Homework 4

Homework 4 - E 60 Engineering Economic Analysis Autumn...

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E 60 Engineering Economic Analysis November 19, 2007 Autumn 2007-2008 Homework 4 Solutions Professor Samuel Chiu Homework 4 Solutions 5.8 The maximum amount that the you would be willing to pay for the house makes the present value of all cash flows (purchase price, rental incomes, operating and maintenance costs and salvage value) zero. Let the purchase price be A 0 . Then A 0 solves: 793113 0 ) 25 %, 12 , | ( 3000 ) 25 %, 12 , | ( 45000 ) 25 %, 12 , | ( 50000 ) 5 %, 12 , | ( 19965 ) 10 %, 12 , | ( 18150 ) 15 %, 12 , | ( 16500 ) 20 %, 12 , | ( 15000 ) 25 %, 12 , | ( 150000 0 0 = = + + + + + + = A G P A P F P A F A F A F A F A F A P 5.23 (a) - (d) The project balance at the end of year 5 gives the future worth of the project. So: Project Future Worth at t=5 Present Worth A 0 0 B 575 = ) 5 %, 18 , | ( 575 F P 251.3377993 C 0 0 (b) Project balance at the end of period 2 for project C=X=-530*1.12+500=-93.60 (c) Project A Project B Project C n Balance Cash Flows Balance Cash Flows Balance Cash Flows 0 -1000 -1000 -1000 -1000 -1000 -1000 1 -800 200 -680 500 -530 590 2 -600 200 -302 500 -93.6 500 3 -400 200 -57 299 -211 -106 4 -200 200 233 300 -89 147 5 0 200 575 300 0 100 5.27 (a) 7926846 05 . 0 100000 05 . 0 ) 15 %, 5 , | ( 1000000 5000000 %) 5 ( = + + = F A CE (b) 7604852 05 . 0 100000 05 . 0 ) 20 %, 5 , | ( 1000000 5000000 %) 5 ( = + + = F A CE
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E 60 Engineering Economic Analysis November 19, 2007 Autumn 2007-2008 Homework 4 Solutions Professor Samuel Chiu 5.36 The least common multiple of life span of projects is 6. Project's Cash Flow Period A (1st Time) A (2nd Time) A (Total) B (1st Time) B (2nd Time) B (3rd Time) B(Total) 0 -10000 -10000 -22000 -22000 1 7500 7500 15500 15500 2 7000 7000 18000 -22000 -4000 3 5000 -10000 -5000 15500 15500 4 7500 7500 18000 -22000 -4000 5 7000 7000 15500 15500 6 5000 5000 18000 18000 PW: $9,989.41 PW: $15,055.51 The present worth of project B is higher than the present worth of project A in this cycle.
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Homework 4 - E 60 Engineering Economic Analysis Autumn...

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