367
Chapter 20: Engineering Economics
20.1 Compute the future value of the following deposits made today:
(a) $10,000 at 6.75% compounding annually for 10 years
(b) $10,000 at 6.75% compounding quarterly for 10 years
(c) $10,000 at 6.75% compounding monthly for 10 years
SOLUTION
20.2 Compute the interest earned on the deposits made in Problem 20.1.
SOLUTION
20.3 How much money do you need to deposit in a bank today if you are planning to
have $5000 in 4 years by the time you get out of college? The bank offers a
6.75% interest rate that compounds monthly.
368
SOLUTION
20.4 How much money do you need to deposit in a bank each month if you are
planning to have $5000 in 4 years by the time you get out of college? The bank
offers a 6.75% interest rate that compounds monthly.
SOLUTION
1
12
0675.0
1
11
)12)(4(
m
i
20.5 Determine the effective rate corresponding to the following nominal rates
(a) 6.25% compounding monthly
(b) 9.25% compounding monthly
(c) 16.9% compounding monthly
SOLUTION
0625.0
12
m
i
12
eff m
20.6 Using Excel or a spreadsheet of your choice, create interest-time factor tables,
similar to Table 20.9, for i = 6.5%, and i = 6.75%.
SOLUTION
The Interest-Time Factors for i =
6.5%
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
1
2
1.13422500
0.88165928
1.82062642
0.54926150
2.06500000
0.48426150
3
4
1.28646635
0.77732309
3.42579860
0.29190274
4.40717462
0.22690274
5
6
1.45914230
0.68533412
4.84101356
0.20656831
7.06372764
0.14156831
7
8
1.65499567
0.60423119
6.08875096
0.16423730
10.07685648
0.09923730
9
10
1.87713747
0.53272604
7.18883022
0.13910469
13.49442254
0.07410469
11
12
2.12909624
0.46968285
8.15872532
0.12256817
17.37071141
0.05756817
13
14
2.41487418
0.41410025
9.01384233
0.11094048
21.76729515
0.04594048
15
16
2.73901067
0.36509533
9.76776418
0.10237757
26.75401034
0.03737757
17
18
3.10665438
0.32188969
10.43246638
0.09585461
32.41006738
0.03085461
19
20
3.52364506
0.28379703
11.01850725
0.09075640
38.82530867
0.02575640
21
22
3.99660632
0.25021228
11.53519562
0.08669120
46.10163573
0.02169120
23
24
4.53305081
0.22060198
11.99073871
0.08339770
54.35462778
0.01839770
25
26
5.14149955
0.19449579
12.39237251
0.08069480
63.71537769
0.01569480
27
28
5.83161733
0.17147902
12.74647668
0.07845305
74.33257427
0.01345305
29
30
6.61436616
0.15118607
13.05867591
0.07657744
86.37486405
0.01157744
31
32
7.50217946
0.13329460
13.33392925
0.07499665
100.03353017
0.00999665
33
34
8.50915950
0.11752042
13.57660892
0.07365610
115.52553076
0.00865610
35
370
The Interest-Time Factors for i =
6.5
% (continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
36
9.65130143
0.10361297
13.79056970
0.07251332
133.09694513
0.00751332
37
38
10.94674737
0.09135134
13.97921021
0.07153480
153.02688259
0.00653480
39
40
12.41607453
0.08054075
14.14552687
0.07069373
175.63191590
0.00569373
41
42
14.08262214
0.07100950
14.29216149
0.06996842
201.27110981
0.00496842
43
44
15.97286209
0.06260619
14.42144327
0.06934119
230.35172453
0.00434119
45
46
18.11681951
0.05519733
14.53542575
0.06879743
263.33568475
0.00379743
47
48
20.54854961
0.04866524
14.63591946
0.06832505
300.74691704
0.00332505
49
50
23.30667868
