TABLE C-16 Discrete Compounding; i = 18%

Single Payment
Compound
Present
Compound
Amount
Worth
Amount
Factor
Factor
Factor
To Find F
To Find P
To Find F
Given P
Given F
Given A
N
F/P
P/F
F/A
1
1.1800
0.8475
1.0000
2
1.3924
0.7182
2.1800
3
1.6430
0.6086
3.5724
4
1.9388
0.5158
5.2154
5
2.2878
0.4371
7.1542
6
2.6996
0.3704
9.4420
7
3.1855
0.3139
12.1415
8
3.7589
0.2660
15.3270
9
4.4355
0.2255
19.0859
10
5.2338
0.1911
23.5213
11
6.1759
0.1619
28.7551
12
7.2876
0.1372
34.9311
13
8.5994
0.1163
42.2187
14
10.1472
0.0985
50.8180
15
11.9737
0.0835
60.9653
16
14.129
0.0708
72.9390
17
16.6722
0.0600
87.0680
18
19.6733
0.0508
103.7403
19
23.2144
0.0431
123.4135
20
27.393
0.0365
146.6280
21
32.3238
0.0309
174.0210
22
38.1421
0.0262
206.3448
23
45.0076
0.0222
244.4868
24
53.109
0.0188
289.4945
25
62.6686
0.0160
342.6035
30
143.3706
0.0070
790.9480
35
327.9973
0.0030
1816.6516
40
750.3783
0.0013
4163.2130
45
1716.6839
0.0006
9531.5771
50
3927.3569
0.0003
21813.0937
60
20555.14
a
114189.6665
80 563067.6604
a
3128148.1133

Uniform Series
Present
Sinking
Worth
Fund
Factor
Factor
To Find P To Find A
Given A
Given F
P/A
A/F
0.8475
1.0000
1.5656
0.4587
2.1743
0.2799
2.6901
0.1917
3.1272
0.1398
3.4976
0.1059
3.8115
0.0824
4.0776
0.0652
4.3030
0.0524
4.4941
0.0425
4.6560
0.0348
4.7932
0.0286
4.9095
0.0237
5.0081
0.0197
5.0916
0.0164
5.1624
0.0137
5.2223
0.0115
5.2732
0.0096
5.3162
0.0081
5.3527
0.0068
5.3837
0.0057
5.4099
0.0048
5.4321
0.0041
5.4509
0.0035
5.4669
0.039
5.5168
0.0013
5.5386
0.0006
5.5482
0.0002
5.5523
0.0001
5.5541
a
5.5553
a
5.5555
a
5.5556

capital
recovery
Factor
To Find A
Given P
A/P
1.1800
0.6387
0.4599
0.3717
0.3198
0.2859
0.2624
0.2452
0.2324
0.2225
0.2148
0.2086
0.2037
0.1997
0.1964
0.1937
0.1915
0.1896
0.1881
0.1868
0.2857
0.1848
0.1841
0.1835
0.1829
0.1813
0.1806
0.1802
0.1801
0.1800
0.1800
0.1800
0.1800

Uniform Gradient
Gradient
Gradient
Present Worth
Uniform Series
Factor
Factor
To Find P
To Find A
Given G
Given G
P/G
A/G
0.000
0.0000
0.7180
0.4587
1.935
0.8902
3.483
1.2947
5.231
1.6728
7.083
2.0252
8.967
2.3526
10.829
2.6558
12.633
2.9358
14.353
3.1936
15.972
3.4303
17.481
3.647
18.877
3.8449
20.158
4.0250
21.327
4.1887
22.389
4.3369
22.348
4.4708
24.212
4.5916
24.988
4.7003
25.681
4.7978
26.300
4.8851
26.851
4.9632
27.339
5.0329
27.773
5.0950
28.156
5.1502
29.486
5.3448
30.177
5.4485
30.527
5.5022
30.701
5.5293
30.786
5.5428
30.847
5.5526
30.863
5.5554

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
40
45
50
60
80

TABLE C-17 Discrete Compounding; i = 20%

Single Payment
Compound
Present
Compound
Amount
Worth
Amount
Factor
Factor
Factor
To Find F
To Find P
To Find F
Given P
Given F
Given A
N
F/P
P/F
F/A
1
1.2000
0.8333
1.0000
2
1.4400
0.6944
2.2000
3
1.7280
0.5787
3.6400
4
2.0736
0.4823
5.3680
5
2.4883
0.4019
7.4416
6
2.9860
0.3349
9.9299
7
3.5832
0.2791
12.9159
8
4.2998
0.2326
16.4991
9
5.1598
0.1938
20.7989
10
6.1917
0.1615
25.9587
11
7.4301
0.1346
32.1504
12
8.9161
0.1122
39.5805
13
10.6993
0.0935
48.4966
14
12.8392
0.0779
59.1959
15
15.4070
0.0649
72.0351
16
18.4884
0.0541
87.4421
17
22.1861
0.0451
105.9306
18
26.6233
0.0376
128.1167
19
31.9480
0.0313
154.7400
20
38.3376
0.0261
186.6880
21
46.0051
0.0217
225.0256
22
55.2061
0.0181
271.0307
23
6.2474
0.0151
326.2369
24
79.4968
0.0126
392.4842
25
95.3962
0.0105
471.9811
30
237.3763
0.0042
1181.8816
35
590.6682
0.0017
2948.3411
40
1469.7716
0.0007
7343.8578
45
3657.2620
0.0003
18281.3099
50
9100.4382
0.0001
45497.1908
60
56347.5144
a
281732.5718
80 2160228.4620
a
10801137.3101

