INSTRUCTOR’S SOLUTIONS MANUAL
Contemporary Engineering Economics, 7th edition
by Chan S Park
ST
U
D
YL
AB
, Table of Content
PART 1: FUNDAMENTALS
1.Engineering Economic Decisions
2.Accounting Information for Engineering Economic Decisions
3.Interest Rate and Economic Equivalence
4.Understanding Money and Its Management
PART 2: EVALUATION TOOLS OF BUSINESS AND ENGINEERING ASSETS
5.Present-Worth Analysis
6.Annual Equivalent-Worth Analysis
7.Rate-of-Return Analysis
ST
PART 3: DEVELOPMENT OF PROJECT CASH FLOWS
8.Cost Concepts Relevant to Decision Making
9.Depreciation and Corporate Taxes
U
10.Developing Project Cash Flows
11.Inflation and Its Impact on Project Cash Flows
D
PART 4: CONSIDERING RISK AND UNCERTAINTY IN ECONOMIC ANALYSES
12.Project Risk and Uncertainty
YL
12-A. Risk Analysis by Computer Simulation
13.Real-Options Analysis
PART 5: SPECIAL TOPICS IN ENGINEERING ECONOMICS
AB
14.Replacement Decisions
15.Capital-Budgeting Decisions
16.Economic Analysis in the Service Sector
, JHGFD
Chapter 1 Engineering Economic Decisions
1.1
• Lease
o Deposit (typically one month worth of deposit) refundable when lease
expires.
o Monthly lease payment
o Monthly maintenance fees
o Monthly utility expenses
• Buy
o Closing fees
o Down payment
ST
o Monthly mortgage payments
o Property taxes
o Monthly utility fees
o Monthly maintenance fees
o Repair expenses
o Homeowners’ association fee (if applicable)
U
1.2
•
D
Option 1:
o Total amount at the end of two years: $1,150
YL
• Option 2:
o Loan $500 to a friend for one year and receive $600
o Deposit $500 (left over) in a back at 3% for two years:
$500(1.03)(1.03) = $530.45
AB
o Deposit $600 received from your friend at 3% per year for a year:
$600(1.03) = $618
Total amount at the end of two years:
$530.45 + $618 = $1,148.45
These two options are about the same. But considering the trustworthiness, you
could go with Option 2.
, Contemporary Engineering Economics, 7th ed. ©2023
Chapter 2 Accounting Information for Engineering
Economic Decisions
2.1
(2) Income statement; (1) balance sheet; (3) cash flow statement; (4) operating
activities; (5) investing activities, and (6) financing activities; (7) capital account
(paid-in capital)
2.2
(7), (8), (1), (11), (3), (9)
2.3
ST
(a)
• Current assets = $150,000 + $200,000 + $150,000 + $50,000 + $30,000
= $580,000
• Current liabilities = $50,000 + $100,000 + $80,000 = $230,000
• Working capital = $580,000 - $230,000 = $350,000
U
• Shareholder’s equity = $100,000 + $150,000 + $150,000 + $70,000
= $470,000
D
(b) EPS = $500,000/10,000 = $50 per share
(c) Par value = $15; capital surplus = $150,000/10,000 = $15
YL
Market price = $15 + $15 = $30 per share
AB
2.4
(a) Shareholder’s equity in 2021 = $700 - $510 = $190(M)
Shareholder’s equity in 2022 = $900 - $640 = $260(M)
(b) Net working capital in 2021 = $100 - $60 = $40(M)
Net working capital in 2022 = $200 - $90 = $110(M)
(c) The income taxes in year 2022:
($2,350 - $1,130-$420-$210) *0.35 = $206.5(M)
(d) $383.50 + $420=$803.50 (M)
(Cash from Operating activities = Net income + Depreciation)
1
Copyright © 2023 Pearson Education, Inc.
Contemporary Engineering Economics, 7th edition
by Chan S Park
ST
U
D
YL
AB
, Table of Content
PART 1: FUNDAMENTALS
1.Engineering Economic Decisions
2.Accounting Information for Engineering Economic Decisions
3.Interest Rate and Economic Equivalence
4.Understanding Money and Its Management
PART 2: EVALUATION TOOLS OF BUSINESS AND ENGINEERING ASSETS
5.Present-Worth Analysis
6.Annual Equivalent-Worth Analysis
7.Rate-of-Return Analysis
ST
PART 3: DEVELOPMENT OF PROJECT CASH FLOWS
8.Cost Concepts Relevant to Decision Making
9.Depreciation and Corporate Taxes
U
10.Developing Project Cash Flows
11.Inflation and Its Impact on Project Cash Flows
D
PART 4: CONSIDERING RISK AND UNCERTAINTY IN ECONOMIC ANALYSES
12.Project Risk and Uncertainty
YL
12-A. Risk Analysis by Computer Simulation
13.Real-Options Analysis
PART 5: SPECIAL TOPICS IN ENGINEERING ECONOMICS
AB
14.Replacement Decisions
15.Capital-Budgeting Decisions
16.Economic Analysis in the Service Sector
, JHGFD
Chapter 1 Engineering Economic Decisions
1.1
• Lease
o Deposit (typically one month worth of deposit) refundable when lease
expires.
o Monthly lease payment
o Monthly maintenance fees
o Monthly utility expenses
• Buy
o Closing fees
o Down payment
ST
o Monthly mortgage payments
o Property taxes
o Monthly utility fees
o Monthly maintenance fees
o Repair expenses
o Homeowners’ association fee (if applicable)
U
1.2
•
D
Option 1:
o Total amount at the end of two years: $1,150
YL
• Option 2:
o Loan $500 to a friend for one year and receive $600
o Deposit $500 (left over) in a back at 3% for two years:
$500(1.03)(1.03) = $530.45
AB
o Deposit $600 received from your friend at 3% per year for a year:
$600(1.03) = $618
Total amount at the end of two years:
$530.45 + $618 = $1,148.45
These two options are about the same. But considering the trustworthiness, you
could go with Option 2.
, Contemporary Engineering Economics, 7th ed. ©2023
Chapter 2 Accounting Information for Engineering
Economic Decisions
2.1
(2) Income statement; (1) balance sheet; (3) cash flow statement; (4) operating
activities; (5) investing activities, and (6) financing activities; (7) capital account
(paid-in capital)
2.2
(7), (8), (1), (11), (3), (9)
2.3
ST
(a)
• Current assets = $150,000 + $200,000 + $150,000 + $50,000 + $30,000
= $580,000
• Current liabilities = $50,000 + $100,000 + $80,000 = $230,000
• Working capital = $580,000 - $230,000 = $350,000
U
• Shareholder’s equity = $100,000 + $150,000 + $150,000 + $70,000
= $470,000
D
(b) EPS = $500,000/10,000 = $50 per share
(c) Par value = $15; capital surplus = $150,000/10,000 = $15
YL
Market price = $15 + $15 = $30 per share
AB
2.4
(a) Shareholder’s equity in 2021 = $700 - $510 = $190(M)
Shareholder’s equity in 2022 = $900 - $640 = $260(M)
(b) Net working capital in 2021 = $100 - $60 = $40(M)
Net working capital in 2022 = $200 - $90 = $110(M)
(c) The income taxes in year 2022:
($2,350 - $1,130-$420-$210) *0.35 = $206.5(M)
(d) $383.50 + $420=$803.50 (M)
(Cash from Operating activities = Net income + Depreciation)
1
Copyright © 2023 Pearson Education, Inc.