0.04290616
14.72452067
0.06791393
343.17967198
0.00291393
The Interest
–
Time Factors for i = 6.75%
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
1
1.06750000
0.93676815
0.93676815
1.06750000
1.00000000
1.00000000
2
3
1.21647630
0.82204643
2.63634915
0.37931243
3.20705625
0.31181243
4
5
1.38624317
0.72137416
4.12779022
0.24226037
5.72212099
0.17476037
6
7
1.57970207
0.63303076
5.43658132
0.18393912
8.58817874
0.11643912
8
9
1.80015936
0.55550637
6.58509075
0.15185820
11.85421276
0.08435820
10
11
2.05138285
0.48747605
7.59294748
0.13170116
15.57604224
0.06420116
12
13
2.33766615
0.42777708
8.47737659
0.11796102
19.81727629
0.05046102
14
15
2.66390207
0.37538917
9.25349371
0.10806729
24.65040105
0.04056729
16
17
3.03566625
0.32941698
9.93456331
0.10065868
30.15801858
0.03315868
18
19
3.45931245
0.28907478
10.53222542
0.09494670
36.43425856
0.02744670
20
21
3.94208113
0.25367312
11.05669459
0.09044294
43.58638706
0.02294294
22
23
4.49222319
0.22260693
11.51693441
0.08682866
51.73663979
0.01932866
24
371
The Interest-Time Factors for i = 6.75%
(continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
25
26
5.46468303
0.18299323
12.10380399
0.08261865
66.14345223
0.01511865
27
28
6.22731370
0.16058289
12.43580911
0.08041294
77.44168439
0.01291294
29
30
7.09637424
0.14091703
12.72715507
0.07857215
90.31665545
0.01107215
31
32
8.08671762
0.12365957
12.98282123
0.07702486
104.98840920
0.00952486
33
34
9.21526961
0.10851554
13.20717712
0.07571641
121.70769788
0.00821641
35
36
10.50131808
0.09522614
13.40405716
0.07460428
140.76026779
0.00710428
37
38
11.96684265
0.08356423
13.57682621
0.07365492
162.47174292
0.00615492
39
40
13.63689033
0.07333050
13.72843702
0.07284150
187.21319009
0.00534150
41
42
15.54000361
0.06435005
13.86148075
0.07214236
215.40746085
0.00464236
43
44
17.70870824
0.05646939
13.97823122
0.07153981
247.53641831
0.00403981
45
46
20.18006915
0.04955384
14.08068379
0.07101928
284.14917258
0.00351928
47
48
22.99632392
0.04348521
14.17058947
0.07056869
325.87146555
0.00306869
49
50
20.7 Using Excel or a spreadsheet of your choice, create interest-time factor tables,
similar to Table 20.9, for i = 7.5%, and i = 7.75%.
372
SOLUTION
The Interest
–
Time Factors for i = 7.5%
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
1
2
1.15562500
0.86533261
1.79556517
0.55692771
2.07500000
0.48192771
3
4
1.33546914
0.74880053
3.34932627
0.29856751
4.47292188
0.22356751
5
6
1.54330153
0.64796152
4.69384642
0.21304489
7.24402034
0.13804489
7
8
1.78347783
0.56070223
5.85730355
0.17072702
10.44637101
0.09572702
9
10
2.06103156
0.48519393
6.86408096
0.14568593
14.14708750
0.07068593
11
12
2.38177960
0.41985413
7.73527827
0.12927783
18.42372799
0.05427783
13
14
2.75244405
0.36331347
8.48915373
0.11779737
23.36592066
0.04279737
15
16
3.18079315
0.31438699
9.14150674
0.10939116
29.07724206
0.03439116
17
18
3.67580409
0.27204932
9.70600908
0.10302896
35.67738785
0.02802896
19
20
4.24785110
0.23541315
10.19449136
0.09809219
43.30468134
0.02309219
21
22
4.90892293
0.20371067
10.61719101
0.09418687
52.11897237
0.01918687
23
24
5.67287406
0.17627749
10.98296680
0.09105008
62.30498744
0.01605008