Uniform Series
Present
Sinking
Worth
Fund
Factor
Factor
To Find P To Find A
Given A
Given F
P/A
A/F
0.8333
1.0000
1.5278
0.4545
2.1065
0.2747
2.5887
0.1863
2.9906
0.1344
3.3255
0.1007
3.6046
0.0774
3.8372
0.0606
4.0310
0.0481
4.1925
0.0385
4.3271
0.0311
4.4392
0.0253
4.5327
0.0206
4.6106
0.0169
4.6755
0.0139
4.7296
0.0114
4.7746
0.0094
4.8122
0.0078
4.8435
0.0065
4.8696
0.0054
4.8913
0.0044
4.9094
0.0037
4.9245
0.0031
4.9371
0.0025
4.9476
0.0021
4.9789
0.0008
4.9915
0.0003
4.9966
0.0001
4.9986
0.0001
4.9995
a
4.9999
a
5.0000
a
5.0000

capital
recovery
Factor
To Find A
Given P
A/P
1.2000
0.6545
0.4747
0.3863
0.3344
0.3007
0.2774
0.2606
0.2481
0.2385
0.2311
0.2253
0.2206
0.2169
0.2139
0.2114
0.2094
0.2078
0.2065
0.2054
0.2044
0.2037
0.2031
0.2025
0.2021
0.2008
0.2003
0.2001
0.2001
0.2000
0.2000
0.2000
0.2000

Uniform Gradient
Gradient
Gradient
Present Worth
Uniform Series
Factor
Factor
To Find P
To Find A
Given G
Given G
P/G
A/G
0.000
0.0000
0.694
0.4545
1.852
0.8791
3.299
1.2742
4.906
1.6405
6.581
1.9788
8.255
2.2902
9.883
2.5756
11.434
2.8364
12.887
3.0739
14.233
3.2893
15.467
3.4841
16.588
3.6597
17.601
3.8175
18.510
3.9588
19.321
4.0851
20.042
4.1976
20.681
4.2975
21.244
4.3861
21.740
4.4643
22.174
4.5334
22.555
4.5941
22.887
4.6475
23.176
4.6943
23.428
4.7352
24.263
4.8731
24.661
4.9406
24.847
4.9728
24.932
4.9877
24.970
4.9945
24.994
4.9989
25.000
5.0000

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35
40
45
50
60
80

APPENDIX D

lnterest and Annuity

Tables for Continuous
compounding
For various values of r from 8% to 20%,
r = nominal interest rate per period, compounded continuourty
N = number of compounding periods
(F/P,r%,N)

(P/F,1%,N)

(F/ A,r%,N)

(P / A,r%,N)

TABLE C-18 Discrete Compounding; i = 25%

Single Payment
Compound
Present
Compound
Amount
Worth
Amount
Factor
Factor
Factor
To Find F
To Find P
To Find F
Given P
Given F
Given A
N
F/P
P/F
F/A
1
1.2500
0.8000
1.0000
2
1.5625
0.6400
2.2500
3
1.9531
0.5120
3.8125
4
2.4414
0.4096
5.7656
5
3.0518
0.3277
8.2070
6
3.8147
0.2621
11.2588
7
4.7684
0.2097
15.0735
8
5.9605
0.1678
19.8419
9
7.4506
0.1342
25.8023
10
9.3132
0.1074
33.2529
11
11.6415
0.859
42.5661
12
14.5519
0.687
54.2077
13
18.1899
0.0550
68.7596
14
22.7374
0.0440
86.9495
15
28.4217
0.0352
109.6868
16
35.5271
0.0281
138.1085
17
44.4089
0.0225
173.6357
18
55.5112
0.018
218.0446
19
69.3889
0.0144
273.5558
20
86.7362
0.0115
342.9447
21
108.4202
0.0092
429.6809
22
135.5253
0.0074
538.1011
23
16.4066
0.0059
673.6264
24
211.7582
0.0047
843.0329
25
264.6978
0.0038
1054.7912
30
807.7936
0.0012
3227.1743
35
2465.1903
0.0004
9856.7613

Uniform Series
Present
Sinking
Worth
Fund
Factor
Factor
To Find P To Find A
Given A
Given F
P/A
A/F
0.8000
1.0000
1.4400
0.4444
1.952
0.2623
2.3616
0.1734
2.6893
0.1218
2.9514
0.0888
3.1611
0.0663
3.3289
0.0504
3.4631
0.0388
3.5705
0.0301
3.6564
0.0235
3.7251
0.0184
3.7801
0.0145
3.8241
0.0115
3.8593
0.0091
3.8874
0.0072
3.9099
0.0058
3.9279
0.0046
3.9424
0.0037
3.9539
0.0029
3.9631
0.0023
3.9764
0.0019
3.9764
0.0015
3.9811
0.0012
3.9849
0.0009
3.9950
0.0003
3.9984
0.0001

capital
recovery
Factor
To Find A
Given P
A/P
1.2500
0.6944
0.5123
0.4234
1.3718
0.3388
0.3163
0.3004
0.2888
0.2801
0.2735
0.2684
0.2645
0.2615
0.2591
0.2572
0.2558
0.2546
0.2537
0.2529
0.2523
0.2519
0.2515
0.2512
0.2509
0.2503
0.2501

Uniform Gradient
Gradient
Gradient
Present Worth
Uniform Series
Factor
Factor
To Find P
To Find A
Given G
Given G
P/G
A/G
0.000
0.0000
0.640
0.4444
1.664
0.8525
2.893
1.2249
4.204
1.5631
5.514
1.8683
6.773
2.1424
7.947
2.3872
9.021
2.6048
9.987
2.7971
10.846
2.9663
11.602
3.1145
12.262
3.2437
12.833
3.3559
13.326
3.4530
13.748
3.5366
14.109
3.6084
14.415
3.6698
14.674
3.7222
14.893
3.7667
15.078
3.8045
15.233
3.8365
15.363
3.8634
15.471
3.8861
15.562
3.9052
15.832
3.9628
15.937
3.9858

