Engineering Economy
Autor: Sam King • April 29, 2019 • Course Note • 1,056 Words (5 Pages) • 440 Views
Unit 1 Exam, 6/11/2013
ISE 2014, Summer I 2013
NAME:_____________________________________________
Please circle the category that best describes you:
ISE Student Non-ISE Student
You have 1 hour, 15 minutes to complete this exam.
You may use a calculator and scratch paper.
Here is a formula that may be of use in a particular situation:
[pic 1]
[pic 2]
1)
1.1
Identify the concept described by each situation. (2 points each)
Choose from the following concepts: Uniform Gradient, Multiple Interest Rates, Differed Annuity, and Geometric Gradient
Situation | Method |
Alex wants to save money now, so he can pay for a house in 10 annual payments beginning 15 years from now. | Differed annuity |
Every year Peter increases the amount of money he puts into savings by $500. | Uniform gradient |
Walker puts $X into a savings account earning 3% interest. After 5 years, he moves that money to an account that earns 5%. | Multiple interest rates |
A company invests in a project that requires end-of-year cash flows that increase at a constant 10% in each subsequent year. | Geometric gradient |
Now solve the following problems (hint: you should know which concepts to apply from the above table). (10 points each)
1.2
Alex wants to save money now, so he can pay for a house in 10 annual payments of $20,000 beginning 15 years from now. If he puts the money in an account that earns 3% annual interest, how much money should he set aside right now?
P = $20,000(P/A, 3%, 10)(P/F, 3%, 14)
= $112,786.30
1.3
At the end of Year 3, Peter puts $2,000 in an account. He decides to increase the amount of his deposit in each subsequent year by $500 (so he will deposit $2,500 in Year 4, $3,000 in Year 5, etc.). He does this until Year 10. If he earns 3% annual interest, find the present equivalent value of all these deposits at the end of Year 2.
...