Solutions Manual for Fundamentals of Engineering Economics 4th Edition By Chan Park

Chapter 1 Engineering Economic Decisions
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1.1) Not providedl




For The Wall Street Journal, go to the Front page to find the section on “What’s
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News.” This is a section on a brief summary on major headlines of the day’s news.
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Quickly browse through the news summary to see if there is any news related to
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business investment. The best places to find the major business news oninvestment
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are sections on “BUSINESS”, “MARKETS” or “TECH.”
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1.2)
Not providedl




Some of the well-known business publications are:
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• Daily Newspapers: l




o The Wall Street Journal l l l



o The New York Times (Business Section)
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o Financial Times l




• Weekly or Monthly Magazines: l l l




o BusinessWeek
o Forbes
o Money
o Smart Money l



o Fortune

,Chapter 2: Time Value of Money
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2.1) I = (iP)N = (0.06)($2,000)(5) = $600
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2.2)
• Simple interest: l




$20,000 = $10,000(1+ 0.075N)(1+ l l l l l l l




0.075N) = 2
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1
N= =13.3314years
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0.075

• Compound interest: l




$20,000 = $10,000(1+ 0.07)N l l l l




(1+ 0.07)N = 2 l l l l




N =10.24 11years l l l l




2.3)

• Simple interest: l




I = iPN = (0.10)($10,000)(5) = $5,000
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• Compound interest: l




I = P[(1+i)N −1] = $10,000(1.6105−1) = $6,105
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2.4)

• Option 1: Compound interest with 8.5%:
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F = $4,500(1+ 0.085)5 = $4,500(1.5037) = $6,766.65
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• Option 2: Simple interest with 9%:
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$4,500(1+0.095) = $5,000(1.45) = $6,525
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 Option 1 is still better.
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,2.5)
• Compound interest: l




F =$1,000(1+0.065)5
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=$1,370.09
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• Simple interest: l




F =$1,000(1+0.068(5)) l l l l




=$1,340 l l




The compound interest option is better. l l l l l




2.6)

End of Year l l Principal Interest Remaining
Repayment payment Balance
0 $15,000.00
1 $4,620.50 $1,200.00 $10,379.50
2 $4,990.14 $830.36 $5,389.36
3 $5,389.35 $431.15 $0


2.7)

P = $22,000(P / F,5%,5) = $22,000(0.7835) = $17,237.58
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2.8) F = $30,000(F / P,9%,3) = $30,000(1.295) = $38,850.87
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2.9)
F = $100(F / P,10%,10)+$200(F / P,10%,8) = $688
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2.10) F = $250,000(F / P,6%,10) = $447,712
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2.11) P = $300,000(P / F,8%,10) = $138,958
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2.12) i =10.5%, two-year discount rate is (1+ 0.105)2 =1.221 (or 22.1%)
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2.13)


(a) F = $5,000(F / P,7%,5) = $7,013
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, (b) F = $7,250(F / P,9%,15) = $26,408
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(c) F = $9,000(F / P,6%,33) =$61,565
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(d) F = $12,000(F / P,5.5%,8) = $18,416
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2.14)
(a) P = $25,500(P / F,12%,8) = $10,299
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(b) P = $58,000(P/ F,4%,12) = $36,227
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(c) P = $25,000(P / F,6%,9) = $14,797
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(d) P = $35,000(P / F,9%,4) = $24,795
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2.15) (a) P = $12,000(P / F,13%,4) = $7,360
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(b) F = $30,000(F / P,13%,5) = $55,273
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2.16)
F = 3P = P(1+ 0.08)N
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log3= N log(1.08) l l l l




N =14.27 →15 years
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2.17)
F = 2P = P(1+ 0.06)N l l l l l




log 2 = N log 1.06 l l l l l




N =11.896 years (or 12 years)
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2.18)
F = 2P = P(1+ 0.06)N
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• log2 = N log(1.06) l l l l




N =11.90 years l l l l 12 years l




• Rule of 72: l l 72/6 =12 years l l l l l




2.19) F = $1(1.08)394 = $14,755,694,730,611
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