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
30
35

40
45
50
60

7523.1638
22958.874
70064.9232
652530.4468

0.0001
a
a
a

30088.6554
91831.4962
280255.6929
2610117.7872

3.9995
3.9998
3.9999
4.0000
4.0000

a
a
a
a

0.2500
0.2500
0.2500
0.2500
0.2500

15.977
15.992
15.997
16.0000

3.9947
3.9980
3.9993
3.9999

40
45
50
60

INTEREST AND ANNUITY TABLES FOR CONTINOUS COMPOUNDING

TABLE D-1 Continous Compounding; r = 8%

Discrete Flows
Single Payment
Uniform Series
Compound
Present
Compound
Present
Amount
Worth
Amount
Worth
Factor
Factor
Factor
Factor
To Find F
To Find P
To Find F
To Find P
Given P
Given F
Given A
Given A
N
F/P
P/F
F/A
P/A
1
1.0833
0.9231
1.0000
0.9231
2
1.1735
0.8521
2.0833
1.7753
3
1.2712
0.7866
3.2568
2.5619
4
1.3771
0.7261
4.5280
3.2880
5
1.4918
0.6703
5.9052
3.9584
6
1.6161
0.6188
7.3970
4.5771
7
1.7507
0.5712
9.0131
5.1483
8
1.8965
0.5273
10.7637
5.6756
9
2.0544
0.4868
12.6602
6.1624
10
2.2255
0.4493
14.7147
6.6117
11
2.4109
0.4148
16.9402
7.0265
12
2.6117
0.3829
19.3511
7.4094
13
2.8292
0.3535
21.9628
7.7629
14
3.0649
0.3263
24.7920
8.0891
15
3.3201
0.3012
27.8569
8.3903
16
3.5966
0.2780
31.1770
8.6684
17
3.8962
0.2567
34.7736
8.9250
18
4.2207
0.2369
38.6698
9.162
19
4.5722
0.2187
42.8905
9.3807
20
4.9530
0.2019
47.4627
9.5826
21
5.3656
0.1864
52.4158
9.7689
22
5.8124
0.172
57.7813
9.9410
23
6.2965
0.1588
63.5938
10.0998
24
6.812
0.1466
69.8903
10.2464
25
7.3891
0.1353
76.7113
10.3817
26
8.0045
0.1249
84.1003
10.5067
27
8.6711
0.1153
92.1048
10.6220
28
9.3933
0.1065
100.776
10.7285
29
10.1757
0.0983
110.1690
10.8267
30
11.0232
0.907
120.345
10.9174
35
16.4446
0.0608
185.439
11.2765
40
24.5325
0.0408
282.547
11.5172
45
36.5982
0.0273
427.416
11.6786
50
54.5982
0.0183
643.535
11.7868
55
81.4509
0.0123
965.947
11.8593

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
35
40
45
50
55

651

60
65
70
75
80
85
90
95
10

121.510
181.272
270.426
403.429
601.845
897.847
1339.43
1998.20

0.0082
0.0055
0.0037
0.0025
0.0017
0.0011
0.0007
0.0005

1446.93
2164.47
3234.91
4831.83
7214.15
10768.1
16070.1
23979.7

11.9078
11.9404
11.9623
11.9769
11.9867
11.9933
11.9977
12.0007

60
65
70
75
80
85
90
95
10

2980.96

0.0003

35779.3

12.0026

652 APPENDIX D/

INTEREST AND ANNUITY TABLES FOR CONTINOUS COMPOUNDING

TABLE D-2 Continous Compounding; r = 10%

Discrete Flows
Single Payment
Uniform Series
Compound
Present
Compound
Present
Amount
Worth
Amount
Worth
Factor
Factor
Factor
Factor
To Find F
To Find P
To Find F
To Find P
Given P
Given F
Given A
Given A

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100

F/P
1.1052
1.2214
1.3499
1.4918
1.6487
1.8221
2.0138
2.2255
2.4596
2.7183
3.0042
3.3201
3.6693
4.0552
4.4817
4.953
5.4739
6.0496
6.6859
7.3891
8.1662
9.025
9.9742
11.0232
12.1825
13.4637
14.8797
16.4446
18.1741
20.0855
33.1155
54.5981
90.0171
148.413
244.692
403.429
665.142
1096.63
1808.04
2980.96
4914.77
8103.08
13359.7
22026.5

P/F
0.9048
0.8187
0.7408
0.6703
0.6065
0.5488
0.4966
0.4493
0.4066
0.3679
0.3329
0.3012
0.2725
0.2466
0.2231
0.2019

F/A
1.0000
2.1052
3.3266
4.6764
6.1683
7.8170
9.6391
11.6528
13.8784
16.3380
19.0536
22.0604
25.3806
29.0499
33.1051
37.5867

P/A
0.9048
1.7236
2.4644
3.1347
3.7412
4.2900
4.7866
5.236
5.6425
6.0104
6.3433
6.6445
6.9170
7.1636
7.3867
7.5886

N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

0.1827
0.1653
0.1496
0.1353
0.1225
0.1108
0.1003
0.0907
0.0821
0.0743
0.0672
0.0608
0.0550
0.0498
0.0302
0.0183
0.0111
0.0067
0.0041
0.0025
0.0015
0.0009
0.0006
0.0003
0.0002
0.0001
a
a

42.5398
48.0137
54.0634
60.7493
68.1383
76.3045
85.3295
95.3037
106.327
118.509
131.973
146.853
163.298
181.472
305.364
509.629
846.404
1401.65
2317.10
3826.43
6314.88
1401.65
17182.0
28334.4
46721.7
77037.7
127019.0
209425.0

