INSTRUCTOR'S SOLUTIONS
MANUAL
Niall M. Fraser
Open Options Corporation
Elizabeth M. Jewkes
University of Waterloo
Engineering Economics
Financial Decision Making for Engineers
Fifth Edition
Niall M. Fraser
Open Options Corporation
Elizabeth M. Jewkes
University of Waterloo
Toronto
Copyright © 2013 Pearson Canada Inc., Toronto, Ontario. Pearson Prentice Hall. All rights reserved. This work is
protected by Canadian copyright laws and is provided solely for the use of instructors in teaching their courses and
assessing student learning. Dissemination or sale of any part of this work (including on the Internet) will destroy the
integrity of the work and is not permitted. The copyright holder grants permission to instructors who have adopted
ENGINEERING ECONOMICS, FIFTH EDITION, by FRASER and JEWKES to post this material online only if the
use of the website is restricted by access codes to students in the instructor’s class that is using the textbook and
provided the reproduced material bears this copyright notice.
, Contents
Chapter 1 Engineering Decision Making 1
Chapter 2 Time Value of Money 5
Chapter 3 Cash Flow Analysis 28
Chapter 4 Comparison Methods Part 1 55
Chapter 5 Comparison Methods Part 2 84
Chapter 6 Depreciation and Financial Accounting 119
Extended Case: Part 1 143
Chapter 7 Replacement Decisions 148
Chapter 8 Taxes 190
Chapter 9 Inflation 216
Chapter 10 Public Sector Decision Making 239
Chapter 11 Project Management 265
Extended Case: Part 2 306
Chapter 12 Dealing With Risk 314
Chapter 13 Qualitative Considerations and Multiple Criteria (CW only) 360
Copyright © 2013 Pearson Canada Inc.
, Preface
This document contains solutions to all of the chapter-end problems for the text, as well
as the solutions to the two extended cases. The answers are as complete as possible, with
two exceptions. First, some questions may require judgment rather than a quantitative
answer. This is especially true for the questions at the end of Chapter 1, but other
questions of this type can be found throughout the text. In these cases, it is usually
pointed out that there is no single correct answer to the question, and sometimes some
guidance on suitable answers is given.
A second case in which answers may be incomplete in this document deals with those
solutions that rely upon spreadsheet calculations. Although spreadsheets and graphs are
printed in this document, sometimes a complete answer to a question requires a number
of variations to the same spreadsheet. In this case, usually only one spreadsheet display is
printed. To offset this, most of the spreadsheets used in answering chapter-end problems
are also available on the Instructor’s Resource CD-ROM or the Companion Website for
the text.
This document also contains the notes for the questions in the Canadian Mini-Cases. The
notes provide suggestions as to what the key points of discussion should be in answering
the open-ended questions.
On the Instructor’s Resource CD-ROM and the Companion Website are spreadsheets that
are used in chapter-end problems or in the problem solutions. The spreadsheets are stored
in Excel Version 2002 format, which can be read by all popular spreadsheet programs.
The file names indicate the chapter numbers (“Ch” followed by a number). Each file
contains a number of worksheets. Each worksheet is named after the corresponding
chapter-end problem (the name appears on the sheet tab at the bottom of the worksheet).
Copyright © 2013 Pearson Canada Inc.
, CHAPTER 1
Solutions to Chapter-End Problems
A. Key Concepts
When to Use Engineering Economics:
1.1 (a) Yes - several quantifiable alternatives exist
(b) Yes - if quantifiable
(c) No - alternatives are not quantifiable
(d) No - since it mainly involves intangible qualifications of the candidate
(e) Yes - at least two alternatives are quantifiable
(f) Yes - with quantifiable costs and benefits
(g) No - hard to quantify
(h) Yes - if the effect is quantifiable
(i) Yes - quantifiable
(j) No - benefits are hard to quantify
(k) Yes - quantifiable
(l) Yes - if quantifiable
1.2 Five examples:
1) Location of the business: renting vs. buying decision
2) Equipment: leasing vs. buying decision
3) Equipment: choosing one out of several alternatives; analysis of cost
savings
4) Viability of the business: analysis of cash flow; ability to recover the
capital investment
5) Effect of the corporate tax rate
1.3 Whatever the description for the items listed, it should be clear that all
engineering design is founded on controlling the costs incurred.
Ethics in Decision-Making:
1.4 There is no right or wrong answer to any of these questions. The student
should observe, however, that there often is a difference in how we should
behave compared to how we do behave.
1
Copyright © 2013 Pearson Canada Inc.
