CHAPTER 3 Solutions Manual
For
Basics of Engineering Economy, 1e
Leland Blank, PhD, PE
Texas A&M University
and
American University of Sharjah, UAE
Anthony Tarquin, PhD, PE
University of Texas at El Paso
PROPRIETARY MATERIAL.
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3- 1
Chapter 3
3.1 Effective
3.2 Simple: F = P + Pni
= 20 + 20(1)(0.18)
= $23.6 million
Compound: F = 20(1 + 0.18)1
= $23.6 million
Difference = 23.6 23.6 = $0
3.3 (a) Quarter
(b) Semiannual (c) Month
3.4 (a) 2
(b) 6
(c) 1
3.5 (a) 12
(b) 3
(c) 24
3.6 (a) r = 4%
3.7 (a) Nominal
(b) r = 0.04*2 = 8%
(d) Week
(e) Continuous
(c) r = 0.04*4 = 16%
(b) Effective (c) Effective (d) Nominal (e) Nominal
3.8 i/yr = (1 + 0.12/4)4 1
= 12.55%
3.9 i/yr = (1 + 0.16/4)4 1
= 16.99%
3.10 0.12 = (1 + r/4)4 -1
1.12 = (1 + r/4)4
(1 + r/4) = 1.120.25
1 + r/4 = 1.0287
r = 11.48%
3.11 i/yr = e0.12 1
= 12.75%
3.12 r/quarter = 0.06
i/quarter = e0.06 1
= 6.18%
3- 2
3.13 0.036/quarter = er 1
er = 1.036
Take natural log of both sides:
r = 0.035367 = 3.54% per quarter
r/month = 0.0354/3
= 1.18%
3.14 (a) Years
(b) Semiannual
(c) Quarter
3.15 Time periods on i and n must be years
3.16 Time periods on i and n must be semiannual
3.17 P = 190,000(P/F,2%,36)
= 190,000(0.4902)
= $93,138
3.18 F = 250,000(F/P,1%,24)
= 250,000(1.2697)
= $317,425
3.19 F = 160,000(F/P,4%,14)
= 160,000(1.7317)
= $270,072
3.20 F = 192,000(F/P,1.5%,60)
=192,000(2.4432)
= $469,094
3.21 F = 2.3(F/P,5%,20)
= 2.3(2.6533)
= $6,102,590
(millions)
3.22 P = 50,000(P/F,3%,32)
= 50,000(0.3883)
= $19,415
3.23 P = 80,000(P/F,3%,8) + 90,000(P/F,3%,16)
= 80,000(0.7894) + 90,000(0.6232)
= $119,240
3.24 i/yr = e0.14 1 = 15.03%
P = 14(P/F,15.03%,2)
= 14[1/(1 + 0.1503)2]
= $10,580,490
(millions)
3- 3
3.25 i/yr = e0.10 1 = 10.52%
P = 120,000(P/F,10.52%,1) + 180,000(P/F,10.52%,2) + 250,000(P/F,10.52%,3)
= 120,000[1/1.1052)1] + 180,000[1/1.1052)2] + 250,000[1/1.1052)3]
= 120,000(0.90481) + 180,000(0.81869) + 250,000(0.74076)
= $441,131
3.26 i/yr = e0.10 1 = 10.52%
F = 300,000(F/P,10.52%,4) + 250,000(F/P,10.52%,2) + 200,000
= 300,000(1.1052)4 + 250,000(1.1052)2 + 200,000
= $952,961
3.27 i/6 mos = (1 + 0.01)6 1 = 6.15%
P = 13,000(P/A,6.15%,5)
= 13,000(4.1953)
= $54,538
3.28 i/yr = (1 + 0.03)4 1 = 12.55%
P = 40,000(P/A,12.55%,5)
= 40,000(3.5562)
= $142,248
3.29 Monthly difference = 5296 3443 = $1853
F = 1853(F/A,0.5%,480)
= 1853(1991.19)
= $3,690,231
3.30 Cost of treatment = 10,000(F/A,1%,12)
= 10,000(12.6825)
= $126,825
P = 126,825(A/P,1%,60)
= 126,825(0.02224)
= $2820.59
3.31 Savings = 12,000 2000 = $10,000 per quarter
P = 10,000(P/A,3%,8)
= 10,000(7.0197)
= $70,197
3.32 F = 19,000(F/A,3%,13)
= 19,000(15.6178)
= $296,738
3- 4
3.33 i/yr = (1 + 0.05)2 1 = 10.25%
A = 9,000,000(A/P,10.25%,10)
= 9,000,000(0.16450)
= $1,480,476
3.34 i/quarter = (1 + 0.01)3 1 = 3.03%
P = [140,000 + 140,000(0.20)](P/A,3.03%,12)
= 168,000(9.9362)
= $1,669,282
3.35 Income/month = 10(75)(300) = $225,000
P = 225,000(P/A,0.25%, 24)
= 225,000(23.2660)
= $5,234,850
3.36 25,000 = 40,000(P/F,1%,n)
(P/F,1%,n) = 0.6250
n is between 47 and 48 (spreadsheet)
Therefore, n = 48 months