7.7713
7.9366
8.0862
8.2215
8.3440
8.4548
8.5550
8.6458
8.7278
8.8021
8.8693
8.9301
8.9852
9.0349
9.2212
9.3342
9.4027
9.4443
9.4695
9.4848
9.4940
9.4997
9.5031
9.5051
9.5064
9.5072
9.5076
9.5079

17
18
19
20
21
22
23
24
25
26
27
28
29
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100

INTEREST AND ANNUITY TABLES FOR CONTINOUS COMPOUNDING

TABLE D-3 Continous Compounding; r = 20%

Discrete Flows
Single Payment
Uniform Series
Compound
Present
Compound
Present
Amount
Worth
Amount
Worth
Factor
Factor
Factor
Factor
To Find F
To Find P
To Find F
To Find P
Given P
Given F
Given A
Given A
N
F/P
P/F
F/A
P/A
1
1.2214
0.8187
1.0000
0.8187
2
1.4918
0.6703
2.2140
1.4891
3
1.8221
0.5488
3.7132
2.0379
4
2.2255
0.4493
5.5353
2.4872
5
2.7183
0.3679
7.7609
2.8551
6
3.3201
0.3012
10.4792
3.1563
7
4.0552
0.2466
13.7993
3.4029
8
4.9530
0.2019
17.8545
3.6048
9
6.0496
0.1653
22.8075
3.7701
10
7.3891
0.1353
28.8572
3.9054
11
9.0250
0.1108
36.2462
4.0162

N
1
2
3
4
5
6
7
8
9
10
11

653

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

11.0232
13.4637
16.4446
20.0855
24.5325
29.9641
36.5982
44.7012
54.5981
66.6863
81.4509
99.4843
121.510
148.413
181.272
221.406
270.426

0.0907
0.0743
0.0608
0.0498
0.0408
0.0334
0.0273
0.0224
0.0183
0.0150
0.0123
0.0101
0.0082
0.0067
0.0055
0.0045
0.0037

45.2712
56.2944
69.7581
86.2028
106.288
130.8210
160.785
197.383
242.0840
296.6820
363.3690
444.820
544.3040
665.814
814.227
995.500
1216.910

4.1069
4.1812
4.2420
4.2918
4.3325
4.3659
4.3932
4.4156
4.4339
4.4489
4.4612
4.4713
4.4795
4.4862
4.4917
4.4963
4.5000

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

29
30
35
40
45
50
55
60

330.299
403.429
1096.63
2980.96
8103.08
22026.5
59874.1
162755.0

0.0030
0.0025
0.0009
0.0003
0.0001
a
a
a

1487.33
1817.63
4948.60
13459.4
36594.3
99481.4
270426.0
735103.0

4.5030
4.5055
4.5125
4.5151
4.5161
4.5165
4.5166
4.5166

29
30
35
40
45
50
55
60

APPENDIX E

Standard Normal
Distribution

The standard normal distribution is a normal (Gaussian) distribution with a mean of 0

and a variance of 1. It is a continuous diskibution with a range of - to +. The
tabled values denote the probability of observing a value from minus infinity to the Z
value indicated by the left column and top row.lhezvalue is determined by applying the
following formula to the observed data:
Z:(X- )/.

Interested readers are referred to any introductory statistics text book for an In-depth
discussion of the use of the standard normal distribution function.

654
STANDART NORMAL DISTRIBUTION 655

TABLE E-1 Areas under the normal curve

z
-3.4
-3.3
-3.2
-3.1
-3.0
-2.9
-2.8
-2.7
-2.6
-2.5
-2.4
-2.3
-2.2
-2.1
-2.0
-1.9
-1.8
-1.7
-1.6

0
0.0003
0.0005
0.0007
0.0010
0.0013
0.0019
0.0026
0.0035
0.0047
0.0062
0.0082
0.0107
0.0139
0.0179
0.0228
0.0287
0.0359
0.0446
0.0548

0.01
0.0003
0.0005
0.0007
0.0009
0.0013
0.0018
0.0025
0.0034
0.0045
0.0060
0.0080
0.0104
0.0136
0.0174
0.0222
0.0281
0.0352
0.0436
0.0537

0.02
0.0003
0.0005
0.0006
0.0009
0.0013
0.0017
0.0024
0.0033
0.0044
0.0059
0.0078
0.0103
0.0132
0.0170
0.0217
0.0274
0.0344
0.0427
0.0526

0.03
0.0003
0.0004
0.0006
0.0009
0.0012
0.0017
0.0023
0.0032
0.0043
0.0057
0.0075
0.0099
0.0129
0.0166
0.0212
0.0268
0.0336
0.0418
0.0516

0.04
0.0003
0.0004
0.0006
0.0008
0.0012
0.0016
0.0023
0.0031
0.0041
0.0055
0.0073
0.0096
0.0125
0.0162
0.0207
0.0262
0.0329
0.0409
0.0505

0.05
0.0003
0.0004
0.0006
0.0008
0.0011
0.0016
0.0022
0.0030
0.0040
0.0054
0.0071
0.0094
0.0122
0.0158
0.0202
0.0256
0.0322
0.0401
0.0495

0.06
0.0003
0.0004
0.0006
0.0008
0.0011
0.0015
0.0021
0.0029
0.0039
0.0052
0.0069
0.0091
0.0119
0.0154
0.0197
0.0250
0.0314
0.0392
0.0485

0.07
0.0003
0.0004
0.0005
0.0007
0.0011
0.0015
0.0021
0.0028
0.0038
0.0051
0.0068
0.0089
0.0116
0.0150
0.0192
0.0244
0.0307
0.0384
0.0475

0.08
0.0003
0.0004
0.0005
0.0007
0.0010
0.0014
0.0020
0.0027
0.0037
0.0049
0.0066
0.0087
0.0113
0.0146
0.0118
0.0239
0.0301
0.0375
0.0465

