MIME 310 - Problem Exercises

MIME 310 - Problem Exercises - MIME 310 ENGINEERING ECONOMY...

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M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y PROBLEM EXERCISES F A L L 2 0 0 9 Department of Mining, Metals and Materials Engineering McGill University
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ii F O R E W O R D There are ten sets of problem exercises, one for each chapter in the notes. Their purpose is to help you practice solving typical Engineering Economy problems. The solutions to these prob- lems are available on the course WebCT site. You will benefit from these exercises by attempt- ing them before you look at the solutions. Acquiring the solutions a few days before the class tests or final exam without having spent time on solving the problems is of no practical use. If you have questions concerning any particular problem, please consult the TAs or course instruc- tor(s) during the appropriate hours. Note that problem exercise 1 of Chapter 2 relates to the process of recording business transac- tions as debits and credits for the purpose of producing financial statements. This section of Chapter 2 is no longer part of the course syllabus. Please see the Course Notes for more details. Prof. Bilodeau
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iii C O N T E N T S CHAPTER #1 – INTRODUCTION 1 CHAPTER #2 – PRINCIPLES OF ACCOUNTING 2 CHAPTER #3 – THE TIME VALUE OF MONEY 5 CHAPTER #4 – PRODUCTION AND COST ANALYSES 7 CHAPTER #5 – SOURCES OF FUNDS AND THE COST OF CAPITAL 10 CHAPTER #6 – PROJECT EVALUATION CRITERIA 11 CHAPTER #7 – INCOME TAX CONSIDERATIONS 16 CHAPTER #8 – INFLATION 17 CHAPTER #9 – SENSITIVITY AND RISK ANALYSES 20 CHAPTER #10 – REPLACEMENT ANALYSIS 22
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1 CHAPTER #1 – INTRODUCTION 1. The demand and supply schedules for a particular product are believed to be as follows: Price ($/unit) Quantity demanded (units/month) Quantity supplied (units/month) 100 1 000 25 000 90 3 000 22 000 80 5 000 19 000 70 8 000 15 000 60 12 000 11 000 50 18 000 6 000 40 26 000 1 000 i) Plot the demand and supply curves on an appropriate graph. Determine graphically the equilibrium levels of price and quantity demanded and supplied. ii) Assume that the price is fixed at $45 per unit. Would there be an excess supply or demand at this price? Under this situation, determine graphically the price that could eventually be paid for the product on the black market. iii) Assume that the supply for the product increases to a higher level (the supply curve shifts to the right) such that 6000 additional units are supplied at each price level. Determine graphically the new equilibrium price. iv) Assume that the demand for the product increases to a higher level (the demand curve shifts to the right) such that 5000 additional units are demanded at each price level, in addi- tion to the higher supply level assumed above. Determine graphically the new equilibrium price. 2.
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MIME 310 - Problem Exercises - MIME 310 ENGINEERING ECONOMY...

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