CHAPTER 14 PROBLEMS
14-1
Dene ination in terms of the purchasing power of dollars.
Solution:
During times of inflation, the purchasing power of a monetary unit is reduced. In this
way the currency itself is less valuable on a per unit basis. In the USA, w
Identifying Cash Inflows and Outflows
5.1 Camptown Togs, Togs, a childrens clothing manufacture, has always found payroll
processing to be costly, because it must be done by a clerk so that the number of piece-goods
coupons collected for each employee can
CHAPTER 8 PROBLEMS
Unless otherwise noted, all problems for Chapter 8 should be solved by rate of return
analysis.
8-1
A firm is considering moving its manufacturing plant from Red Deer to a new
location. The industrial engineering department was asked to
CHAPTER 5 PROBLEMS
5.34-5.46 Trust Funds
5.47-5.73 ME Alternatives
5.74-5.84ExcelExamoles NO
5-1
Compute P for the following diagram.
Solution:
P = $50 (P/A, 10%, 4) + $50 (P/G, 10%, 4)
= $50 (3.170) + $50 (4.378)
= $377.40
5-2
Compute the value of P that
Park Chapter 3
Market Interest Rates (Nominal versus Effective Interest Rates)
3.1 A loan company offers money at 1.5% per month compounded monthly.
(a) What is the nominal interest rate?
(b) What is the effective annual interest rate?
(a) r = 1.5%*12 = 1
Park Fundamentals of EE
Chapter 2 Time Value of Money
Methods of Calculating Interest 2.1-2.5
The Concept of Equivalence 2.6-2.8
Single Payments (Use of F/P or P/F Factors) 2.9 -2.15
Uneven-Payment Series 2.16-2.23
Equal-Payment Series 2.24-2.34
Linear Gr
CHAPTER 6 PROBLEMS
6-1
Using a 10% interest rate, compute the value of C for the following diagram.
Solution:
C = $15 + $15 (A/G, 10%, 4)
= $15 + $15 (1.381) = $35.72
6-2
Compute the value of B for the following diagram:
Solution:
B = [$100 + $100 (F/P, 1
Note: The symbol i* represents the interest rate that makes the present worth of the
project equal to zero. The symbol IRR represents the internal rate of return of the
investment. For a simple investment, IRR = i*. For a nonsimple investment, i*
generall
Park 5-27
A/F,5,15
i
(1+i)^15-1
2/3
0.0500000000
1.0789281794
0.0463422876
926,845.75
5,000,000
2,000,000
100,000
7,926,845.75
5,000,000
2,000,000
Up front payment
Left in bank to earn 100,000
926,845.75
Left in bank for 15 years
1,926,845.75
Value in 15
CHAPTER 3 - PROBLEMS
3-1
In your own words explain the time value of money. From your own life (either now or in
a situation that might occur in the future), provide an example in which the time value of money
would be important.
Solution:
Time value of m
CHAPTER 16 PROBLEMS
16-1 Economic analysis and decision making in the public sector is often called a
multi-actor or multi-stakeholder decision problem. Explain what this phrase means.
Solution:
Public decision-making involves the use of public money and
Note: In these problems, the term market interest rate represents the inflationadjusted interest rate for equivalence calculations or the APR (annual percentage
rate) quoted by a financial institution for commercial loans. Unless otherwise
mentioned, all
Valuation of Benefits and Costs
12.1 The state of Michigan is considering a bill that would ban the use of road salt on
highways and bridges during icy conditions. Road salt is known to be toxic, costly,
corrosive, and caustic. Chevron Chemical Company Pr