Engineering Economics

If Norm had the following cash inflows and cash outflows over a 15-year period, and the account was giving him an interest rate of 6% per annum, what will be the ending balance (or the FV) for the account.

$16,667

You would like to have a loan from a bank for 15 years. You are to make monthly payments at the end of the month at an interest rate of 6% per year, or 0.5% per month (6% / 12 = 0.5%). If the loan amount is $175,000 and you would like to keep $50,000 as a balloon payment at the end of the 15years, what monthly payment will you have to make?

$1,305

You would like to have a loan from a bank for 15 years. You are to make monthly payments at the end of the month at an interest rate of 6% per year, or 0.5% per month (6% / 12 = 0.5%). If the loan amount is $175,000 what monthly payment will you have to make?

$1,477

For what value of S will the FV of the series of cash flows be zero at 10% per period interest rate?

$1,652

Greg wants to provide for the education of his daughter. He would like to save a fixed amount for 25 years and then spend for 5 years starting in the 26th year. He would like to be able to give his daughter $22,500 for the first year of her college (the 26th year) and would like to increase the amount by 5% every year to compensate for inflation. If his investments earned 6.5% per year, what uniform amount will Greg have to save every year for 25 years to make this possible?

$1,744

For what value of W will the NPV of the series of cash flows be zero at 12% per period interest rate?

$167

You want $1.5M to retire in 45 years. You have $15,000 today. If you can deposit the funds in a money market account which earns 4.5% interest per year, and say you plan to make yearly deposits, how large should the annual deposits be?

$10,020

If Norm had the following cash inflows and cash outflows over a 15-year period, and the account was giving him an interest rate of 5% per annum, what will be the ending balance (or the FV) for the account.

$10,421

Susan deposits $5,000 into a money-market account earning 7% per year, and keeps depositing twice the amount every two years for a total of 6 years after she started the account. In other words she deposits $5,000 on Year 0, $10,000 on Year 2, $20,000 on Year 4 and $40,000 on Year 6. How much money will she have in her account at the end of Year 9 if the money was earning the initial interest rate for the entire time?

$102,303

What will be the FV for the cash flow shown if the rate and value of Q are as shown below?

$111,325

Ashton, on his 25th birthday started a 401K account earning 4.5% per year compounded yearly. He deposited $1,500 to begin the account, and put in $1,000 on his 26th birthday. From the 27th to his 35th birthday, he put in $100 more than the previous year, but could not put in anything for five years after that when he was under-employed. He would now like to start depositing money in the account again, starting with $500 and increasing it by $50 each year till he retires on his 65th birthday. How much money can he expect to have in the account on his 65th birthday?

$117,800

If you borrow $15,000 from your dad for college and he agrees to charge you compound interest at 5% per year, how much will you owe when you graduate after 4 years?

$18,233

For what value of W will the NPV of the series of cash flows be zero at 6% per period interest rate?

$184

What is the value of J at 8% interest rate per year for which the NPV of the cash flows will be zero?

$2,089

Dori is planning to retire in 44 years and would like to plan for her retirement by depositing $10,000 in a saving account at the local bank, earning her 4% per year compounded annually. She thinks her new job will allow her to deposit $1500 at the end of the second year, and make a deposit every other year after that increasing by $200 every time. How much will she have collected for her retirement at the end of the 44th year?

$225,770

If you borrowed $128,000 from a bank for a period of 20 years and paid compound interest at the rate of 5.5% per year, what will the total interest that you will end up paying?

$245,472

Anna wants to plan for retirement. She estimates that she would need $24,000 when she retires at age 67 to live the first year after retirement (year 68). She estimates that the amount that she will need for living will have to grow by 3.5% every year to keep up with inflation. Her retirement account earns 4.5% every year. How much should she start saving on her 36th birthday to comfortably live till she is 85 years old, if she is ready to increase the amount that she saves every year with the rate of inflation?

$3,972

Vera wants to buy an antique car for $75,000 on her 36th birthday. She would like to begin with a yearly amount deposited in her money market account earning 6.5% on her 26th birthday, and increase the amount each year by the inflation rate of 4.5%. What amount should she plan on depositing on her 26th birthday?

$3,986

If you borrowed $131,000 from a bank for a period of 25 years and paid compound interest at the rate of 5% per year, what will the total interest that you will end up paying?

