Benha University

Benha Faculty of Engineering

Department: Mechanical Engineering

Time: 2 hr.
Jun 2014 -Fall semester
5rd year (all departments)
Exam(Regular)
Subject: Engineering Economy M561
************************************************************************

1.

A young engineer wishes to buy a house but only can afford every six months payments
of LE 200. Thirty year loans are available at 12% interest compounded semi annually .If
she can make a LE 5000 down payment , what is the price of the most expensive house
that she can afford to purchase

in 12%C.s a
i/ s-a =12%/2= 6%
pw

0
200

60
period

5000
Inomanal=12
c .s-a

PW=5000+200(P/A,I,n)

1 i n 1
= 5000+200* ( P / A,.i, n) =5000+200* (16.161)=8232.2
n

i
1

PW=5000+200*

2. A company, whose earnings put them in the 45% tax schedules, is considering purchasing
a piece of equipment for $900. The equipment has Double declining balance
depreciation (DDB), a useful life of 7 years and a salvage value of $82. It is estimated that
the equipment will increase the companys earnings by $300 for the each year. Should the
equipment be purchased? Use an interest rate of 1.5%.
DDB depreciation
Dr.Sohier Hussien

Benha University
Benha Faculty of Engineering

Department: Mechanical Engineering

Time: 2 hr.
Jun 2014 -Fall semester
5rd year (all departments)
Exam(Regular)
Subject: Engineering Economy M561
************************************************************************

DDB depreciation

2
(P-Depreciation charges to date)
N

1st year =

2
(900-0)
7

2nd year=

2
(900-257)
7

3rd year=

2
(900-(257+183.7))
7

4th year=

2
(900-(257+183.7+144))
7

= 90

5th year=

2
(900-(257+183.7+144+90))
7

= 64.4

6th year =

2
(900-(257+183.7+144+90+64.4)) =45.97
7

7th year =

2
(900-(257+183.7+144+90+64.4+45.97))
7

Year

Beforetax
cash flow

0
1
2
3
4
5
6
7
s.v

Dr.Sohier Hussien

(a)
-$900
300
300
300
300
300
300
300
82

=$257
= 183.7

DDB dep.

= 144

= 33

(b)

Taxable
income
(a)-(b)
(c)

45%
income
taxes
-0.45(c)*
(d)

$257
184
144
90
64
46
33

$43
116
156
210
236
254
267

-$19.35
- 52.2
- 70.2
- 94.5
- 106.2
-114.3
120.15

Aftertax cash
flow
(a) +(d)**
(e)
$-900
280.65
247.8
229.8
205.5
193.8
185.7
179.85
82

Benha University
Benha Faculty of Engineering

Department: Mechanical Engineering

Time: 2 hr.
Jun 2014 -Fall semester
5rd year (all departments)
Exam(Regular)
Subject: Engineering Economy M561
************************************************************************
280.7

247.8
229.8

82
205.5

193.8

185.7
179.9

3
7

i=12%

900

PW(cost)=900
PW(benefit)=F(P/F,i,n)= 280.7( .9852)+247.8 (.9707 )+229.8 (.9563 )+205.5 ( .9422 ) +
193.8 ( .9283 )+185.7( .9145 ) +179.9(.9010 ) +82 (.9010 )
= 276.5+240.5+219.76+193.6+179.9+169.8+162.09+73.88 = 1506.03

The equipment be purchased

3. A man wants to help provide a college education for his young daughter. He can afford to
invest $600 per year for the next four years, beginning on the girl's fourth birthday. He
wishes to give his daughter $4000 on her 18th, 19th, and 20st birthdays each. Assuming 5%
interest, what uniform annual investments will he have to make on the girl's 8th
through 17th birthday?

17
18

600/year

Dr.Sohier Hussien

A/year

19

20

Benha University
Benha Faculty of Engineering

Department: Mechanical Engineering

Time: 2 hr.
Jun 2014 -Fall semester
5rd year (all departments)
Exam(Regular)
Subject: Engineering Economy M561
************************************************************************

PWC 600( P / A, i,4)(P / F , i,3) A( P / A, i,10)(P / F , i,7)

PWC 600(3.546)(0.8638) A(7.722)(0.7107)
PWC 1837.8 5.488A
PWB 4000( P / F , i,18) 4000( P / F , i,20) 4000( P / F , i,19)
PWB 4000[. 4155 0.3769 0.3957] 4752.4
PWC PWB
1837.8 5.488A 4752.4
5.488A 4752.4 1837.8
A 531.08

4. A land surveyor just starting in private practice needs a van to carry crew and
equipment. He can lease a used van for $3000 per year, paid at the beginning of
each year in which case maintenance is provided. Alternatively, he can buy a
used van for$7000 per year, and pay for maintenance himself. He expects to
keep the van three years at which time he could sell it for $1500.what is the
most he should pay for uniform annual maintenance to make it worthwhile
buying the van instead of leasing it. If the MARR is 20%

1500
Buy
Lease
:

0
0

3000/yr 3000/yr 3000/yr

Dr.Sohier Hussien

7000
4

Benha University
Benha Faculty of Engineering

Department: Mechanical Engineering

Time: 2 hr.
Jun 2014 -Fall semester
5rd year (all departments)
Exam(Regular)
Subject: Engineering Economy M561
************************************************************************

EUAC ( Lease) [3000( P / A,20%,2) 3000]( A / P,20%,3)

EUAC ( Lease) [3000(1.528) 3000](.4747)
EUAC ( Lease) 3600.125
EUAC ( Buy) [7000 M ( P / A,20%,3) 1500( P / F ,20%,3)]( A / P,20%,3)
EUAC ( Buy) [7000 M (2.106) 1500(.5787)](.4747)
3322.9 .9997M 412.06 .9997M 2910.84
EUAC ( Buy) EUAC ( Lease)
M 689.49

5.

Find Kfor the following cash flow diagram if i=2.5%

Pw2

150

120

Pw1

120

100

PW1=A(P/A,I,4) =100(3. 762) = 376.2

Pw2 = F(P/F,I,7) +A(P/A,1,3) (P/F,I,8) +(120(P/A,I,2)+ K)(P/F,I, 12)
PW2 =150(0.8413) +120(2.856)(0 .8207) +(120(1.927) +K)(0.7436)
=126.15 +281.27 + 171.95 +0.7436K
PW1=PW2
376.2 -579.37+=0.743 K
K= -273.042

Dr.Sohier Hussien