JORDAN UNIVERSITY OF SCIENCE AND TECHNOLOGY

Civil Engineering Department

CE 303:Engineering Economy
Home Work #2

Note: You have to use tables, direct formulas should’nt be used.

Question 1:
How much can XYZ Inc., afford to spend now on an energy management system if the software will
save the company $21,300 per year for the next 5 years? Use an interest rate of 10% per year.
Question 2:
CGK firm makes high-performance rotational viscometers capable of steady shear and yield stress
testing in a rugged, compact footprint. How much could the company afford to spend now on new
equipment in lieu of spending $200,000 one year from now and $300,000 three years from now, if the
company uses an interest rate of 15% per year?
Question 3:
Henry Mueller Supply Co. sells tamperproof, normally open thermostats (i.e., thermostat closes as
temperature rises). Annual cash flows are shown in the table below. Determine the future worth of
the net cash flows at an interest rate of 10% per year.

Question 4:
For the factor (F/A, 15%, 52), find the percent difference between the interpolated and formula
calculated values, assuming the formula- calculated value is the correct one.
Question 5:
Rolled ball screws are suitable for high-precision applications such as water jet cutting. Their total
manufacturing cost is expected to decrease because of increased productivity, as shown in the table.
Determine the equivalent annual cost at an interest rate of 8% per year.

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Question 6:
For the cash flows below, determine the amount of A, if the equivalent annual worth in years 1
through 9 is $601.17 and the interest rate is 10% per year.

Question 7:
A mechanical engineering graduate who wanted to have his own business borrowed $350,000 from
his father as start-up money. Because he was family, his father charged interest at only 4% per year.
If the engineer was able to pay his father $15,000 in year 1, $36,700 in year 2, and amounts
increasing by $21,700 each year, how many years did it take for the engineer to repay the loan?
Question 8:
At i= 12% per year, Find the equivalent future value for the following cash flow diagram.

Question 9:
Twelve payments of $10,000 each are to be repaid monthly at the end of each month. The monthly
interest rate is 2%.
a- What is the present equivalent (i.e., P0) of these payments?
b- Repeat Part (a) when the payments are made at the beginning of the month. Note that the present
equivalent will be at the same time as the first monthly payment.
c- Explain why the present equivalent amounts in Parts (a) and (b) are different.
Question 10:
What lump sum of money must be deposited into a bank account at the present time so that $500 per
month can be withdrawn for four years, with the first withdrawal scheduled for six months from
today? The interest rate is 3/4% per month.