Majmaah University
College of Engineering
GE 407 Engineering Economics
Assignment 1
Due February 28, 2015
MM: 10 Marks
1. A future sum of 100,000SR is needed at 10 years from now. What deposit
should be made now to get the desired amount after 10 years ? The interest
rate is 10% compounded annually.
2. A person has invested 300,000SR 5 years before, 200,000SR 3 years before
in an industrial establishment. The interest rate is 4% compounded
annually. Draw the cash flow diagram.
a) What is the present worth of money at present?
b) What is the worth of money after 2 years from now?
3. A national highway agency is trying to estimate the worth of money
collected through Toll Tax. It is expected that a total of 200,000 SR will be
deposited till the end of next year. The collection will increase by 100,000
SR each year for the next 9 years and then tax collection will cease. Draw
cash flow diagram and
Calculate
i)
What is the equivalent present worth of money collected
ii)
What will be the equivalence of money at the end of 10 years from
now.
Given i@ 10% compounded annually.
4. A company will invest in a new plant. The initial construction cost during
the first 3 years is 2 million SR per year. The production will start in year
5. The annual revenues are
Year
5
6
7
8
Revenues
(million SR)
6
6.5
10
15
Draw the cash flow diagram for this investment project.
5. A new investment project requires 400,000 SR in construction cost today.
If the interest rate is 4.5% compounded annually, what is equivalent of the
construction cost after 5 years from now?
6. A telecommunications company will invest today in a project so that it will
accumulate worth 50,000,000 SR after 5 years. The annual rate of return
from this project is 2%.
a. Construct the cash flow diagram.
b. Calculate the equivalent value of the future revenues a year from
today.