25
26
6.55571508
0.15253866
11.29948452
0.08849961
74.07620112
0.01349961
27
28
7.57594824
0.13199668
11.57337763
0.08640520
87.67930991
0.01140520
29
30
8.75495519
0.11422103
11.81038627
0.08467124
103.39940252
0.00967124
31
32
10.11744509
0.09883918
12.01547757
0.08322599
121.56593454
0.00822599
33
34
11.69197248
0.08552877
12.19294976
0.08201461
142.55963310
0.00701461
35
36
13.51153570
0.07401083
12.34652224
0.08099447
166.82047600
0.00599447
37
38
373
The Interest-Time Factors for i = 7.5%
(continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
39
16.78533858
0.05957580
12.53898931
0.07975124
210.47118102
0.00475124
40
41
19.39755689
0.05155288
12.64596155
0.07907663
245.30075857
0.00407663
42
43
22.41630168
0.04461039
12.73852811
0.07850201
285.55068912
0.00350201
44
45
25.90483863
0.03860283
12.81862898
0.07801146
332.06451511
0.00301146
46
47
29.93627915
0.03340428
12.88794287
0.07759190
385.81705528
0.00259190
48
49
34.59511259
0.02890582
12.94792244
0.07723247
447.93483451
0.00223247
50
The Interest
–
Time Factors for i = 7.75%
1
2
1.16100625
0.86132181
1.82307806
0.55884777
2.07750000
0.48134777
3
4
1.34793551
0.74187525
3.45720809
0.30024243
4.48949048
0.22274243
5
6
1.56496155
0.63899333
4.92617562
0.21467748
7.28982651
0.13717748
7
8
1.81693015
0.55037889
6.25086544
0.17236735
10.54103414
0.09486735
9
10
2.10946726
0.47405334
7.44961707
0.14735335
14.31570652
0.06985335
11
12
2.44910467
0.40831248
8.53853668
0.13098130
18.69812474
0.05348130
13
14
2.84342583
0.35168844
9.53177085
0.11954129
23.78613969
0.04204129
15
16
3.30123516
0.30291692
10.44174681
0.11117757
29.69335684
0.03367757
17
18
3.83275465
0.26090895
11.27938321
0.10485853
36.55167288
0.02735853
19
20
4.44985210
0.22472657
12.05427515
0.09996473
44.51422066
0.02246473
21
22
5.16630610
0.19356190
12.77485651
0.09610161
53.75878840
0.01860161
23
24
5.99811367
0.16671908
13.44854244
0.09300585
64.49178932
0.01550585
25
26
6.96384746
0.14359878
14.08185436
0.09049497
76.95287048
0.01299497
374
The Interest-
Time Factors for i = 7.75%
(continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
27
7.50354564
0.13327033
14.38519091
0.08941658
83.91671794
0.01191658
28
29
8.71166339
0.11478864
14.96848114
0.08754971
99.50533401
0.01004971
30
31
10.11429564
0.09886996
15.52447829
0.08600313
117.60381469
0.00850313
32
33
11.74276045
0.08515885
16.05735567
0.08471416
138.61626388
0.00721416
34
35
13.63341828
0.07334918
16.57079114
0.08363452
163.01184872
0.00613452
36
37
15.82848383
0.06317724
17.06802807
0.08272643
191.33527519
0.00522643
38
39
18.37696865
0.05441594
17.55192890
0.08195993
224.21895034
0.00445993
40
41
21.33577546
0.04686963
18.02502202
0.08131102
262.39710271
0.00381102
42
43
24.77096866
0.04036984
18.48954304
0.08076028
306.72217623
0.00326028
44
45
28.75924943
0.03477142
18.94747097
0.08029186
358.18386361
0.00279186
46
47
33.38966833
0.02994938
19.40055994
0.07989274
417.93120430
0.00239274
48
49
38.76561362
0.02579606
19.85036706
0.07955213
487.29824027
0.00205213
50
20.8 Using Excel or a spreadsheet of your choice, create interest-time factor tables,
similar to Table 20.9, for i = 8.5%, and i = 9.5%.