0.09
0.0002
0.0003
0.0005
0.0007
0.0010
0.0014
0.0019
0.0026
0.0036
0.0048
0.0064
0.0084
0.0110
0.0143
0.0183
0.0233
0.0294
0.0367
0.0455

-1.5
-1.4
-1.3
-1.2
-1.1
-1.0
-0.9
-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0

0.0668
0.0808
0.0968
0.1151
0.1357
0.1587
0.8141
0.2119
0.2420
0.2743
0.3085
0.3446
0.3821
0.4207
0.4602
0.5000

0.0655
0.0793
0.0951
0.1131
0.1335
0.1562
0.1841
0.2090
0.2389
0.2709
0.3050
0.3409
0.3783
0.4168
0.4562
0.4960

0.0643
0.0778
0.0934
0.1112
0.1314
0.1539
0.1788
0.2061
0.2358
0.2676
0.3015
0.3372
0.3745
0.4129
0.4522
0.4920

0.0630
0.0764
0.0918
0.1093
0.1292
0.1515
0.1762
0.2033
0.2327
0.2643
0.2981
0.3336
0.3707
0.4090
0.4483
0.4880

0.0618
0.0749
0.0901
0.1075
0.1271
0.1492
0.1736
0.2005
0.2296
0.2611
0.2946
0.3300
0.3669
0.4052
0.4443
0.4840

0.0606
0.0735
0.0885
0.1056
0.1251
0.1469
0.1711
0.1977
0.2266
0.2578
0.2912
0.3264
0.3632
0.4013
0.4404
0.4801

0.0594
0.0722
0.0869
0.1038
0.1230
0.1446
0.1685
0.1949
0.2236
0.2546
0.2877
0.3228
0.3594
0.3974
0.4364
0.4761

0.0582
0.0708
0.0853
0.1020
0.1210
0.1423
0.1660
0.1922
0.2206
0.2514
0.2843
0.3192
0.3557
0.3936
0.4325
0.4721

0.0571
0.0694
0.0838
0.1003
0.1190
0.1401
0.1635
0.1894
0.2177
0.2483
0.2810
0.3156
0.3520
0.3897
0.4286
0.4681

0.0559
0.0681
0.0823
0.0985
0.1170
0.1379
0.1611
0.1867
0.2148
0.2451
0.2776
0.3121
0.3483
0.3859
0.4247
0.4641

656 APPENDIX E / STANDART NORMAL DISTRIBUTION

TABLE E-1 (continued)

z
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7

0
0.5000
0.5398
0.5793
0.6179
0.6554
0.6915
0.7257
0.7580
0.7881
0.8159
0.8413
0.8643
0.8849
0.9032
0.9192
0.9332
0.9452
0.9554
0.9641
0.9713
0.9772
0.9821
0.9861
0.9893
0.9918
0.9938
0.9953
0.9965

0.01
0.5040
0.5438
0.5832
0.6217
0.6591
0.695
0.7291
0.7611
0.7910
0.8186
0.8438
0.8665
0.8869
0.9049
0.9207
0.9345
0.9463
0.9564
0.9649
0.9719
0.9778
0.9826
0.9864
0.9896
0.9920
0.9940
0.9955
0.9966

0.02
0.5080
0.5478
0.5871
0.6255
0.6628
0.6985
0.7324
0.7642
0.7939
0.8212
0.8461
0.8686
0.8888
0.9066
0.9222
0.9357
0.9474
0.9573
0.9656
0.9726
0.9783
0.9830
0.9868
0.9898
0.9922
0.9941
0.9956
0.9967

0.03
0.5120
0.5517
0.5910
0.6293
0.6664
0.7019
0.7357
0.7673
0.7967
0.8238
0.8485
0.8708
0.8907
0.9082
0.9236
0.9370
0.9484
0.9582
0.9664
0.9732
0.9788
0.9834
0.9871
0.9901
0.9925
0.9943
0.9957
0.9968

0.04
0.5160
0.5557
0.5948
0.6331
0.6700
0.7054
0.7389
0.7704
0.7995
0.8264
0.8508
0.8729
0.8925
0.9099
0.9251
0.9382
0.9495
0.9591
0.9671
0.9738
0.9793
0.9838
0.9875
0.9904
0.9927
0.9945
0.9959
0.9969

0.05
0.5199
0.5596
0.5987
0.6368
0.6736
0.7088
0.7422
0.7734
0.8023
0.8289
0.8531
0.8749
0.8944
0.9115
0.9265
0.9394
0.9505
0.9599
0.9678
0.9744
0.9798
0.9842
0.9878
0.9906
0.9929
0.9946
0.9960
0.9970

0.06
0.5239
0.5636
0.6026
0.6406
0.6772
0.7123
0.7454
0.7764
0.8051
0.8315
0.8554
0.8770
0.8962
0.9131
0.9278
0.9406
0.9515
0.9608
0.9686
0.975
0.9803
0.9846
0.9881
0.9909
0.9931
0.9948
0.9961
0.9971

0.07
0.5279
0.5675
0.6064
0.6443
0.6808
0.7157
0.7486
0.7794
0.8078
0.8340
0.8577
0.879
0.8980
0.9147
0.9292
0.9418
0.9525
0.9616
0.9693
0.9756
0.9808
0.985
0.9884
0.9911
0.9932
0.9949
0.9962
0.9972

0.08
0.5319
0.5714
0.6103
0.648
0.6844
0.719
0.7517
0.7823
0.8106
0.8365
0.8599
0.8810
0.8997
0.9162
0.9306
0.9429
0.9535
0.9625
0.9699
0.9761
0.9812
0.9854
0.9887
0.9913
0.9934
0.9951
0.9963
0.9973

