Homework#4

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School

San Diego State University *

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Course

E330

Subject

Industrial Engineering

Date

Jan 9, 2024

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pdf

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2

Uploaded by ConstableSteel13076

Homework #4. 1.24 A new engineering graduate who started a consulting business borrowed money for 1 year to furnish the office. The amount of the loan was $23,800, and it had an interest rate of 10% per year. However, because the new graduate hadn’t built up a credit history, the bank made him buy loan default insurance for 5% of the loan amount. In addition, the bank charged a loan setup fee of $300. What was the effective interest rate the engineer paid for the loan? Interest on loan = 23,800(0.10) = $2,380 Default insurance = 23,800(0.05) = $1190 Set-up fee = $300 Total amount paid = 2380 + 1190 + 300 = $3870 Effective interest rate = (3870/23,800)(100) = 16.3% 1.29 A medium-size consulting engineering firm is trying to decide whether it should replace its office furniture now or wait and do it 1 year from now. If it waits 1 year, the cost is expected to be $16,000. At an interest rate of 10% per year, what is the equivalent cost now? Equivalent cost now = 16,000/1.10 = $14,545.45 1.44 If your money earns compound interest at a generous 20% per year, how long will it take $50,000 to accumulate to at least $85,000? Solve using two methods: ( a ) year-by-year accumulated total, and ( b ) Equation [1.6]. (a) Amount Year 1 = 50,000 + 50,000(0.20) = $60,000 < $85,000 Amount Year 2 = 60,000 + 60,000(0.20) = $72,000 < $85,000 Amount Year 3 = 72,000 + 72,000(0.20) = $86,400 > $85,000 Time = 3 years 85,000 = 50,000(1.20) n
1.70 = 1.20 n log 1.70 = n log 1.20 0.23045 = n(0.07918) n = 2.9 years 1.57 Every engineering economy problem will involve at least how many symbols? It will involve at least four symbols. 1.66 What does the term end-of-period convention mean? What does it not mean? End-of-period-convention means end-of-interest period. It does not mean end of the calendar year. 1.67 Identify the following as cash inflows or outflows to a commercial air carrier: fuel cost, pension plan contributions, fares, maintenance, freight revenue, cargo revenue, extra-bag charges, cost of snacks, web-based advertising, landing fees, and seat-preference fees. Fuel cost - outflow , pension plan contributions - outflow , passenger fares - inflow, maintenance - outflow , freight revenue - inflow, cargo revenue - inflow , extra-bag charges – inflow , snacks - outflow , web-based advertising - outflow , landing fees - outflow , seat preference fees – inflow
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