375
SOLUTION
The Interest
–
Time Factors for i = 8.5%
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
1
1.08500000
0.92165899
0.92165899
1.08500000
1.00000000
1.00000000
2
3
1.27728913
0.78290810
2.55402237
0.39153925
3.26222500
0.30653925
4
5
1.50365669
0.66504542
3.94064208
0.25376575
5.92537283
0.16876575
6
7
1.77014225
0.56492635
5.11851352
0.19536922
9.06049702
0.11036922
8
9
2.08385571
0.47987968
6.11906264
0.16342372
12.75124361
0.07842372
10
11
2.45316703
0.40763633
6.96898439
0.14349293
17.09608276
0.05849293
12
13
2.88792956
0.34626883
7.69095490
0.13002287
22.21093603
0.04502287
14
15
3.39974288
0.29413989
8.30423658
0.12042046
28.23226916
0.03542046
16
17
4.00226231
0.24985869
8.82519194
0.11331198
35.32073306
0.02831198
18
19
4.71156325
0.21224378
9.26772022
0.10790140
43.66544998
0.02290140
20
21
5.54657005
0.18029160
9.64362821
0.10369541
53.48905936
0.01869541
22
23
6.52956092
0.15314965
9.96294524
0.10037193
65.05365790
0.01537193
24
25
7.68676236
0.13009378
10.23419078
0.09771168
78.66779242
0.01271168
26
27
9.04904881
0.11050885
10.46460174
0.09556025
94.69469193
0.01056025
28
29
10.65276649
0.09387233
10.66032554
0.09380577
113.56195871
0.00880577
30
31
12.54070303
0.07974035
10.82658416
0.09236524
135.77297684
0.00736524
32
33
14.76322913
0.06773586
10.96781343
0.09117588
161.92034266
0.00617588
34
35
17.37964241
0.05753858
11.08778137
0.09018937
192.70167539
0.00518937
36
37
20.45974953
0.04887645
11.18968878
0.08936799
228.93822981
0.00436799
376
The Interest-Time Factors for i = 8.5%
(continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
38
22.19882824
0.04504742
11.23473620
0.08900966
249.39797935
0.00400966
39
40
26.13301558
0.03826577
11.31452034
0.08838201
295.68253624
0.00338201
41
42
30.76443927
0.03250506
11.38229339
0.08785576
350.16987372
0.00285576
43
44
36.21666702
0.02761160
11.43986357
0.08741363
414.31372959
0.00241363
45
46
42.63516583
0.02345482
11.48876686
0.08704154
489.82548032
0.00204154
47
48
50.19118309
0.01992382
11.53030802
0.08672795
578.71980107
0.00172795
49
50
59.08631551
0.01692439
11.56559538
0.08646334
683.36841782
0.00146334
The Interest
–
Time Factors for i = 9.5%
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
1
1.09500000
0.91324201
0.91324201
1.09500000
1.00000000
1.00000000
2
3
1.31293238
0.76165385
2.50890683
0.39857997
3.29402500
0.30357997
4
5
1.57423874
0.63522767
3.83970879
0.26043642
6.04461833
0.16543642
6
7
1.88755161
0.52978684
4.94961222
0.20203603
9.34264849
0.10703603
8
9
2.26322156
0.44184803
5.87528385
0.17020454
13.29706910
0.07520454
10
11
2.71365924
0.36850611
6.64730414
0.15043693
18.03851828
0.05543693
12
13
3.25374527
0.30733813
7.29117753
0.13715206
23.72363438
0.04215206
14
15
3.90132192
0.25632337
7.82817500
0.12774370
30.54023072
0.03274370
16
17
4.67778251
0.21377651
8.27603678
0.12083078
38.71350013
0.02583078
18
19
5.60877818
0.17829195
8.64955842
0.11561284
48.51345450
0.02061284
20
21
6.72506525
0.14869744
8.96107956
0.11159370
60.26384478
0.01659370
22
23
8.06352137
0.12401530
9.22089161
0.10844938
74.35285649
0.01344938
24
25
9.66836371
0.10343012
9.43757770
0.10595939
91.24593375
0.01095939
26
10.58685826
0.09445673
9.53203443
0.10490940
100.91429745
0.00990940
377
The Interest-Time Factors for i = 9.5%
(continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
27
28
12.69390772
0.07877795
9.69707423
0.10312389
123.09376551
0.00812389
29
30
15.22031271
0.06570167
9.83471924
0.10168058