3.37 Solve for F at the end of year 4 and then convert to A:
F = 835,000(F/P,1%,24) + 1,100,000
= 835,000(1.2697) + 1,100,000
= $2,160,200
A = 2,160,200(A/F,1%,48)
= 2,160,200(0.01633)
= $35,276
3.38 F = 7500(F/A,1.5%,24)
= 7500(28.6335)
= $214,751
3.39 840,000 = (30 + 5)(500)(P/A,0.5%,n)
840,000 = 17,500(P/A,0.5%,n)
(P/A,0.5%,n) = 48.0000
From 0.5% interest tables, n is slightly greater than 55
Therefore, n = 56 months
3.40 i/mo = e0.01 1 = 1.005%
A = 9900 100(A/G,1.005%,36)
= 9900 100(16.42318)
= $8258
(formula)
3- 5
3.41 Monthly power savings = 4*24*30*0.08 = $230.40
10,000 = 230.40(P/A,1%,n)
(P/A,1%,n) = 43.40278
From 1% table, n is between 55 and 60 months
n = 58 (by trial and error)
3.42 i/year = (1 + 0.00833)12 1 = 10.47%
A = 1.8(A/P,10.47%,200)
= $0.19 trillion
(formula)
3.43 i/year = (1 + 0.01)12 1 = 12.68%
P = 300,000(P/A,12.68%,5) 25,000(P/G,12.68%,5)
= 300,000(3.5449) 25,000(6.24853)
= $907,247
3.44 A = 40,000 + 1000(A/G,3%,16)
= 40,000 + 1000(6.8742)
= $46,874
3.45 290,000(P/F,0.5%,48) = 4000(P/A,0.5%,48) + G(P/G,0.5%,48)
290,000(0.7871) = 4000(42.5803) + G(959.9188)
959.9188G = 57,938
G = $60.36
3.46 Pg = 100,000[1 (1.01/1.015)24]/(0.015 0.01)
= 100,000(22.35297)
= $2,235,297
3.47 i = e0.10 1 = 10.52%
Pg = 8000[1 (1.10/1.1052)7]/(0.1052 0.10)
= 8000(6.2450)
= $49,960
3.48 Convert all cash flows into present worth and then amortize:
i/yr = (1 + 0.0112 1 = 12.68%
Pg = 90,000[1 (1.03/1.1268)10]/(0.1268 0.03)
= $551,073
P = 800,000 + Pg
= 800,000 + 551,073
= $1,351,073
A = 1,351,073(A/P,12.68%,10)
= 1,351,073(0.18194)
= $245,813
3- 6
3.49 Move all cash flows to year 10 and check balances:
Option 1: F = 6697.44(F/P,0.01083%,120) 100(F/A,0.01083%,120)
= 6697.44(3.6423) 100(243.9789)
= 24,394.08 24,397.89
= $-3.86 (zero balance)
Option 2: Credit bal: F = 6697.44(F/P,0.01083%,120) 50(F/A,0.01083%,120)
= 6697.44(3.6423) 50(243.9789)
= 24,394.08 12,198.95
= $12,195.14
Savings bal: F = 50(F/A,0.5%,120)
= 50(163.8793)
= $8193.97
3.50 Move chemical cost to end of interest period and amortize pump:
Chemical cost/mo = 10(30) = $300
A = 950(A/P,1%,36) + 300
= 950(0.03321) + 300
= $331.55
3.51 Find A per six months and then divide by 6:
A/semi = 201,500(A/P,6%,6)
= 201,500(0.20336)
= $40,977
A/mo = 40,977/6
= $6829.51
3.52 Move deposits to end of compounding period and then find F:
F = 6000(F/A,5%,20)
= 6000(33.0660)
= $198,396
3.53 Move cash flow to end of quarter and find F:
F = 9000(F/A,2%,12)
= 9000(13.4121)
= $120,709
3.54 Move cash flow to end of interest period and then find P:
Cost/quarter = 100,000(0.019)(3) = $5700
P = 5700(P/A,3%,12)
= 5700(9.9540)
= $56,737
3- 7
3.55 Move cash flow to end of interest period and then find P:
Fuel savings = 800(0.50) = $400 per month
= 400(12) = $4800 per year
P = 4800(P/A,12%,3)
= 4800(2.4018)
= $11,529
Problems for Test Review and FE Exam Practice
3.56 Answer is (d)
3.57 Answer is (c)
3.58 Answer is (d)
3.59 Answer is (b)
3.60 0.1268 = (1 + r/12)12 1
r = 0.12 = 12% per year, compounded monthly
i = 1% per month
Answer is (c)
3.61 Answer is (d)
3.62 P = 40,000(P/F,5%,8)
= 27,074
Answer is (a)
3.63 A = 500,000(A/F,7%,12)
= $27,950
Answer is (c)
3- 8
