Instructor's Solutions Manual for Contemporary Engineering Economics 7th Edition, by Chan Park, Chapter 1-16 | All Chapters

INSTRUCTOR’S SOLUTIONS MANUAL
Contemporary Engineering Economics, 7th edition

by Chan S Park
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, Table of Content
PART 1: FUNDAMENTALS

1.Engineering Economic Decisions

2.Accounting Information for Engineering Economic Decisions

3.Interest Rate and Economic Equivalence

4.Understanding Money and Its Management

PART 2: EVALUATION TOOLS OF BUSINESS AND ENGINEERING ASSETS
5.Present-Worth Analysis

6.Annual Equivalent-Worth Analysis

7.Rate-of-Return Analysis
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PART 3: DEVELOPMENT OF PROJECT CASH FLOWS

8.Cost Concepts Relevant to Decision Making

9.Depreciation and Corporate Taxes
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10.Developing Project Cash Flows
11.Inflation and Its Impact on Project Cash Flows
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PART 4: CONSIDERING RISK AND UNCERTAINTY IN ECONOMIC ANALYSES

12.Project Risk and Uncertainty
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12-A. Risk Analysis by Computer Simulation

13.Real-Options Analysis

PART 5: SPECIAL TOPICS IN ENGINEERING ECONOMICS
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14.Replacement Decisions
15.Capital-Budgeting Decisions

16.Economic Analysis in the Service Sector

, JHGFD




Chapter 1 Engineering Economic Decisions
1.1
• Lease
o Deposit (typically one month worth of deposit) refundable when lease
expires.
o Monthly lease payment
o Monthly maintenance fees
o Monthly utility expenses
• Buy
o Closing fees
o Down payment
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o Monthly mortgage payments
o Property taxes
o Monthly utility fees
o Monthly maintenance fees
o Repair expenses
o Homeowners’ association fee (if applicable)
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1.2

•
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Option 1:

o Total amount at the end of two years: $1,150
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• Option 2:
o Loan $500 to a friend for one year and receive $600
o Deposit $500 (left over) in a back at 3% for two years:

$500(1.03)(1.03) = $530.45
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o Deposit $600 received from your friend at 3% per year for a year:

$600(1.03) = $618
Total amount at the end of two years:

$530.45 + $618 = $1,148.45
These two options are about the same. But considering the trustworthiness, you
could go with Option 2.

, Contemporary Engineering Economics, 7th ed. ©2023


Chapter 2 Accounting Information for Engineering
Economic Decisions
2.1
(2) Income statement; (1) balance sheet; (3) cash flow statement; (4) operating
activities; (5) investing activities, and (6) financing activities; (7) capital account
(paid-in capital)

2.2
(7), (8), (1), (11), (3), (9)

2.3
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(a)

• Current assets = $150,000 + $200,000 + $150,000 + $50,000 + $30,000
= $580,000
• Current liabilities = $50,000 + $100,000 + $80,000 = $230,000
• Working capital = $580,000 - $230,000 = $350,000
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• Shareholder’s equity = $100,000 + $150,000 + $150,000 + $70,000
= $470,000
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(b) EPS = $500,000/10,000 = $50 per share

(c) Par value = $15; capital surplus = $150,000/10,000 = $15
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Market price = $15 + $15 = $30 per share
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2.4
(a) Shareholder’s equity in 2021 = $700 - $510 = $190(M)
Shareholder’s equity in 2022 = $900 - $640 = $260(M)

(b) Net working capital in 2021 = $100 - $60 = $40(M)
Net working capital in 2022 = $200 - $90 = $110(M)

(c) The income taxes in year 2022:

($2,350 - $1,130-$420-$210) *0.35 = $206.5(M)

(d) $383.50 + $420=$803.50 (M)
(Cash from Operating activities = Net income + Depreciation)




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