149.68750218
0.00668058
31
32
18.24953544
0.05479592
9.94951668
0.10050739
181.57405731
0.00550739
33
34
21.88164924
0.04570039
10.04525901
0.09954945
219.80683406
0.00454945
35
36
26.23664448
0.03811463
10.12510916
0.09876437
265.64888921
0.00376437
37
38
31.45839264
0.03178802
10.19170506
0.09811901
320.61465939
0.00311901
39
40
37.71939924
0.02651156
10.24724677
0.09758719
386.51999197
0.00258719
41
42
45.22650267
0.02211093
10.29356917
0.09714803
465.54213337
0.00214803
43
44
54.22770736
0.01844076
10.33220255
0.09678478
560.29165647
0.00178478
45
46
65.02037682
0.01537979
10.36442322
0.09648390
673.89870340
0.00148390
47
48
77.96105732
0.01282692
10.39129561
0.09623439
810.11639284
0.00123439
49
50
93.47725675
0.01069779
10.41370748
0.09602728
973.44480793
0.00102728
20.9 Using Excel or a spreadsheet of your choice, create interest-time factor tables,
similar to Table 20.9, that can be used for i = 8.5% compounding monthly.
SOLUTION
The monthly interest rate: i = 8.5/12 =0.708333%
The Interest-Time Factors for i
=0.7083333333%
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
1
1.00708333
0.99296649
0.99296649
1.00708333
1.00000000
1.00000000
2
3
1.02140088
0.97904753
2.95799646
0.33806667
3.02130017
0.33098333
4
5
1.03592197
0.96532367
4.89548151
0.20427000
5.07133685
0.19718666
6
7
1.05064951
0.95179220
6.80580776
0.14693333
7.15051857
0.13985000
8
9
1.06558642
0.93845040
8.68935591
0.11508333
9.25925968
0.10800000
10
11
1.08073569
0.92529562
10.54650132
0.09481817
11.39798043
0.08773484
12
13
1.09610034
0.91232523
12.37761409
0.08079101
13.56710703
0.07370768
14
15
1.11168342
0.89953666
14.18305914
0.07050665
15.76707176
0.06342332
16
17
1.12748805
0.88692736
15.96319626
0.06264410
17.99831303
0.05556076
18
19
1.14351737
0.87449481
17.71838021
0.05643857
20.26127551
0.04935523
20
21
1.15977457
0.86223653
19.44896078
0.05141663
22.55641016
0.04433330
22
23
1.17626290
0.85015008
21.15528283
0.04726952
24.88417437
0.04018618
24
25
1.19298564
0.83823305
22.83768643
0.04378727
27.24503204
0.03670394
26
27
1.20994613
0.82648308
24.49650683
0.04082215
29.63945364
0.03373881
28
29
1.22714774
0.81489780
26.13207464
0.03826715
32.06791635
0.03118382
30
31
1.24459390
0.80347493
27.74471578
0.03604290
34.53090413
0.02895957
32
33
1.26228810
0.79221218
29.33475163
0.03408926
37.02890781
0.02700593
34
35
36
The Interest-Time Factors for i
=0.7083333333% (continued)
n (F/P, i, n)
(P/F, i, n)
(P/A, i, n)
(A/P, i, n)
(F/A, i, n)
(A/F, i, n)
37
1.29843473
0.77015808
32.44827053
0.03081828
42.13196123
0.02373495
38
39
1.31689436
0.75936235
33.97237404
0.02943568
44.73802792
0.02235235
4
0
1.32622237
0.75402137
34.72639541
0.02879654
46.05492229
0.02171321
41
42
1.34507706
0.74345183
36.21856519
0.02761015
48.71676110
0.02052682
43
44
1.36419980
0.73303045
37.68981839
0.02653236
51.41644284
0.01944903
45
46
1.38359441
0.72275516
39.14044822
0.02554902
54.15450553
0.01846568
47
48
1.40326475
0.71262390
40.57074377
0.02464830
56.93149482
0.01756497
49
50
1.42321475
0.70263465
41.98099008
0.02382031
59.74796412
0.01673697
20.10 Most of you have credit cards, so you already know that if you do not pay the
balance on time, the credit card issuer will charge you a certain interest rate each
month. Assuming that you are charged 1.25% interest each month on your unpaid
balance, what are the nominal and effective interest rates? Also, determine the
effective interest rate that your own credit card issuer charges you.