$312,612

Mary would like to save for retirement. She starts a money market account on her 28th birthday with $2,000 with an investment company which is guaranteed to earn at least 2% per year, compounded six-monthly. She would like to retire on her 67th birthday by being able to make 2 deposits per year. She starts the first deposit of $1,000 six months after her 28th birthday, followed by another $1,000 deposit six months later on her 29th birthday. She increases the deposit the next year by $100, and repeats the deposit pattern which ends on her 67th birthday . How much can she expect to have collected in her account on her 67th birthday?

$315,250

Mr. Nina borrows $425,000 from the bank at 3.5% per year interest over a 30-year period. He can make a monthly month-end payment of $1,400 and would like to make a balloon payment at the end of the 30-year period. What would be the size of the balloon payment?

$323,069

Dana would like to have a loan from a bank for 12 years. She is to make bi-weekly payments (a payment every two weeks or 26 payments per year) at the end of each bi-weekly period at an interest rate of 6.5% per year, or 0.25% per two weeks (6.5% / 26 = 0.25% per period). If the loan amount is $105,000 what would be each payment?

$485

If you took $75,000 from the bank as a loan at 6% interest per year and paid amounts back as shown in the table below, how much will you still owe at the end of 8 years?

$42,320

Mr. Nina borrows $400,000 from the bank at 3.75% per year interest over a 30-year period. He can make a monthly month-end payment of $1,200 and would like to make a balloon payment at the end of the 30-year period. What would be the size of the balloon payment?

$433,197

For what value of R will the NPV of the series of cash flows be zero at 6% per period interest rate?

$6,510

Say you are starting your working life today with a bank account of $2,500 that earns a compound interest rate of 3.5%, and can manage to save $6,000 every year. What amount would you have saved if you worked for 45 years?

$646,446

Mori is planning to retire in 40 years and would like to plan for his retirement by depositing $2000 in a saving account at the local bank, earning him 3% per year compounded annually. He thinks his new job will allow him to deposit $500 at the end of the first year, and he plans to keep increasing the deposited amount by $20 every year. How much will he have collected for his retirement at the end of the 40th year?

$67,825

Jack would like to have $1.25M to retire in 35 years. He will get $375,000 the day he retires from his company's pension plan that he plans to use to collect the amount needed to retire. If he can deposit funds in a money market account which earns 6.5% interest per year, and he would like to make yearly deposits to collect the money to retire, how large should the annual deposits be?

$7,054 per year

What is the value of Q at 10% interest rate per year for cash flows as shown below?

$7,386

Mary has inherited money, and would like to go on vacation and also use some for retirement. She believes in her working life of 35 years, she should be able to save $6,000 every year which she plans to deposit in a money market account earning 6.5%. She would at least like to have $1.5 million when she retires. How much of her inheritance should she transfer into her money market account to be able to achieve her goal?

$83,400

Marla would like to collect $195,000 to buy a house in 12 years. She thinks she can save money in a money-market account earning 5% interest per year. She would like to deposit an amount Q today to open the account, make a deposit every year, and make the last deposit at the end of Year 12 into the account. She also believes that she can increase the value of the deposit that she makes into the account every year by 3% above what she deposited the previous year, starting with the amount Q. What is the value of Q with which she will have to open the account to make this happen?

$9,350

Susan deposits $4,000 into a money-market account earning 8% per year, and keeps depositing twice the amount every two years for a total of 6 years after she started the account. In other words she deposits $4,000 on Year 0, $8,000 on Year 2, $16,000 on Year 4 and $32,000 on Year 6. How much money will she have in her account at the end of Year 10 if the money was earning the initial interest rate for the entire time?

$92,369

If you deposited $1,000 in a bank account earning 5% per year, how long will it take for the money to triple?

22.5 years

You have $25,000 today. If you can deposit the funds in a money market account along with yearly deposits of $12,000, what rate should it earn in the least to allow you to retire in 40 years with $1.25M?

3.967%

What rate of interest will you have to get per year if you would like to buy a car for $49,000 at the end of 9 years, if you start a money-market account with $2,500 and are ready to deposit $350 at the end of each month

4.00%

Moving manufacturing facilities to China along with the entire design department for lawn mowers is an intermediate level decision.

