Peyton Sheffield
Professor Malast
Economic Decisions in Engineering
9-9-22
Ch1. Homework
2. Identify at least three noneconomic attributes that may be used as evaluation criteria
in the decision-making process.
Sustainability, Morale, and Environmental Acceptability are good non-economic
attributes that may be used.
8. Consult the NSPE Code of Ethics for Engineers (Appendix C) and identify sections
that are points of concern about Stefanie’s decisions and actions.
She violated section III.1.a and e which states engineers should not alter facts when
considering personal finances. She also violated section III.9.a which states engineers
should name the correct person responsible for designs.
15. Which of the following 1-year investments has the highest rate of return: $12,500
that yields $1125 in interest, $56,000 that yields $6160 in interest, or $95,000 that yields
$7600 in interest?
I= (1/P) * 100
1125 / 12500 = 9%
6160 / 56000 = 11%
7600 /95000 = 8%
highest rate of return is the 56,000-dollar investment with $6160 of interest.
23. The annual cash flows (in $1000 units) for Browning Brothers Glass Works are
summarized.
A Determine the total net cash flow over the 5 years.
B. Calculate the percentage of revenues represented by expenses for each year.
A.) The net flow for each year was -89, 62, 51, -11, and 140. The sum over the five
years is equal to 153 total net cash flow over the 5 years
B.)
521 / 610 = 85.4%.
685/623 = 109.95%.
650/599 = 108.5%.
804/815 = 98.65%.
929/789 = 117.7%.
30. A publicly traded construction company reported that it just paid off a loan that it
received 1 year earlier. If the total amount of money the company paid was $1.6 million
and the interest rate on the loan was 10% per Year. How much money had the
company borrowed 1 year ago?
F/(1 + D = 1,600.000 / (1+0.1) = $1.454.545
36. The Nicor family is planning to purchase a new home 3 years from now. If they have
$240,000 now, how much will be available 3 years from now? The fund grows at a
compound rate of 12% per year.
Simple interest = (P * |* N) / 1
Compound Interest = P - P(1 + (i/100))*.
P is 240,000, I is 12%, and N is 3 years.
Future amount = 240,000((1 + (12/100))° = 240,000 * 1.4 = $337,182
46. Your boss, whose background is in financial planning, is concerned about the
company's high-weighted average cost of capital of 21%. He has asked you to
determine what combination of debt-equity financing would lower the company's WACC
to 13%. If the cost of the company's equity capital is 6% and the cost of debt financing is
28%. What debt-equity mix would you recommend?
WACC = (RI * ) + (R: * e). R is rate of returns, e is equity, and d is debt
13% = 28% * d + 6%(1- d)
0.07 = 0.22d 7 d= 31.8%.
For equity, e = 1-d. > 1 - 0.318 = 0.682 = 68.2%