SOLUTION
20.11 You have accepted a loan in the amount of $15,000 for your new car. You have
agreed to pay the loan back in four years. What is your monthly payment if you
agree to pay an interest rate of 9% compounding monthly? Solve this problem for
i = 5%, i = 6%, i = 7%, and i = 8%, each compounding monthly.
380
© 2020 Cengage Learning®. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
𝐴=𝑃(𝑖
𝑚)(1+ 𝑖
𝑚)
(1+ 𝑖
𝑚)−1=15000(0.09
12)(1+0.09
12)
(1+0.09
12)−1 =$373.27
For i = 5%
𝐴=𝑃(𝑖
𝑚)(1+ 𝑖
𝑚)
(1+ 𝑖
𝑚)−1=15000(0.05
12)(1+0.05
12)
(1+0.06
12)−1 =$345.44
For i = 6%
𝐴=𝑃(𝑖
𝑚)(1+ 𝑖
𝑚)
(1+ 𝑖
𝑚)−1=15000(0.06
12)(1+0.06
12)
(1+0.06
12)−1 =$352.27
For i = 7%
𝐴=𝑃(𝑖
𝑚)(1+ 𝑖
𝑚)
(1+ 𝑖
𝑚)−1=15000(0.07
12)(1+0.07
12)
(1+0.07
12)−1 =$359.19
For i = 8%
𝐴=𝑃(𝑖
𝑚)(1+ 𝑖
𝑚)
(1+ 𝑖
𝑚)−1=15000(0.08
12)(1+0.08
12)
(1+0.08
12)−1 =$366.19
20.12 How much money will you have available to you after 5 years if you put aside
$100 a month in an account that gives you 6.75% interest compounding monthly?
381
© 2020 Cengage Learning®. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
15.7113$
12
0675.0
1)
12
0675.0
1(
100
1)1( )5)(12(
))((
m
i
m
i
AF
nm
20.13 How long does it take to double a deposit of $1000
(a) at a compound annual interest rate of 6%
(b) at a compound annual interest rate of 7%
(c) at a compound annual interest rate of 8%
(d) If instead of $1000 you deposit $5000, would the time to double your money
be different in parts (a)-(c)? In other words, is the initial sum of money a factor in
determining how long it takes to double your money?
Now use your answers to verify a rule of thumb that is commonly used by
bankers to determine how long it takes to double a sum of money. The rule of
thumb commonly used by bankers is given by:
rate
interest
72
money of sum a double toperiod Time
SOLUTION
382
6
11.89
71.3
7
10.24
71.7
8
9
72
20.14 Imagine that as an engineering intern you have been assigned the task of selecting
a motor for a pump. After reviewing motor catalogs you narrow your choice to
two motors that are rated at 1.5 kW. Additional information collected is shown in
an accompanying table. The pump is expected to run 4200 hours every year. After
checking with your electric utility company, you determine the average cost of
electricity is about 11 cents per kWh. Based on the information given here, which
one of the motors will you recommend to be purchased?
Criteria Motor X Motor Y
Expected useful life
5 years
5 years
Initial cost
$300
$400
Efficiency at the
operating point
0.75 0.85
Estimated maintenance
cost
$12 per year $10 per year
SOLUTION
383
© 2020 Cengage Learning®. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
PW = -3695
Based on the given information, Motor-Y should be recommended.
20.15 What is the equivalent present worth of the cash flow given in the accompanying
figure? Assume i = 8%.
SOLUTION
20.16 What is the equivalent future worth of the cash flow given in the accompanying
figure? Assume i = 8%.