INSTRUCTOR’S SOLUTIONS
MANUAL
Contemporary Engineering Economics, 7th edition
By Chan S Park
LU
XE
LI
BR
AR
Y
, Table of Content
PART 1: FUNDAMENTALS
Engineering Economic Decisions
Accounting Information for Engineering Economic Decisions
Interest Rate and Economic Equivalence
Understanding Money and Its Management
PART 2: EVALUATION TOOLS OF BUSINESS AND ENGINEERING ASSETS
Present-Worth Analysis
Annual Equivalent-Worth Analysis
LU
Rate-of-Return Analysis
PART 3: DEVELOPMENT OF PROJECT CASH FLOWS
Cost Concepts Relevant to Decision Making
XE
Depreciation and Corporate Taxes
Developing Project Cash Flows
Inflation and Its Impact on Project Cash Flows
PART 4: CONSIDERING RISK AND UNCERTAINTY IN ECONOMIC ANALYSES
LI
Project Risk and Uncertainty
12-A. Risk Analysis by Computer Simulation
Real-Options Analysis
BR
PART 5: SPECIAL TOPICS IN ENGINEERING ECONOMICS
Replacement Decisions
Capital-Budgeting Decisions
Economic Analysis in the Service Sector
AR
Y
, 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
LU
• Buy
o Closing fees
o Down payment
o Monthly mortgage payments
o Property taxes
o Monthly utility fees
XE
o Monthly maintenance fees
o Repair expenses
o Homeowners’ association fee (if applicable)
1.2
LI
• Option 1:
o Total amount at the end of two years: $1,150
BR
• 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
AR
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
Y
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
LU
(7), (8), (1), (11), (3), (9)
2.3
(a)
• Current assets = $150,000 + $200,000 + $150,000 + $50,000 + $30,000
XE
= $580,000
• Current liabilities = $50,000 + $100,000 + $80,000 = $230,000
• Working capital = $580,000 - $230,000 = $350,000
• Shareholder’s equity = $100,000 + $150,000 + $150,000 + $70,000
= $470,000
LI
(b) EPS = $500,000/10,000 = $50 per share
(c) Par value = $15; capital surplus = $150,000/10,000 = $15
BR
Market price = $15 + $15 = $30 per share
AR
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)
Y
(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.
MANUAL
Contemporary Engineering Economics, 7th edition
By Chan S Park
LU
XE
LI
BR
AR
Y
, Table of Content
PART 1: FUNDAMENTALS
Engineering Economic Decisions
Accounting Information for Engineering Economic Decisions
Interest Rate and Economic Equivalence
Understanding Money and Its Management
PART 2: EVALUATION TOOLS OF BUSINESS AND ENGINEERING ASSETS
Present-Worth Analysis
Annual Equivalent-Worth Analysis
LU
Rate-of-Return Analysis
PART 3: DEVELOPMENT OF PROJECT CASH FLOWS
Cost Concepts Relevant to Decision Making
XE
Depreciation and Corporate Taxes
Developing Project Cash Flows
Inflation and Its Impact on Project Cash Flows
PART 4: CONSIDERING RISK AND UNCERTAINTY IN ECONOMIC ANALYSES
LI
Project Risk and Uncertainty
12-A. Risk Analysis by Computer Simulation
Real-Options Analysis
BR
PART 5: SPECIAL TOPICS IN ENGINEERING ECONOMICS
Replacement Decisions
Capital-Budgeting Decisions
Economic Analysis in the Service Sector
AR
Y
, 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
LU
• Buy
o Closing fees
o Down payment
o Monthly mortgage payments
o Property taxes
o Monthly utility fees
XE
o Monthly maintenance fees
o Repair expenses
o Homeowners’ association fee (if applicable)
1.2
LI
• Option 1:
o Total amount at the end of two years: $1,150
BR
• 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
AR
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
Y
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
LU
(7), (8), (1), (11), (3), (9)
2.3
(a)
• Current assets = $150,000 + $200,000 + $150,000 + $50,000 + $30,000
XE
= $580,000
• Current liabilities = $50,000 + $100,000 + $80,000 = $230,000
• Working capital = $580,000 - $230,000 = $350,000
• Shareholder’s equity = $100,000 + $150,000 + $150,000 + $70,000
= $470,000
LI
(b) EPS = $500,000/10,000 = $50 per share
(c) Par value = $15; capital surplus = $150,000/10,000 = $15
BR
Market price = $15 + $15 = $30 per share
AR
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)
Y
(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.