0.09
0.5359
0.5753
0.6141
0.6517
0.6879
0.7224
0.7549
0.7852
0.8133
0.8389
0.8621
0.883
0.9015
0.9177
0.9319
0.9441
0.9545
0.9633
0.9706
0.9767
0.9817
0.9857
0.989
0.9916
0.9936
0.9952
0.9964
0.9974

2.8
2.9
3.0
3.1
3.2
3.3
3.4

0.9974
0.9981
0.9987
0.9990
0.9993
0.9995
0.9997

0.9975
0.9982
0.9987
0.9991
0.9994
0.9995
0.9997

0.9976
0.9982
0.9987
0.9991
0.9994
0.9996
0.9997

0.9977
0.9983
0.9988
0.9991
0.9994
0.9996
0.9997

0.9977
0.9984
0.9988
0.9992
0.9994
0.9996
0.9997

0.9978
0.9984
0.9989
0.9992
0.9994
0.9996
0.9997

0.9979
0.9985
0.9989
0.9992
0.9994
0.9996
0.9997

0.9979
0.9985
0.9989
0.9992
0.9995
0.9996
0.9997

0.9980
0.9986
0.9990
0.9993
0.9995
0.9996
0.9997

0.9981
0.9986
0.999
0.9993
0.9995
0.9997
0.9998

APPENDIX F

Selected References
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(Boston: Allyn and Bacon, 1992).
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M.S.

Applied

Economic

Analysis

for

Technologists,Engineersa,

and

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CAMPEN,

J.T.Benefit,

cost,

and

Beyond

(cambridge,

MA:

Ballinger

publishing

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658 APPENDIX F / SELECTED REFERENCES

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A.K.Engineering

Economy

with

Computer

Applications

(Mahomet,

IL:

Engineering Technology, 1979 ).

MATTEWS L.M. Estimating Manufacturing Casts: A Practical Guide for Managers and
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Selected references 659

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Competitive

Strategy:

Techniques for

Analyzing lndustries

and

Competitors (New York: The Free Press, 1980).

RIGGS, J.L., D.D. BEDWORTH, and S.V. RANDHAWA. Engineering Economics, 4th ed
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STEINER, H.M. Engineering Economic Principles, 2nd ed. (New York: McGraw-Hill,
1996)
STERMOLE, F.J., and J.M. STERMOLE. Economic Evaluation and lnvestment Decision
Methods,6th ed. (Golden, CO: investment Evaluations Corp., 1997).
STEWART, R.D. Cost Estimating (New York John Wiley & Sons, 1982).
STEWART, R.D., R.M. Wyskida, and J.D. JOHANNES, eds. Cost Estimators' Reference
Manual, 2nd ed. (New York John Wiley & Sons, 1995).
TAYLOR, G.A. Managerial and Engineering Economy, 3rd ed. (New York Van Nostrand
Reinhold, 1980).
THUESEN, G.J., and W.J. FABRYCKY. Engineering Economy, 9th ed. (Upper Saddle
River, NJ: Prentice Hall 2001).
VANHORNE, J.C. Financial Management and Policy,8th ed. (Upper Saddle River, NJ:
Prentice Hall, 1989).
WEINGARTNER,

H.M.

Mathematical

Programming

and

the

analysis

of

Capital

Budgeting Problems (Englewood Cliffs, NJ: Prentice-Hall, 1975).

WHITE, J.A., K.E. Case, D.B. PRATT, and M.H. AGEE. Principles of Engineering
Economic Analysis, 4th ed. (New York: John Wiley & Sons, 1998).
WOODS, D.R. Financial Decision Making in the Process Industry (Englewood Cliffs,
NJ): Prentice-Hall, 1975).

APPENDIX G

Answers to Selected
Problems
D' = 2,404pumps/month;

CHAPTER 2
2-12

a. D* = 2,425 circuit

22.75% reduction
2-27

R-30; LCC = $19,513.00

2-30

$4,448

2-37

a. Either machine

boards/month
b. Profit = $75,612.50/month

b. Machine A
2-39

Process 1 ; Profit : $2,640/ day

2-39

a. Speed B; cost/piece : $0.104

c. D = 480.6 481 circuit

2-43

Method 1; Profit - $10,974,A0A

boards/month

(maximum profit)

2-53

Select (a)

D = 4,369.4 4,369

2-54

Select (b)

circuit boards/month

2-55

Select (c)

2-59

Select (d)

d. 481 to 4,369 circuit boards

per month
2-14

D* 240 units per month

Profit = $4,960 per month

CHAPTER 3

D = 18 units/month
D= 462 units/month
2-18

a. D* 50 units per month

3-4
3-6

= $262,78A.27
a.

b.

= 154.9
= 203.4

for D > 1. Therefore, D* = 50

b.

is a point of maximum profit.

2-19

X = l5.64 megawatts

2-21

D' = 3,112pumps/month;

3-7

a.

= $412,710
= 176

b.

= 144.5
= $797,696

3-l I

a. $630A/year

3-15

$11,54

3-22

a. y = 31.813 + 0.279 x
b. R = 0.99
c. y = $101.56

3-26

x = 4,497 units

3-29

Total Cost = $2,239,046

3-30

s = 0.9 (90% learning curve)

3-38

Select (d)

3-39

Select (c)

3-40

Select (b)

3-42

Select (d)

ANSWERS TO SELECTED PROBLEMS

CHAPTER 4
I = $4,250

c. 10.51%
Select D; A = $1,430
P = $4,729.87
N = 30 months

I = $7,560

i/yr = 8.24%

F = $13,382

F = $6,340.50

P = $31,775

Select (c); A = $312

i = 2.17% per year

F = $17,303.19

A = $2,925

a. False; b. False; c. False;

P = $8,865
A = $3,397.50

d. True;

e. False; f. True;

g. False; h. False; i, False;

Fr= $124,966
a. N8years.
b. I = 15.11%
c.P = $720.96
d. A= $277.40
Select D; F = $13,490
A = -$581.86
P = $33,511.70
Z = $3,848.15
i' /year = 11.55% per year
W = $714.25

4-99

Z = $1,421.67

P= -$165,104

4-103

A = $1,320.66

A = $1,203.69

4-106

a. True

Z = $608.21

b. True

d. False e. False

P = $100(P / A,10%,4 + $100(P/G ,

4-114

Select( e)

10%,8)

4-116

Select(d )

4-717

Select (c)

A = $124.34
Q= $435.75
N = 8 years
A = $2,790.73

4-1 19 Select(d )
4-121

Select (c)

4-122

Select (a)

4-123

Select (c)

X = $5,573.25
a. 10.25%
b. 10.38%

CHAPTER 5

c. False

661

5-2

N = 72 months

5-4

PW (12%) = $13,423.57

5-5

PW (15%) = $2,911.60
Fw (15%) = $5,855.60
AW (15%) = $868.70

5-8

PW (15%) = $352,650> 0;
Invest in the new product line.

5-12

a.

= $7,688.96

b. A = $150,992.90
5- 14

i'% = 7.5% per six months

5-17

PW of 5 yr lining = $5,514.72
PW 10 yr lining = $9,003.56

5-21

A = $4,490/year

5-25

AW (of costs) = $20,736.30 per

year

5-27

a. As i , the PW approaches $3,000

b. = 6 years
c. PW(0%) = -$1,000
AW(0%) = -$166.70

5-30

APR = 22.8% compounded monthly

5-33

= 51.1% Per year.

5-34

i = 14 %

5-38

a. I5.2% b. 18.8% c. 21.5%

d. 20%

5-41

i = 1.24% per year

5-43

a. ' = 6 years
b. i'%= 29.4% per year

5-49

a. i = 1/2% and 28.8% per year.

b. i' = 21.15%;ERR > 20% accept
project.

5-51

a. PW = 1.710 X + 26.006Y
b. AW = 0.2732X + 4.1558Y

ANSWER TO SELECTED PROBLEMS

CHAPTER 4
1 I = $4,250

4-99 Z = $1,421.67
4-103 A = $1,320.66

I = $7,560

F = $13,382

4-106 a. True
False

P = $31,775

d. False

11 i = 2.17% per year

4-114 Select (e)

14 A = $2,925

4-116 Select (d)

17 P = $8,865

4-117 Select (c)

20 A = $3,397.50

4-119 Select (d)

24 F4 = $124,966

4-121 Select (c)

25 a. N - 8 years.

4-122 Select (a)

b. i =15.11%

b. True c.

e. False

4-123 Select (c)

c. P = $720.96
d. A = $277.40
29 Select D; F4 = $13,490

33 A = - $681.86
35 P = $33,511.70
38 Z $3,848.15

CHAPTER 5
5-2

N = 72 months

5-4

PW(12%) = -$13,423.57

5-5

PW(15%) = $2,911.60

42 i'/year =11.55% per year

FW(15%) = $5,855.60

45 W = $714.25
48 Po = $165,104 1 A = $1,203.69
53 Z = $608.21
58 Po = $100(P/A, 10%, 4) + $100(P/G,
10%, 8)
60 A = $124.34
64 Q = $435.75
65 N = 8 years ;
69 A = $2,790.73
73 X = $5,573.25
77 a. 10.25%

AW(15%) $868.70
5-8

PW(15%) $352,650 > 0;

invest in the new product line.

5-12 a. VN = $7,688.96
b. A = $150,892.90
5-14 i'% = 7.5% per six months
5-17 PW of 5 yr lining = $5,614.72
PW 10 yr lining = $9,003.56
5-21 A = 54,490/year
5-25 AW (of costs) = $20,736.30 per

149

ANSWER TO SELECTED PROBLEMS

5-52 a. IIW = 59.91 Y

7-7 a. $180,550.50

b. A = 9.908Y
5-63 Select (d)

b. $14,449.50
c. $43,329

7-11

5-64 Select (a)

a. d3 =
$42,857.15

$3,428.57;

BV5

b. d3 = $6,297.38; BV5 = $27,759.86

5-67 Select (c)

c. d- = $10,494; BV5, = $13,386

5-69 Select (e)

d. d2 = d3=. =d14_$4,285.71

5-70 Select (c)

5-72 Select (d)

150

BV5 = $40,714.30
7-16

a. Income taxes = $18,850

b. Depreciation + Expenses $130,000

CHAPTER 6
6-2 Select Design D3 for PW, FW, and AW
6-4 Select Design C; AW,(20%) = $16,245

7-19

t =37.96%;
t = 41.92%

6-7 Select Alternative B; PWB(20%) $9,180

7-22 Alternative A: Plastic; AWA = $1,184

6-12 Select Alternative Al; AW(18%)

$13,492

7-25 PW(15%) = $363,690 > > 0;

investment should be made

6-14 Select Design A; AWA(6%) = $48,594/mile, PWA (6%) = $557,273/mile

7-27 Design S1; AW(10%) = -$290

6-17 Select Alternative Y; PWy(5%) =

$40,885.54
6-21 a. Standard light bulb is less expensive
by
$0.44 per year
6-25 a. Select A; AWA = -$12,053.60
b. Select A; AWA = -$12,053.60
6-27 a. Select Alternative El; AWE,(15%)
= -$16,990
b. Select Alternative El; AWE'(15%)
= -$16,990
6-30 Select Bridge Design L; CWL(15%)

7-31 N = 6 years
7-33 X = $864,135 / year
7-34 a. PW $171,592
b. AW $37,115
7-37 AW(12%) = $3,468 for both ATCF
and EVA
7-39 Accept Quotation II, PW = $136,848
7-46 Select (b)
7-48 Select (c)
7-51 Select (d)
7-53 Select (d)

