1 Matt Anderson IET 330 / 330L Industrial Design / Industrial Design Lab Spring 2015 Department of Applied Engineering and Technology College of Science and Technology Morehead State University Chapter 12: Engineering Economics Note: Please contact instructor if you have any question about this assignment Reading: 1. PowerPoint on Chapter 12 Engineering Economic Analysis, available in the Course Documents section of Blackboard. 2. Chapter 12: Engineering Economics, Engineering Design 2nd Edition by Eggert: Key Reading Sections: Pages 285 – 290 and 301 – 305. Emphasis on Solved Examples. Problem 1: ( 5 points) Determine the interest due on a $5,000 loan after three years. Assume that the loan accrues simple interest at 6 percent per year. Determine the total amount to be paid. ( you can refer page 286: 12.2) Interest=(principal)(number of interest periods)(interest rate) Interest=$5,000(3)(6/100) Interest= $900 Total amount to be paid= principal + interest Total amount to be paid= $5,000 + $900 Total amount to be paid= $5,900 Problem 2: (5 points) Calculate the amount realized at the end of 7 years through annual deposits of $1000 at 10 percent compound interest. (refer page 289: 12.3, use appendix to get the value of factor. Do not use equation) 2 F=P(1+i)n F=$1,000(1+.10)7= $1948.72 Problem 3. (10 points) Use the equivalent-uniform annual-worth method to determine which machine the company should choose, assuming the interest rate is 12 percent per year. (You can refer the example in page 300: 12.4.3) Initial cost Annual operating expenses Salvage value Life Machine K $55,000 500 4,500 15 Machine L $45,000 1,500 3,000 15 Machine K EUAW=PW(A/P)-SV(A/F) A/P=i(1+i)^n / (1+i)^n -1 A/F=i/(1+i)^n -1 EUAW= $-55,000 (0.1468)-($-4,500)(0.0268) EUAW=$-7,953.4 Machine L EUAW= $-45,000(0.1468)-($-3,000)(0.0268) EUAW= $-6,525.6 Therefore, Machine L is more economical. Problem 4. (10 points) Determine the breakeven point for a company that has monthly fixed costs of $50,000, revenue per unit of $130, and variable cost per unit of $55. (a) Calculate using equation 12.32 (b) Plot breakeven point using excel. Please indicate the breakeven point in your chart. Plot format is shown in example below. 3 a) q*= FC/ r-v q*= $50,000/ $130-$55 q*= 666.67 b) Was not sure how to do the breakeven chart on Excel without the amount of products?