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Matt Anderson
IET 330 / 330L
Industrial Design / Industrial Design Lab
Spring 2015
Department of Applied Engineering and Technology
College of Science and Technology
Chapter 12: Engineering Economics
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)
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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.
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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?
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