Engineering Economics Practice Problems
Engineering Economics Practice
Problems
20 original problems: time value, project selection, taxes, and uncertainty
Original independent resource. All explanations, examples, and practice questions are newly
written for general study. This is not official course material and contains no instructor-provided
assessments, slides, or proprietary content.
Instructions
Show a timeline, identify the method, and retain at least two decimals during intermediate
calculations. Unless otherwise stated, cash flows occur at year-end and rates are effective annual
rates. Do not use a factor table blindly—write the relationship you are applying.
P1 — Single-payment compounding
A technician deposits $8,500 today in an account earning 6.2% effective annually. What amount will
be available at the end of 7 years?
Work space:
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P2 — Present worth
A manufacturing upgrade will produce a one-time net benefit of $42,000 at the end of year 5. At a
MARR of 9%, what is the maximum amount that could be spent today?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
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P3 — Uniform annual series
At 7% effective annual interest, how much must be deposited at the end of each year for 6 years to
accumulate $30,000 immediately after the sixth deposit?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
Original independent study resource | Not affiliated with or endorsed by any university or instructor
, Engineering Economics Practice Problems
P4 — Capital recovery
A test fixture costs $26,000, has a $3,000 salvage value after 5 years, and has no other costs. At
10%, find its equivalent uniform annual cost (EUAC).
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
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_____________________________________________________________________________________________________
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P5 — Arithmetic gradient
A process-improvement program saves $4,000 in year 1, and the savings increase by $900 each
year through year 6. What is the present worth of the savings at 8%?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P6 — Net present value
A $55,000 automation project generates after-tax net cash inflows of $16,000 at each year-end for 5
years and has a $4,000 salvage value at the end of year 5. At a 11% MARR, calculate NPV and state
the decision.
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P7 — Internal rate of return
An equipment investment costs $40,000 now and returns $12,500 at each year-end for 4 years.
Estimate the IRR and decide whether it clears a 9% MARR.
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P8 — Mutually exclusive alternatives
Choose the lower-EUAC option at 8% over 4 years. Option A: $32,000 first cost, $4,000 annual
operating cost, $5,000 salvage. Option B: $21,000 first cost, $7,200 annual operating cost, $2,000
salvage.
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
Original independent study resource | Not affiliated with or endorsed by any university or instructor
Engineering Economics Practice
Problems
20 original problems: time value, project selection, taxes, and uncertainty
Original independent resource. All explanations, examples, and practice questions are newly
written for general study. This is not official course material and contains no instructor-provided
assessments, slides, or proprietary content.
Instructions
Show a timeline, identify the method, and retain at least two decimals during intermediate
calculations. Unless otherwise stated, cash flows occur at year-end and rates are effective annual
rates. Do not use a factor table blindly—write the relationship you are applying.
P1 — Single-payment compounding
A technician deposits $8,500 today in an account earning 6.2% effective annually. What amount will
be available at the end of 7 years?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P2 — Present worth
A manufacturing upgrade will produce a one-time net benefit of $42,000 at the end of year 5. At a
MARR of 9%, what is the maximum amount that could be spent today?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P3 — Uniform annual series
At 7% effective annual interest, how much must be deposited at the end of each year for 6 years to
accumulate $30,000 immediately after the sixth deposit?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
Original independent study resource | Not affiliated with or endorsed by any university or instructor
, Engineering Economics Practice Problems
P4 — Capital recovery
A test fixture costs $26,000, has a $3,000 salvage value after 5 years, and has no other costs. At
10%, find its equivalent uniform annual cost (EUAC).
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P5 — Arithmetic gradient
A process-improvement program saves $4,000 in year 1, and the savings increase by $900 each
year through year 6. What is the present worth of the savings at 8%?
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P6 — Net present value
A $55,000 automation project generates after-tax net cash inflows of $16,000 at each year-end for 5
years and has a $4,000 salvage value at the end of year 5. At a 11% MARR, calculate NPV and state
the decision.
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P7 — Internal rate of return
An equipment investment costs $40,000 now and returns $12,500 at each year-end for 4 years.
Estimate the IRR and decide whether it clears a 9% MARR.
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
___
_____________________________________________________________________________________________________
___
P8 — Mutually exclusive alternatives
Choose the lower-EUAC option at 8% over 4 years. Option A: $32,000 first cost, $4,000 annual
operating cost, $5,000 salvage. Option B: $21,000 first cost, $7,200 annual operating cost, $2,000
salvage.
Work space:
____________________________________________________________________________________________
_____________________________________________________________________________________________________
Original independent study resource | Not affiliated with or endorsed by any university or instructor
