HW 1/2/3

Identify all nine steps in the decision-making process.

1. Recognize the Problem 2. Define the goal 3. Assemble relevant data 4. Identify feasible alternatives 5. Select the criterion to determine the best alternative 6. Construct a model 7. Predict each alternative's outcomes or consequences 8. Choose the best alternative 9. Audit the result

A trade group tracks average prices of electrical equipment and uses these average prices as a cost index that it publishes for members. Five years ago the average price for transformers was $5000. Now the average price of a transformer is $6800.

A. If a Westinghouse 10 KVA transformer was priced at $4100 five years ago, what price would you estimate it is now? C now = 4100(6800/5000) = 5576 B. If the power sizing index for transformers is .6, what would a 5 KVA transformer cost now? C now = 5576(5/10)^.6

You are being offered three loans, but they have different nominal rates and different compounding periods. Which one is best for you? Use an effective annual interest rate to compare all options Loan A is offered with a nominal annual rate of 8.9% compounded daily. Loan B is offered with a nominal annual rate of 9.1% but continuously compounded. Loan C is offered at .75% per month

Because it is a loan, one wants to have the lowest rate, SO CHOOSE A

$1,000 was borrowed 3 months ago at 1% per month. Calculate how much will be owed at the end of next month.

F1 = P(F/P,i,n) = 1,000 (F/P),1%,4) = 1,000 (1.041) = 1,041

Calculate the future worth at the end of year 8 of $10,000 deposited at the end of year 3 plus $10,000 deposited at the end of year 5, and $10,000 at the end of year 8 at an interest rate of 12% per year.

F8 = 10,000(F/P,12%,5) + 10,000(F/P,12%,3) + 10,000 = 41,670

Identify the correct economic decision criteria for the given criteria

Fixed input = Maximize benefits Fixed output = Minimize cost Neither input or output is fixed = Max. profits( value of outputs - cost of inputs)

Decide and explain which of the following problems you need in engineering economics: a. To compare a 4-year and a 5-year car loan b. To decide whether a new or a used car is cheaper c. To decide whether to pay your car insurance quarterly or annually d. All of the above e. None of the above

The correct answer is d because they all involve cash flows at different times and involve enough money to make analysis worthwhile.

. An engineering student is offered a loan of $8,000 per year for his undergraduate study time of 4 years. The student will have to pay back the loan after graduation, paying $8,000 each year for the first 4 years of the student's professional career. Decide if and why this is an economically good or bad deal.

This is a good deal. It is an interest-free loan for 8 years, due when the student has an income and better able to repay.

You have leased an empty storefront in the South Plains Mall for your new business of selling flower arrangements. Your rent is $3000/month. The average cost of materials to make a flower arrangement is $22. The average selling price is $30. You employ four flower arrangers who you pay $10/hour. Each 8-hour shift has two of your employees working and you have two shifts per day. You are closed on Sunday so you average being open 26 days/month. How many arrangements must you sell per month to make a $2000 profit for the month?

Total Revenue - Total Cost = Profit 30x - (3000 + 2 * 10 *8 *26*2 +22x) = 2000 1665

You have been asked by your supervisor to make estimates of a job your company is bidding significantly lower than what you think is realistic. Your supervisor tells you that there is a lot of pressure from the division chief to win this contract and that their jobs were probably on the line if the company doesn't win. What will you do?

a) It is only an estimate, so some inaccuracy is expected. Change your figures as requested so the folks above you can still have a job. b) Change your estimates, but not as much as directed. That way you can keep your integrity and jobs can still be saved. c) Give an honest appraisal to the best of your ability, regardless of the effects it has on other people in your company