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Engineering Economy
- At an interest rate of 10% per year, what is the capitalized cost of an expenditure of $1,000 per year?
- An expenditure for maintaining a bridge occurs in five-year cycles. If the cost is $100,000 now and $100,000 every five years forever, what is the capitalized cost of this expenditure at 10% per year?
Problems 3 through 4 are based on the following statement:
The data for new and used machines are shown below:
Used machine New machine
Initial cost($) 15,000 40,000
Annual operating cost ($/year) 8,000 2,000
Salvage value ($) 5,000 10,000
Life (years) 3 6
Use an interest rate of 10% per year.
- What is the present worth of the new machine?
- To compare the machines on the basis of a present worth analysis, what are the present worth values to use?
- For an 8%, $10,000 bond with interest payable quarterly, what is the amount and frequency of the interest payments?
- Interest payments on a certain bond are $500 every three months. If the bond interest rate is 10% per year compounded quarterly, what is the bond face value?
- A $25,000 bond has interest payable at 4% per year compounded quarterly. The bond will mature in ten years. At a market interest rate of 8% per year compounded quarterly, what is the present worth of the bond?
Problems 8 and 9 are based on the following statement:
A 9%, $10,000 bond with interest payable semiannually was issued three years ago. The bond’s maturity date is 10 years after issue. The interest rate in the marketplace is 12% per year compounded semiannually.
- What is the amount of interest the bond-holder will receive every six months?
- What is the present worth of the bond?
