Embed Size px x x x x ISBN All rights reserved. This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. Preface This Instructor's Manual to Fundamentals of Engineering Economics, 2nd edition contains detailed solutions to all the end-of-chapter problems except some open-ended case problems. The problem solutions follow topical headings listed in the main text to indicate the generic content of each problem.
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Chapter 4 Equivalence Calculations under Inflation. ISBN All rights reserved. This material is protected by Copyright and written permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise.
Comments: If you use the Rule of 72, you may find. Actual dollars. Constant Dollars. Comments: As an alternative way of finding the equivalent cash flows in actual dollars, we may use the compound growth ra te geometric growth and inflation :. First compute the equivalent present wo rth of the constant dollar series at i ' :. Then, we compute the equivalent equal annual payment in actual dollars using i :.
Market interest rate:. Actual dollar analysis:. Present Worth. Then, we can calculate the equivalent amount of this first wit hdrawal in actual dollars as follows:. The second withdrawal will be made after 43 semiannual periods. The equivalent amount of this second wi thdrawal in actu al dollars is. The remaining withdrawal s in actual dollars are. Let i be the effective interest rate per month.
As shown in the following table, it will cost almost eight 7. Year n. Tuition CPI. That is,. If a baby born in goes to college at the age of 18, the expected college tuition each school year is as follows:. There are many ways to meet the future college expenses.
One of the options is to consider opening a mutual fund account and make regular contribution, say monthly, until the child reaches Then, we may be able to estimate the required monthly contribution C as follows:.
Now to compare two mutually exclusive bond investment alternatives, we need to perform an incremental analysis. After-tax Cash Flow. We cannot find the rate of return on incremental investment, as returns from municipal bond dominate those from corporate bond in every year. Municipal bond is a clear choice for any value of MARR. Two common approaches may be used: either 1 constant dollar analysis or 2 actual dollar analysis.
Then, we need to dete rmine which interest rate to use in evaluating the three differen t subscription optio ns. Assuming that the decision-. P 1-year subscription. P 2-year subscription. P 3-year subscription. In this case, the 3-year subscription op tion appears to be a better choice. Note that 4. If we take a finite planning horizon, say 6-year, the subscription cost for each option would be as follows:.
It still appears that the 3-year subscription is a better choice. Expected Tuition and Fees. Savings Rate. Accumulated Savings at age of 18 years. Required College Savings at age of 18 years. Market rate. The breakeven interest rate is about 8. In other words, if you cannot invest your money at higher than 8. Learn more about Scribd Membership Home.
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Download Now. For Later. Related titles. Carousel Previous Carousel Next. Effective Rate vs. Stated Rated - Time Value of Money. Jump to Page. Search inside document. Equivalent single-sum amount at. Required annual deposit in actual dollars:.
The average annual general inflation rate:. Constant dollars:. Conversion factors:. Future JD. Fara Lya. Mobin Akhand. Aaron Balasch. Center for Economic and Policy Research. Shahriar Shajib. Marriam Ghafoor. Karan Suri. Thavam Ratna. Shohinur Ergasheva.
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Fundamentos de Ingenieria Economica, 2da Edicion 04