exact:
2 P = P (1 + i )5
2 = (1 + i )5
log 2 = 5 log(1 + i )
i = 14.87%
Rule of 72:
72 / i = 5years
i =14.4%
2.61)
(1 + i )5 1
= $150
$50 (1 + i ) 1
5
i (1 + i )
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
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2.62)
$200 $150
$50
$200
$50
+
+
+
+
2
3
4
(1 + i ) (1 + i ) (1 + i ) (1 + i ) (1 + i )5
P1 = P2 and solving i with Excel Goal Seek function,
i = 14.96%
P2 =
2.63) The equivalent future worth of the prize payment series at the end of
Year 20 (or beginning of Year 21) is
F1 = $1,952,381(F / A,6%,20)
= $1,952,381(36.7856)
= $71,819,506.51
The equivalent future worth of the lottery receipts is
F2 = ($36,100,000 $1,952,381)( F / P,6%,20)
= ($36,100,000 $1,952,381)(3.2071)
= $109,514,828.9
The resulting surplus at the end of Year 20 is
F2 F1 = $109,514,828.9 $71,819,506.51
= $37,695,322.4
2.64)
= $4,583.4
$4,583.4( F / P,9.4%,60)
= $4,583.4((1 + 0.094)60 )
= $4,583.4(219.3)
= $1,005,141.21
Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
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in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
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Instructor Solutions Manual to accompany Fundamentals of Engineering Economics, Second Edition, by Chan S. Park.
ISBN-13: 9780132209618. 2008 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.
This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage
15
in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.