Engineering Economy, 9th Edition Blank & Tarquin - Solutions Manual & Study Guide

All 19 Chapters Covered
k k k




SOLUTIONS

,Table of Contents
k k




1. Foundations of Engineering Economy k k k


2. Factors: How Time and Interest Affect Money
k k k k k k




3. Combining Factors and Spreadsheet Functions
k k k k




4. Nominal and Effective Interest Rates
k k k k




5. Analysis Using Present Worth and Future Worth Values
k k k k k k k




6. Annual Worth Analysis
k k




7. Rate of Return Analysis: One Project
k k k k k




8. Rate of Return Analysis: Multiple Alternatives
k k k k k




9. Benefit/Cost Analysis and Public Sector Economics
k k k k k




10. Project Financing and Noneconomic Attributes
k k k k




11. Replacement and Retention Decisions k k k




12. Independent Projects with Budget Limitation
k k k k




13. Breakeven and Payback Analysisk k k




14. Effects of Inflation
k k




15. Cost Estimation and Indirect Cost Allocation
k k k k k




16. Depreciation and Depletion Methods k k k




17. After-Tax Economic Analysis
k k




18. Sensitivity Analysis and Staged Decisions
k k k k




19. Decision Making under Risk
k k k

, Chapter 1 k


Foundations of Engineering Economy k k k




Basic Concepts
k




1.1 Financialkunitskforkeconomicallykbest.
1.2 Morale,kgoodwill,kdependability,kacceptance,kfriendship,kconvenience,kaesthetics,ketc.
1.3 Measurekofkworthkiskakcriterionkusedktokselectkthekeconomicallykbestkalternative.kSo
me measures are present worth, rate of return, payback period, benefit/cost rati
k k k k k k k k k k k

o.
1.4 Thek colorkIk like,k bestk fuelk rating,k roomiest,k safest,k mostkstylish,k fastest,k etc.
1.5 Sustainability:kIntangible;kinstallationkcost:ktangible;ktransportationkcost:ktan
gible; simplicity: intangible; taxes: tangible; resale value: tangible; mora
k k k k k k k k

le: intangible;
k



rate of return: tangible; dependability: intangible; inflation: tangible; acceptance by others: intang
k k k k k k k k k k k

ible; ethics: intangible.
k k




1.6 Exampleskare:khousekpurchase;kcarkpurchase,kcreditkcardk(whichkonesktokuse);kpersonalklo
ans (and their rate of interest and repayment schedule); investment decisions of all types; wh
k k k k k k k k k k k k k k
en to sell a house or car.
k k k k k k




Ethics
1.7 Thisk problemkcank bek usedk askakdiscussionktopickforkakteam-basedkexercisek ink class.
(a) MostkobviouskarekthekviolationskofkCanonsknumberk4kandk5.kUnfaithfulnessktokthekclientkandk
deceptive acts are clearly present. k k k k



(b) ThekCodekforkEngineer’skiskonlykpartiallykusefulktokthekownerskinkdeterminingksound
kbases since the contractor is not an engineer. Much of the language of the Code i
k k k k k k k k k k k k k k k

s oriented toward representation, qualifications, etc., not specific acts of deceit an
k k k k k k k k k k k

d fraudulent behavior. Code sections may be somewhat difficult to interpret in
k k k k k k k k k k k k

construction of a house. k k k



(c) ProbablykakbetterksourcekwouldkbekakCodekforkContractor’skorkconsultingkwithkakrea
l estate attorney.
k k




1.8 Manyksectionskcouldkbekidentified.kSomekare:kI.b;kII.2.akandkb;kIII.9.akandkb.

1.9 Examplekactionskare:
 Tryktoktalkkthemkoutkofkdoingkitknow,kexplainingkitkiskstealing
 Tryktokgetkthemktokpaykforktheirkdrinks

,  Paykforkallkthekdrinkskhimself
 Walkkawaykandknotkassociatekwithkthemkagain

1.10 Thiskiskstructuredktokbekakdiscussionkquestion;kmanykresponseskarekacceptable.kResponseskc
ankvarykfromkthekethicalk(statingkthektruthkandkacceptingkthekconsequences)ktokunethicalk(continui
ngktokdeceivekhimselfkandkthekinstructorkandkdeviseksomekon-the-spotkexcuse).

Lessonskcankbeklearnedkfromkthekexperience.kAkfewkofkthemkare:
 Thinkkbeforekhekcheatskagain.
 Thinkkaboutktheklonger-termkconsequenceskofkunethicalkdecisions.
 Facekethical-dilemmaksituationskhonestlykandkmakekbetterkdecisionskinkrealktime.

Alternatively,kClaudekmayklearnknothingkfromkthekexperiencekandkcontinuekhiskunethicalkpract
ices.

Interest Rate and Rate of Return
k k k k k



1.11 Extrakamountkreceivedk=k2865k-
k25.80*100k=k$285kRatekofkreturnk=k285/25

80
=k 0.110 (11%)

Totalkinvestedk+kfeek2865k+k50k=k$2915kAm
ountkrequiredkfork11%kreturnk=k2915*1.11
=k $3235.65

1.12 (a)kPaymentk =k 1,600,000(1.10)(1.10)k =k $1,936,000
(b)kInterestk=ktotalkamountkpaidk–kprincipal
=k 1,936,000-k 1,600,000
=k $336,000

1.13 ik=k[(5,184,000k–k4,800,000)/4,800,000]*100%k=k8%kperkyear

1.14 Interestkratek=kinterestkpaid/principal
=k (312,000/2,600,000)
=k 0.12 (12%)

1.15 ik=k(1125/12,500)*100k=k9%k
ik=k(6160/56,000)*100k=k11%k
ik=k(7600/95,000)*100k=k8%
Thek$56,000kinvestmentkhaskthekhighestkratekofkreturn

1.16 Interestk onkloank =k 45,800(0.10)k =k $4,580
Defaultkinsurancek=k$900k
Set-upkfeek=k45,800(0.01)k=k458
Copyrightk©k2018kMcGraw-
HillkEducation.kAllkrightskreserved.kNokreproductionkorkdistributionkwithoutkthekpriorkwrittenkconsentkofkMcGraw-HillkEducation.

@Seismicisolation
@Seismicisolation
2