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IE343_HW12_Solutions

# IE343_HW12_Solutions - Homework#12 Solutions PURDUE...

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Homework #12 Solutions PURDUE UNIVERSITY Homework Assignment #12 IE 343: Engineering Economics Assigned: 3 Dec 2010 Fall 2010 Due: 10 Dec 2010 Instructor: A. Capponi Problem 1 (10 points) Textbook problem 8-33 (a) Two years from now, we will have that ( ) . This means that ( ) . Thus, in order to buy one dollar two years from now, the number of units of currency X to pay is 6.08, as opposed to 6.4 units needed today. (b) If the currency X is devaluing at a rate of 26% per year, then three years from now we will have that ( ) . Therefore, 6.91 units of X will be needed to buy one dollar three years from now, as opposed to 6.4 units needed today. Problem 2 (10 points) Textbook problem 8-35 a) Devaluation of currency A relative to dollar = ( )( ) This is the IRR in Currency A b) Devaluation of dollar relative to currency B = ( ) ( )( ) This is the IRR in Currency B

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Homework #12 Solutions Problem 3 ( 10 points ) Textbook problem 9-5 MARR = 10% Year EUAC 1 ( ) 2 ( ) 3 ( ) 4 ( ) ( ) ( ) ( ) 5 ( ) ( ) ( ) ( ) ( ) ( ) 6 ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) After 5 years, EUAC starts increasing. Therefore, choose N=5 years for the challenger.
Homework #12 Solutions Problem 4 ( 10 points )

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