Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Question
Chapter 12, Problem 12P
(a):
To determine
Calculate the expected present worth.
(b):
To determine
Calculate the probability.
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The tree diagram in figure below describes the uncertain cash flows for an engineering project. The analysis period is two years, and MARR = 12% per year. Based on this information,
a. What are the E(PW), V(PW), and SD(PW) of the project?
b. What is the probability that PW≥ 0?
Click the icon to view the tree diagram.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.
a. Calculate the E(PW), V(PW), and SD(PW) of the project.
E(PW) = $ (Round to the nearest dollar.)
More Info
0
-$29,000
0.2
0.6
0.2
Time Period
1
$5,500
$11,000
$17,500
0.1
0.1
0.8
0.1
0.7
0.2
0.2
0.3
0.5
2
$17,200
$20,200
$24,800
$20,100
$24,600
$29.300
$21,900
$28,000
$31,100
C
Q
- X
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N
1
2
3
4
5
Discrete Compounding; i = 12%
Compound
Amount
Factor
To Find F
Given A
FIA
1.0000
2.1200
3.3744
4.7793
6.3528
Single Payment
Compound
Amount
Factor
To Find F
Given P
F/P
1.1200
1.2544
1.4049
1.5735
1.7623
Present
Worth Factor
To Find P
Given F
P/F
0.8929
0.7972…
A new manufacturing line is being built and your team has narrowed it down to
2 options. Which one is the best option using a 20% rate to evaluate each
option? Answer the question by entering the amount of savings by choosing the
best option.
Margin of error: +/- 10
Enter your answer as a positive number representing savings from one option to
another.
Hint: When you use Net present Worth Analysis you must must LCM of the
lives to assess each option over the same period.
Option
A
B
Operating
First and
Salvage
Cost Maintenance Value
Cost/Yr
$18M $5M
$25M $3M
501,025
$4M
$6M
Life
10
years
20
years
Assume a pool of 115 people in an insurance pool (a group of people insured through
community rating). It is estimated that a small number in the pool will have significant pre-
existing conditions as indicated in the table.
Based on the age of these 115 people, the insurance company estimates the following
distribution of health care claims (which includes necessary profit and administrative costs of the
insurance company).
Number of Insured
Antidipated Heath Costs/Year/Person
$1,400
$1,500
$1,600
$1,700
$1,800
$1,900
$2,000
$2,100
$2,200
$2.300
$2,400
$2,500
$2,700
$2,000
$2,900
$3,000
$3,100
$3.200
$3.300
$4,000
57,00
$10,000
Everyone joins the poal ad pays the necessary premum in the first year. The clams experience of the customers is
faund to be generaly consstent with expeclations of the insurance company.
A) What would be the premium In the third year if there is no inflation, based on the
company's oxperience from the past year?
B) If those customers who have anticipated…
Chapter 12 Solutions
Engineering Economy (17th Edition)
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - A new snow making machine utilizes technology that...Ch. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10P
Ch. 12 - Prob. 11PCh. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - If the interest rate is 8% per year, what decision...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26SE
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