EGN3613 Module 3 Example Problems
Engineering Economics Calculations
Simple interest, compounded interest, present worth, future worth.
Problems Solved:
1. Manufacturing company would like to borrow $250,000 to add a new production line in
their facility. If the company borrowed the money from a financial institution that offered
the money with 6% simple interest over 3 year:
a) What will be the amount of money the company has to pay back at the end of the
third year?
b) What will be the amount of money to pay back in three years if the interest rate is
compound interest?
2. A new college graduate has a job with Aerospace Company. She plans to borrow $25,000
now to help in buying a car, renting an apartment and furnishing her apartment. She has
arranged to repay the entire principal plus 7% per year interest after 3 years. Calculate the
amount of money that she needs to pay back at the end of the third year considering that
the 7% is compound interest.
3. How much do you need to deposit in your saving account in today’s money, which earns
10% compound interest, to be able to collect $8,574.35 in 8 years? Solve this problem
using the mathematical method showing all steps. Then solve the problem using Excel
present value (PV) calculations (show the changes in saving over all 8 years, take a snap
shot of the excel sheet and paste in your MS Word answer document).
4. If you deposited $5,000 in your saving account three years ago and you will collect them
now as $5,955.08:
a. What was your account interest for the past three years? Use excel sheet to show
your calculations, take a snap shot and paste it in the MS Word answer document.
b. Using the same interest rate that you calculated if you left your money in the bank
how long would it take for the initial deposited amount to double?
c. Use the tables in the back of the book to find the discount factor of an institution
that provides 11% compound interest after 6 years of investment. Which
institution would you prefer, this one or the first one? Why?
5. Find the future amount of money in account that earns 8% interest, if you were depositing
$2,400 annually for 4 years.