any expert in engineering economic ?

CSUF – Fall 2015 HW #1 Name:______________________

EG-ME401 – 3/1/16 DUE 3/8/16 ______________________

______________________

Solve the following problems for 10 pts each, 40 pts total.

Problem 1 (3-50) First Bank is sending alumni of universities an invitation to obtain a credit card, with the name

of their university written on it, for a nominal 9.9% interest per year after 6 months of 0% interest. These interest

rates apply to the outstanding debt if not paid by a specified date each month, and hence interest is compounded monthly. If you fail to make the minimum payment in any month, your interest rate could increase (without notice)

to a nominal 19.99% per year. Calculate the effective annual interest rates the credit company is charging in both

cases

ANALYSIS:

CSUF – Fall 2015 HW #1 Name:______________________

EG-ME401 – 3/1/16 DUE 3/8/16 ______________________

______________________

Problem 2 These cash flow transactions are said to be equivalent in terms of economic desirability at an interest

rate of 12% compounded annually. Determine the unknown value A.

ANALYSIS:

CSUF – Fall 2015 HW #1 Name:______________________

EG-ME401 – 3/1/16 DUE 3/8/16 ______________________

______________________

Problem 3 (5-43) A new alloy can be produced by Process A, which costs $200,000 to implement. The operating cost will be $10,000 per quarter with a salvage value of $25,000 after its 2-year life. Process B will have

a first cost of $250,000, an operating cost of $15,000 per quarter, and a $40,000 salvage value after its 4-year life.

The interest rate is 8% per year com- pounded quarterly. What is the present value difference between A and B?

ANALYSIS:

CSUF – Fall 2015 HW #1 Name:______________________

EG-ME401 – 3/1/16 DUE 3/8/16 ______________________

______________________

Problem 4 (6-45) A pump is needed for 10 years at a remote

location. The pump can be driven by an electric motor if a power line is extended to the site. Otherwise, a gasoline engine

will be used.

At the rate of return of 10%, conduct economic analysis with

the two methods below and make recommendation on how the

pump should be powered.

(a) Present worth analysis

(b) Annual Cash flow Method

ANALYSIS: