IEOR
UC Berkeley
Dr. Donatella Taurasi
Principles of Engineering Economics
Problem Set 1
You may submit your solution to the homework as an excel/word file or you may write out
your solutions by hand and submit a scanned pdf. Your solutions must be clearl

IEOR
UC Berkeley
Dr. Donatella Taurasi
Principles of Engineering Economics
Problem Set 3
Capital Budgeting
You may submit your solution to the homework as an excel/word file or you may write out
your solutions by hand and submit a scanned pdf. Your soluti

PROBLEMS:
Please do the following problems:
<Problem 1#Using the assumptions in part (a) of Problem 8_5
(assuming there is no cannibalization),
a. Calculate HomeNets net working capital requirements (that is,
reproduce Table 8.4 under the assumptions in P

*
Student Name: Giscielle Carlisa
Student ID: 24722703
E 120 Fall 2013 NLG
Assignment 1, Due September 11, 2013
*
<1_1# The most important difference between corporations and other
organization form is that a corporation is a legally defined,
artificial b

IEOR
UC Berkeley
Dr. Donatella Taurasi
Principles of Engineering Economics
Spring 2016
Problem Set 2
Interest Rates and Bond Valuation
You may submit your solution to the homework as an excel/word file or you may write out
your solutions by hand and submi

E120
Homework 3
2
Due 09/26/2014
02/23/2015
1. What is the present value of $1000 paid at the end of each of the next 100 years if the
interest rate is 7% per year?
2. You are the head of the Schwartz Family Endowment for the Arts. You have decided
to fun

IEOR
UC Berkeley
Dr. Donatella Taurasi
Principles of Engineering Economics
Spring 2016
Problem Set 4 - Portfolio Choice and the CAPM
You may submit your solution to the homework as an excel/word file or you may write out
your solutions by hand and submit

E120
Homework 4
Due 10/03/2014
03/16/2015
1. A 30-year bond with a face value $1000 has a coupon rate of 5.5%, with semiannual
payments.
(a) What is the coupon payment for this bond?
(b) Draw the cash ows for the bond on a timeline.
2. Assume that a bond

Fall 2008 Engineering 120
Industrial Engineering & Operations Research
September 28, 2008, 2008 Page 1 of 2
Homework #5
Due: October 6 Monday, at the beginning of the lecture 1. Metallica Bearings, Inc., is a young start-up company. No dividends w

Qualitative Information to Know E120
Always rely on maximizing the NPV when considering a project
Incremental earnings are how a project will change the firms earnings
o Includes project externalities (cannibalization) and opportunity costs
o Exclude su

Chapter 3:
Valuation Principle: value of asset determined by market price; benefits/costs evaluated using market price; when
benefit > cost then market value of firm inc
NPV decision rule: choose highest NPV
Arbitrage: take advantage of price difference b

Chapter 4: The Time Value of Money
4.1 The Timeline
Stream of cash flows: series of cash flows lasting several periods
Represent stream of cash flows on a timeline
Type 1: only inflows
Type 2: inflows and outflows
4.2 The Three Rules of Time Travel
3 rule

Chapter 1: Introduction
Introduction
Corporations were not always private as they are today
o
Law was passed in 1819 establishing that property of corporation is private and entitled to protection
under constitution
o
Protection from property seizure by t

Chapter 5: Interest Rates
5.1 Interest Rate Quotes and Adjustments
Generally stated as an annual rate, interest payments themselves may occur at different intervals
Discount rate: reflect actual return we could earn over that time period
The Effective Ann

Chapter 6: Valuing Bonds
6.1 Bond Cash Flows, Prices, and Yields
Bond Terminology
Bond: security sold by governments and corps to raise money from investors today in exchange for promised
future payments
Bond certificate: indicates amounts and dates of al

Chapter 3: Financial Decision Making / Law of One
Price
3.1 Valuing Decisions
Financial manager makes decisions on behalf of firm's investors
Good decision: benefits exceed the costs
Involves other skills:
o
Marketing: forecast increase in revenues relate

Chapter 2: Financial Statement Analysis
2.1 Firms' Disclosure of Financial Information
Financial statements are accounting reports with performance info issued quarterly and annually
Must file with the SEC (US securities and exchange commission)
Quarterly

9/7/16
Appendix: The price of Risk
Risky vs. risk-free cash flows
Arbitrage with transactions costs
Table 3A.1 Cash flows and Market
Prices (in $) of a Risk-Free Bond and
an Investment in the Market
Portfolio
Risky Versus Risk-free Cash Flows
Assume t

Data Case 2
I used the data from Marketwatch instead of Morningstar. Therefore, a lot of the ratios may not
make sense to you. I have taken this into consideration when grading the data cases. There may
also be mistakes in the solution, you are welcome to

Example Tornado hazard
To demonstrate:
Total probability theorem, Bayes rule for
updating probabilities.
Problem definition
Windstorm in the County, sometimes
accompanied by tornado, may cause
damage to buildings in the City. We are
interested in determi

8/29/16
Eng. 120
Engineering Economics
Today
Key Topics
Ch.1
Finish ch.1 and start ch.2
Assignments:
Online problem set (MFL) due weds.
No data lab (bcourses) due this week.
control of corporations
the stock market
Ch.2
Financial statements
Rem

9/19/16
Eng. 120
Engineering Economics
Today
Finish up: Retirement (and some investing.)
Not in text but could be on the test.
Start ch. 5.
Outline
Basics of retirement savings
A video!
The power of compounding
Note: this lecture Ill just use brute

Engineering 120: Principles of
Engineering Economics
February 12, 2014:
Instructor: Nicholas Gunther
Office Hours: Monday: 2-4 PM
Office: 4175 Etcheverry
GSIs: Sin Man Choi, Yang Wang
Reader: Ruoyun Li
Text:
Jonathan Berk and Peter Demarzo
Corporate Finan

Engineering 120: Principles of
Engineering Economics
February 5, 2014:
Instructor: Nicholas Gunther
Office Hours: Monday: 2-4 PM
Office: 4175 Etcheverry
GSIs: Sin Man Choi, Yang Wang
Reader: Ruoyun Li
Text:
Jonathan Berk and Peter Demarzo
Corporate Financ

E 120 - Spring 2015
Midterm 1 Solution
1. (a) Initial wealth
D = 75
Optimal consumption in period 0
G = 100
Optimal investment into projects
D H = 15
Optimal amount to borrow from the capital market
G + (D H) D = G H = 25
(b) We know D is the initial weal

E120: Principles of Engineering Economics
Spring 2015
Topics per class:
Date
Jan. W 21
Jan. M 26
Jan. W 28
Feb. M 02
# Class
1
2
3
4
Feb. W 04
5
Feb. M 09
6
Feb. W 11
7
Feb. W 18
Feb. M 23
8
Feb. W 25
Mar. M 02
9
10
Mar. W 04
Mar. M 09
Mar. W 11
11
12
13

E120
Homework 1
Due Friday 02/13/2015
09/12/2014
1. Calculate the future value of $2000 in
(a) 5 years at an interest rate of 5% per year.
(b) 10 years at an interest rate of 5% per year.
(c) 5 years at an interest rate of 10% per year.
(d) Why is the amo