False

A loan agency will lend you $5,000 if you promise to pay $15,000 after 3 years. What compound interest rate will you end up paying per year if you take the loan?

44%

What rate of interest will you have to get per year if you would like to buy a car for $33,500 at the end of 7 years, if you start a money-market account with $2,000 and are ready to deposit $300 at the end of each month?

5.43%

If you borrowed $15,000 at a simple interest rate of 6% from your friend and promised to give back $20,000, for how long can you have the loan?

5.55 years

If you borrow $78,000 from your dad for college and you agree to pay him back at 8% interest per year in monthly installments of $1,850 each month-end after you find a job, how many months will it take you to pay off the loan. Round the answer in months to the next higher digit.

50

If you borrow $15,000 from your dad for college and you agree to pay him $25,000 back at 8% compound interest per year. How many years do you think you have to do this? In other words, given the amounts and the interest rate, what is the number of years?

6 years and 8 months or close to 7 years

Quizzes can be submitted by email, blackboard or hard copy.

False

A car dealer is ready to let you have a $35,000 car for 72 end of the month payments of $715 each. If you think you can sell the car at the end of 72 months for $10,000 what is the rate that the car financing cost you?

7.5%

If you borrow $6,000 for 4 years and agree to pay back $8000, what simple interest rate will you end up paying?

8.33%

The accounting function helps a firm come up with future estimates of the budget, whereas Engineering Economy is concerned with the creation of the firm's annual balance sheet.

False

A machine costs $270,000 and has a life of 12 years. The machine will be under total warranty for 3 years. In the 4th year the maintenance cost is estimated to be $3,500, and increases by $1,750each year till the 12th year. What amount will the company have to put aside at 6% interest per annum compounded yearly for the maintenance?

Around $56,100

$2,123 eight years from today at a compound interest rate of 6% per year is equivalent to $1,200 today.

False

A dollar today is worth less than a dollar tomorrow!

False

Engineering Economics criteria should always supersede strategic considerations in making business related decisions.

False

You may take the exams from home so long as you promise not to discuss the questions with anyone?

False

A company makes engines for cars. The company buys castings from outside for $150. Doing an analysis it has found that if they start making the castings, it will save them $10. Of the cost of $140 that they anticipate for the casting per unit, they estimate $50 will be material, $60 will be labor, and $30 will be overhead. Should they make the decision to start making the castings?

It seems like a good idea, but it would be good to know if they can really save $10 per casting. Sometimes, getting into a new product line may have costs that are not known upfront

Jack and Jill are always out to outwit each other. Jack comes up with a scheme over a 15-month period. He asks Jill to pay $125 to him on Time 0, and keep increasing the amounts by $10 per month. Jack will pay $200 to Jill on Time 0 and keep making equal monthly payments of $200 till the end of the 15th month. This way both would have given and accepted $3,200 each. At 18% interest per year, who will come out ahead?

Jill will come out ahead

Which plant people have the greatest likelihood of being involved in Engineering Economy decisions?

Management and Engineers

An automobile tier II supplier has been offered a contract to supply a gearbox to a car company. The initial price of the gearbox is $389, and the car company is ready to give a contract to the supplier to supply 500,000 gearboxes in the first year, increasing by 2% every year, if the supplier is ready to bring down the price of the gearbox every year by $7.50 over the 12-year life of the contract. How much is the contract worth to the supplier at 6% interest?

Over $1.6 Billion

Amjencio is ready to hire you for a first year salary of $56,000 (assume an inflow of this at the end of year 1) with a guaranteed increase of 2.5% every year for a 35-year contract. How much is the total contract worth at the end of the 35-year term at a 7% interest rate, compounded yearly?

Over $10.3 million

The more the risk, the more can be the expectation of reward.

True

You are required to attend all the live sessions or view the archived sessions.

True

Your dad has agreed to loan you $25,000 at a rate of 2% per year for 5 years. Are the two options shown below equivalent in paying off the loan? 1) You pay $500 every yearend for 5 years, and $25,000 at the end of the 5th year. 2) You pay $5,500 at the end of the first year, $5,400 at the end of the second year, $5,300 at the end of the third year, $5,200 at the end of the fourth year, and $5,100 at the end of the fifth year.

True