MSCI261-003 Tutorial 2
Peggy Li (j252li@uwaterloo.ca)
Q3.31
Reginald is expecting steady growth of 10% per year in profits from his new company. All
profits are going to be invested at 20% interest. If profits for this year (at the end of the year)
total

Engineering Economic Analysis (2014) by Newnan et al.
Chapter 14 solution
13
Since inflation on fuel is 12% per year, the price of fuel after 8 years = (1 + 0.12)8 = 2.476
present price. If one litre of gasoline costs $1 today, the same amount of gasolin

Using Excel in engineering economic analysis
Example 2-1: Hybrid cars are very popular these days. Some people buy it for status (i.e., as an env
many others buy it for economy (i.e., to save gas costs). Using Excel and some engineering econom
we can eval

Lecture 2 (Time value of money) solution
Newnan et al. (2014), Chapter 3
17
If Alvin wants to have $12,000 when he graduates, then he needs to invest $X now, where
X(1.03)4 = 12,000. So X = $10,661. If he has $16,000 from Uncle Arnold, then he can spend
$

Chapter 3: Cash Flow Analysis
Useful Formulas
4 major formulas that quicken lengthy calculations
Mnemonic symbols to help choose the right formula
Example 3-1: How much money will be in a bank account at
the end of 2 years if $5000 is deposited today. Int

Chapter 9: Inflation
9.1 Introduction
9.2 Measuring the Inflation Rate
9.3 Economic Evaluation With Inflation
9.3.1 Converting Between Real and Current Dollars
9.4 The Effect of Correctly Anticipated Inflation
9.4.1 The Effect of Inflation on the MARR
9.4

Chapter 4: Comparison Methods Part 1
Present Worth, Annual Worth, Payback Period, Levelized Cost
Assumptions (for now):
Costs and benefits are measurable in $
Sufficient funding is available
No uncertainty
No tax (Chapter 8)
No inflation or deflation

Chapter 5: Comparison Methods Part 2
Internal Rate of Return & External Rate of Return
Example 5-1. Consider two mutually exclusive investments. The first
costs $10 today and returns $13 in one year. The second costs
$1000 and returns $1250 in one year. W

MSci 261
Business Plan Proposal
Mehrdad Pirnia
As for the first deliverable of your Business Plan assignment, you have to write a business plan proposal
to quickly describe the topic of the project. Also, in this document you have to note the names and
qu

Solutions for Chapter 3
Edition 5 3.7 3.11 3.14 3.16 3.17 3.30 3.33 3.35 3.37
Edition 4 3.9 3.31 3.11 3.47 3.49 3.25 3.35 3.37 3.39
For problem 3.31 edition 4, the total profit is considered as 10,000 and not
1,000,000.
The solution numbers are based on e

Chapter 5 Practice Solutions
CH5 5.10a 5.12 5.13 5.16 5.22 5.27 5.31 5.33 5.38a&b
CH4 5.1a 5.3 5.5 5.25 5.15 5.29 5.11 5.13 5.23a&b
Note that the numbers of problems are based on edition 5. The Sequence is as mentioned
above.
1
2
3
4
5

Engineering Economic Analysis (2014) by Newnan et al.
Chapter 12 solution
1. (We use the 2012 tax rate in table 12-1 of the textbook.)
(a) With the taxable income of $62,000 and non-refundable tax credit of $12,000, the taxable
income is $50,000. For inco

Engineering Economic Analysis (2014) by Newnan et al.
Chapter 11 solution
7
Cost basis B = $45,000
Salvage value = $0
Service life N = 5 years
(a)Straightline
d= (B S)/N = ($45,000 0)/5 = $9,000 depreciation each year
(b)SOYD
SOYD for a 5 year property is

Engineering Economic Analysis (2014) by Newnan et al.
Chapter 7 solution
5
9,375 = 325(P/A, i, 36)
(P/A, i, 36) = 9,375/325 = 28.846
From compound interest tables, i = 1.25%. Note that the IRR is monthly.
Nominal Interest Rate = 1.25 12 = 15%
Effective I

Engineering Economic Analysis (2014) by Newnan et al.
Chapter 3 solution
16
F = $150,000; i = 10%; n = 5 years
P = F(P/F, 10%, 5) = 150,000(0.6209) = $93,135
17
If Alvin wants to have $12,000 when he graduates, then he needs to invest $X now, where
X(1.03

NOTE: only solution 2 is
acceptable this year (not solution 1).
CCTF is from the old text.
CCTF-old = CSF.
CCTF-new=CTF .
More precisely, assume that a lawnmower is needed for at least 12 years,
and the second and third copies of the Clip Job will have th

MSci 261 (Winter 2014) Midterm Exam#2Review Mehrdad Pirnia
1
When and where do I write the exam?
Time: Friday, April 4th @3:30-5:30 p.m.
Location:
DWE 3516, last names starting with: A-J
DWE 3522, Last names starting with: J-Z
What is covered on the Exam?

Chapter 2: Time Value of Money (Interest)
Example 2-1: (a) On September 1, you deposit $1000 into a bank
account that earns interest at the rate of 3% per year. The bank
calculates interest and adds it to your account once per year, on
September 1, based

Chapter 8: Taxes
8.1 Introduction
8.2 Personal Income Taxes and Corporate Income Taxes
Compared
8.3 Corporate Tax Rates
8.4 Before- and After-Tax MARR
8.5 The Effect of Taxation on Cash Flows
8.5.1 The Effect of Taxes on First Cost
8.5.2 The Effect of Tax

Depreciation and Financial Accounting
Reasons for Depreciation Estimates:
Financial statements
Estimation of salvage values
Example 6-1. Assets lose value for a variety of reasons. Give
an example for each of the following types of reasons:
use-related

Business Plan, Part 2
For the second part of the business plan (BP), you have to work on the following sections, based on the
initial idea you proposed in your BP proposal:
1- Market Analysis and Future Outlook Section 6.3.3 of the textbook
2- Funding Req