MANUAL
Niall M. Fraser
Open Options Corporation
Elizabeth M. Jewkes
University of Waterloo
Engineering Economics
Financial Decision Making for Engineers
Fifth Edition
Niall M. Fraser
Open Options Corporation
Elizabeth M. Jewkes
University of Waterloo
Toronto
Copyright © 2013 Pearson Canada Inc., Toronto, Ontario. Pearson Prentice Hall. All rights reserved. This work is
protected by Canadian copyright laws and is provided solely for the use of instructors in teaching their courses and
assessing student learning. Dissemination or sale of any part of this work (including on the Internet) will destroy the
integrity of the work and is not permitted. The copyright holder grants permission to instructors who have adopted
ENGINEERING ECONOMICS, FIFTH EDITION, by FRASER and JEWKES to post this material online only if the
use of the website is restricted by access codes to students in the instructor’s class that is using the textbook and
provided the reproduced material bears this copyright notice.
, Contents
Chapter 1 Engineering Decision Making 1
Chapter 2 Time Value of Money 5
Chapter 3 Cash Flow Analysis 28
Chapter 4 Comparison Methods Part 1 55
Chapter 5 Comparison Methods Part 2 84
Chapter 6 Depreciation and Financial Accounting 119
Extended Case: Part 1 143
Chapter 7 Replacement Decisions 148
Chapter 8 Taxes 190
Chapter 9 Inflation 216
Chapter 10 Public Sector Decision Making 239
Chapter 11 Project Management 265
Extended Case: Part 2 306
Chapter 12 Dealing With Risk 314
Chapter 13 Qualitative Considerations and Multiple Criteria (CW only) 360
Copyright © 2013 Pearson Canada Inc.
, Preface
This document contains solutions to all of the chapter-end problems for the text, as well
as the solutions to the two extended cases. The answers are as complete as possible, with
two exceptions. First, some questions may require judgment rather than a quantitative
answer. This is especially true for the questions at the end of Chapter 1, but other
questions of this type can be found throughout the text. In these cases, it is usually
pointed out that there is no single correct answer to the question, and sometimes some
guidance on suitable answers is given.
A second case in which answers may be incomplete in this document deals with those
solutions that rely upon spreadsheet calculations. Although spreadsheets and graphs are
printed in this document, sometimes a complete answer to a question requires a number
of variations to the same spreadsheet. In this case, usually only one spreadsheet display is
printed. To offset this, most of the spreadsheets used in answering chapter-end problems
are also available on the Instructor’s Resource CD-ROM or the Companion Website for
the text.
This document also contains the notes for the questions in the Canadian Mini-Cases. The
notes provide suggestions as to what the key points of discussion should be in answering
the open-ended questions.
On the Instructor’s Resource CD-ROM and the Companion Website are spreadsheets that
are used in chapter-end problems or in the problem solutions. The spreadsheets are stored
in Excel Version 2002 format, which can be read by all popular spreadsheet programs.
The file names indicate the chapter numbers (“Ch” followed by a number). Each file
contains a number of worksheets. Each worksheet is named after the corresponding
chapter-end problem (the name appears on the sheet tab at the bottom of the worksheet).
Copyright © 2013 Pearson Canada Inc.
, CHAPTER 1
Solutions to Chapter-End Problems
A. Key Concepts
When to Use Engineering Economics:
1.1 (a) Yes - several quantifiable alternatives exist
(b) Yes - if quantifiable
(c) No - alternatives are not quantifiable
(d) No - since it mainly involves intangible qualifications of the candidate
(e) Yes - at least two alternatives are quantifiable
(f) Yes - with quantifiable costs and benefits
(g) No - hard to quantify
(h) Yes - if the effect is quantifiable
(i) Yes - quantifiable
(j) No - benefits are hard to quantify
(k) Yes - quantifiable
(l) Yes - if quantifiable
1.2 Five examples:
1) Location of the business: renting vs. buying decision
2) Equipment: leasing vs. buying decision
3) Equipment: choosing one out of several alternatives; analysis of cost
savings
4) Viability of the business: analysis of cash flow; ability to recover the
capital investment
5) Effect of the corporate tax rate
1.3 Whatever the description for the items listed, it should be clear that all
engineering design is founded on controlling the costs incurred.
Ethics in Decision-Making:
1.4 There is no right or wrong answer to any of these questions. The student
should observe, however, that there often is a difference in how we should
behave compared to how we do behave.
1
Copyright © 2013 Pearson Canada Inc.
