EGN3613 Module 5 Example Calculations
Engineering Economics Calculations
Present worth of a series, gradient payments, adjusted payment series, cash flow diagrams
Q1) Aerospace contractor has four employees whose combined salaries through the end of this year are $250,000. If the contractor expect to give an average raise of 5% each year, calculate the present worth of the employees’ salaries over the next 5 years. Let i=12% per year
Q2) Linda made a deposit of $400 in her savings account 5 years ago. In the first year her account was earning 6%, but she did not deposit any money. In the second year the interest increased to 8%, when Linda knew about the increase she deposited C amount at the end of year 2. During the third year the interest increased again to 11% which made Linda deposit double the amount that she deposited the year before (2C). In the fourth and the fifth year the interest rate dropped to 7%. By the end of the 5th year she had $3,074.39 in hear account. What is the value of C deposited in the account to make Linda Savings $3,074.39?
Q3) Find the present worth of the unequal payment shown in the Cash Flow Diagram below, given that interest rate is 9%
Q4) A chemical company determined the need for a chemical additive that will improve their product by 20%. The company’s CEO arranged to purchase the additive through a 5-year contract at $7,000 per year, starting 1 year from now. He expect the annual price to increase by 12% per year starting in the sixth year and thereafter through year 13. Additionally an initial investment of$35,000 was made now to prepare a site suitable for the contractor to deliver the additive. Use i=15% per year to determine the equivalent total present worth for all these cash flows.
Q5) If you borrowed $24,000 today and you have to pay them back in five equal payments over 10 years (one payment every 2 years). With 8% interest rate compounded annually, what is the amount of each payment? (C=?)