141 = 10%6, what is the watus of P’
5-5 Compute the watue of P forthe following disgram. 5-8
1
b
5.9 stonecutter, assigned to carve the headstone for 9
well-known engineering economist, began with the
} following design.
5-6 Compute the value of P far the following disgear,
se
$.17 napressnt worth analysis of ceria equipmentone
alternative aas 4 net pesent wor of 4-420, tased un
8 & pene seal ysis periud tha equals the wseCal [ie of
the sltemative. A IDS interest rate was used it the
computations
“The elternative device is v9 be repluced at che
end of the € yes by am identical item with the
same cost, bones, and wseful life. Based on a 104%
interest rate, compuur the get present worth of die
‘akeraative equipment for due |2-vear analysis pesiod.
5-25 TBP Inc. isconsidering csablishinga new machine ta
automate a meat packing process. The machine will
suve 950,000 in labor anaually, The machine ca be
‘puretased for $200,000 today and willbe aed fr a
‘pefiod of 10 years. Itis bas salvage value oF $10,000
‘atthe end ofits usefl life. The new machine will
‘require an annual maintenance east uf $8000. The
sconporation has a miniraum rate nf seavm of 10%. Be
‘you recomend sutomating the process?6-3 Compute the value of E:
:
“
.
| 4 15
Pog
“ly |
6-4 Lfi = 6%, compute the value of D that is equivalent
to the two disbursements shown.
200
rt 4
DD bp b Bb DBD
1}
6-10 An electronics firm invested $60,000 in a precision
inspection device. It cost $4000to operate and main-
lain in the first year and $3000 in each of the subse-
‘quent years. At the end of 4 years, the firm changed
heir inspection procedure, eliminating the need for
the device. The purchasing agent was very fortunate
inbbeing able to sell the inspection device for $60,000,
the original price. The plantmanagerasks youro com-
pute the equivalent uniform anmwal cost of the device
during the 4 years it was used, Assume interest at 10%
per year. (Answer: $9287)
6-11 A firmis about to begin pilet plant operation on a pro-
cess it has developed. One item of options) equipment
that could be obtained is a heat exchanger unit. The
company finds that a unit now available for $30,000
could be used in other company operations. It is es-
timated that the heat exchanger unit will be worth
$535,000 ar the end of 8 years. This seemingly high sal-
vage value is due primarily to the fact thatthe $30,000
purchase price is really @ rare bargain. If the firm
believes 15% is an appropriate rate of retum, what
annual benefitis needed to justify the purchase of the
heat exchanger unit? (Answer: $4135)6-22
727
7-32
734
7-45
Jeamy McCarthy isan engineer for a municipal power
plant. The plant uses natural gas, which is currently
provided from an existing pipeline at an anitual cast
‘0 $10,000 per year. Fenny is cousidering a project to
construct ¢ new pipeline, ‘The initial cost of the new
pipeline would be $35,000, but it would reduce the
annual cost to $5000 per year. Assume.an analysis
period of 20 years and ao salvage vaiue for either the
existing or new pipeline. The intetest rate is 6%.
(@) Determine the eouivalent uniform annual cost
(FUAC) for the new pipeline?
(@) Should the new pipeline be constructed?
An investment of $5000 in Biotech common stock
proved to be very profitable. At the end of 3 years
the stock was sold for $25,000. Wht was the rate of
return on the investment?
Jan purchased 100 shares of Peach Computer stock
for 418 per share, plus a $45 brokerage commission.
Every 6 months she received a dividend from Peach
of 50 cents per share. At the end of 2 years, just after
receiving the fourth dividend, she soid the stock for
$23 per share and paid a $58 brokerage commission
from the proceeds. What annuai cate of return did she
receive on her investment?
An investor purchased 100 shares of Omega common
stock for $9000. He beid the stock for 9 years. For
the fist 4 years he received annual end-of-year divi-
dends of $800. For the next 4 years he received annual
dividends of $400. He received no dividend for the
ninth year. At the end of the ninth year he sold his
stock for $6000. What rate of return did he receive on
his investment?
‘The owner of a comer lot wants (0 find a use that will
yielda desirable rear on his investment. After much
study and calculation, the owner decides that the two
best altematives are
Build Soft
Build Ice Cream
Gas Station — Stand
First cost $80,000 $120,000
‘Annual property taxes 3,000 5,000
Annual income 11,000 16,000
Life of building, in years 20 20
Salvage value 0 °
the owner wants a minimum attractive rate of return
cn his investment of 6%, which of therwo alternatives
would you recommend?