Taif University \\ Fundamentals of Engineering Economy (8012101-2) College of Engineering Foundations of Engineering Economy Civil Engineering Dept. Assignment #1 End date: Sunday 20/09/2020 Fall ter— Level 3 TAI UNIVERSITY Name: Bessel ALHARTHLy 434 04472 Solve the following problem: 1, Which of the following 1-year investments has the highest rate of return? (a) $12,500 that yields $1125 in interest, ) $56,000 that yields $6160 in interest, or (©) $95,000 that yields $7600 in interest. 2. A comany borrowed $3,500,000 from a private equity firm for expansion of its manufacturing facility for making carbon monoxide monitors/controllers. The company repaid the loan after 1 year with a single payment of $3,885,000. What was the interest rate on the loan? Perse 39%00,00° i= aggnose 3300000 xX100% Amount Peidefeer 1 Jeet is e000 i=11% 3. A new engineering graduate who started a consulting business borrowed money for | year to furnish the office. The amount of the loan was $23,800, and it had an interest rate of 10% per year. However, because the new graduate had not built up a credit history, the bank made him buy loan-default insurance that cost 5% of the loan amount. In addition, the bank charged a loan setup fee of $300. What was the effective interest rate the engineer paid for the loan? ens! GOV en nt 13,80 oan Yearly intetes ere be: epealt ins arence Seok lernemoun Loth- Lotnsetue fees 309 _ SS fee tiv 43200 x0-LO+2IZAOXO- i e « V2R00K%0- 20473 ca Eifectiveincerest ret 283826 Effective interestrrte=16-26% 4. Construct a cash flow diagram for the following cash flows: $25,000 outflow at time 0, $9000 per year inflow in years | through 5 at an interest rate of 10% per year, and an unknown future amount in year 5. 4000 Us,000 Yaoo aero Yoor 4,000 F.4 ° t q 3 4 S5. Construct a cash flow diagram to find the present worth in year 0 at an interest rate of 15% per year for the following situation. Year Cash Flow, $ -19,000 +8,100 gcce pcre sny000 accumulated in 15 years from an investment of $40,000 now at an. interest rate of 8% per year, P . 4 4,000 7. Atan interest rate of 15% per year, an investment of $100,000 one year ago is equivalent to how much now? 6. Construct a cash flow diagram that represents the amount of money that will be 1s Yeer Amount pow 2 = 100/009 t100 700 °Co- mo 45) = 195 299° 8. As a principal in the consulting firm where you have worked for 20 years, you have accumulated 5000 shares of company stock. One year ago, each share of stock was worth $40. The company has offered to buy back your shares for $225,000. At what ‘interest rate would the firm’s offer be equivalent to the worth of the stock last year? Brcoo(4eH(1ti) =22b.000 (1419 \ =1-125 LAVHS1U-STe Peryeer 9. A welding company has extra funds to invest for future capital expansion. If the selected investment pays simple interest, what interest rate would be required for the amount to grow from $60,000 to $90,000 in 5 years? Jo,000 = bo,000 + b0p000(8) (\) 300 ,000\ = 3907909 Voto (10% Per yer lh)10. To finance a new product line, a company that makes high-temperature ball bearings borrowed $1.8 million at 10% per year interest. If the company repaid the loan in a lump sum amount after 2 years, what was (a ) the amount of the payment and ( b ) the amount of interest? (2) F = 18007099 (tree Cb) Luterest =2 9278s 000 -12004 999 = 3783009 4+0-10) «24178,000 11. If interest is compounded at 20% per year, how long will it take for $50,000 to accumulate to $86,400? " Bb, too = bos000 (140,293 \o3 (Bb, 42.0/50p000)= MLOTP? Or237Bt=O2 07918 bh =3 Yerts 12. At an interest rate of 10% per year, the equivalent amount of $10,000 one year ago is closest to: (a)$8264 (6) $9091) —_(c) $11,000 (d) $12,000 13. Assume that you and your friend each have $1000 to invest. You invest your money in a fund that pays 10% per year compound interest. Your friend invests her money at a bank that pays 10% per year simple interest. At the end of 1 year, the difference in the total amount for each of you is: (a) You have $10 more than she does (b) You have $100 more than she does ©) You both have the same amount of money”) (@ She has $10 more than you do 14. The time it would take for a given sum of money to double at 4% per year simple interest is closest to: (a) 30 years b) 25 years (©) 20 years (4) 10 years