ANSWER TO SELECTED PROBLEMS

= -$378,733 6-32 Recommend Design

ER1
6-38 Select Alternative 2

7-56 Select (d)

7-59 Select (a)
7-61 Select (e)

6-40 Select Design 4; PW4 = $23,433.23

6-48 i'

21.6%; Select (c)

CHAPTER 8

6-49 X = 6.26 or 7 planes per year; Select

(a)

8-2 N

6-52 i' = 13.4% > 10%; Select (c)

8-4 Alternative B, PW = -$369,080

6-54 Select (e)

8-5 Alternative I, PW = $10,000

6-55 Select (a)

8-11 PO(A$) = $43,755

6-57 Select (b); PWA(15%) = $42,848

8-14 a. FW(A$) = $144,105

18 years

b. FW(R$) = $44,932
8-20

CHAPTER 7

a. if, = 36.08% per year

b. if, = 18.44% per year

7-6 a. $7,142.86
b. $11,200

8-25 PW(18%) = -$12,233

c. $5,000

8-30 Select Purchase alternative;

FW -$1,952,551
8-38 Select (d)

840 Select (c)

11-14 b. Retain the steel pier, AW =

$29,332

42 Select (c)

11-17 Construct the levee

11-19 a. Select Design 3

CHAPTER 9
9-1

Keep the old lift truck; PW = $23,331

9-5

Economic life = 3 years

9-9

Keep the defender, AW = $15,383

11-21 Select Design B

11-22 B-C Ratio = 1.1; Select (d)
11-23 Select (b)

9-11 Reinforce the existing bridge

9-16 Keep the defender, PW
56,542.40, Anti

b. Select Design 3

11-25 Select (b)

151

ANSWER TO SELECTED PROBLEMS

$1,725.89

152

CHAPTER 12

9.19 Select Alternative B, PW S1,440,423

9-23 Lease the challenger

12-2 The four-lane bridge should be built

now, PW = $3-500,000

9-25 Relocate the existing transformers

12-4 E(X) 1,350 cubic yards

(Alterna tive B); CW = $54,239

V(X) 66,500(cubic yards)

9-32

Select (a)

SD(X) = 258 cubic yards

9-33

Select (c)

12-6 Select Design E, PW = $239,414

9-35

Select (d)

12-7 Alternative T, Annual Cost =

$52,435

CHAPTER 10

12-10 E(PWAT) = 533,403; implement

the project

10-3 =0.818

12-13 a. V(PW) = 1,097.7 x 106($)2

10-5 a. MV(Alternative 2)

2,050

SD(PW) = 533,131
b.Pr/PW > 0) = 0.57

b. N = 7.3 years
10-9 X = $933,953 in annual revenues year
10-13
most likely estimates,
marginally- preferred to B,

a. At the
Design is

b. X = 11,872 units/year
10-18 X = 362,500,000 Btu per year
10-21

Select
the ABC brand motor, AW,
= -$1,831

10-30 Select (b)

10-31 Select (a)

c. E(AW)Rs = $1,866
The project appears questionable.
The E(PW) is positive but the
SD(PW) is approximately two times
the expected value. Also the Pr[PW
> 01 = 0.57 is only somewhat
attractive.
12-16 Pr(X

171) = 0.7881

12-19 E[PW(B A)] = $5,228

(PWA

B) = $1,183.97

12-25 Select new product, PW = $62,125

12-27 Choose to build

10-34 Select (b)install Machine A

10-38 True
10-39 False

CHAPTER 11

CHAPTER 13
13-2 a. Leasing a tuck is better.
b. The annual cost of having to
operate without a truck, $2,000,
is less than the minimum cost

ANSWER TO SELECTED PROBLEMS

11-1 Select B

alternative in (a). Hence, it is

better to operate without a truck.

11-2 Alternative C
11-5 Alternative B
11-8 Expand the present facility (Alt. A)
11-13 Recommend building the dam (II)

153

13-5 Leasing is better for case a, but

buying is better for case b.
13-6 Leasing is better if the life is 3
years. It appears that a breakeven
life is 4 years (to the nearest whole
year).

13-8 Objective function value = $219.89

Lexicographyno alternatives
eliminated

13-11 Objective function value= $8,822

Hurwicz procedureAlternative A
eliminated

13-12 Recommendations differ for Projects

A and C 13-13 R, = 10%

Additive weightingAlternative B
selected
CHAPTER 14

14-9

14-5 a. Alternative 2

14-11 The solution involves subjective

factors which will vary from one
student to another.

b. Alternative 2
c. Alternative 2
14-7 Dominanceno alternatives
eliminated
SatisficinAlternative A
eliminated

Alternative A

14-13 Dominanceno selection

Feasible rangesno selection
LexicographyDomestic 2
Additive weighting Domestic 2
14-14 Xij 0.7 (keep tool)
1.0 (purchase new)

ANSWER TO SELECTED PROBLEMS

154

INDEX

development of

Abandonment 383, 399

brainstorming, 12, 115

Accounting

Nominal Group Technique 12,115

cost 72

do-nothing (no change) 6, 263, 566

depreciation 72, 302

202 essential 202

fundamental equation of 71

feasible 10

as source of estimates 89

independent 480, 568

Accounting fundamentals 71

investment 248

Accuracy of cost estimates 88

mutually exclusive 247, 482, 568

Actual dollars, definition 354

repeatability assumption 252, 274, 396,

486

Additive weighting method 595

Adjusted (cost) basis 304

rules for comparing by rate of return

methods

After-tax cash flow analyses

260

general procedure for 327

Analysis (study) period 202, 252

impact of inflation on 362

infinite 252, 397

sensitivity analysis in 448

as a source of uncertainty 426

spreadsheet example 332

After-tax cash flow table 329
After-tax comparisons
equations for ATCF 328
illustration using different methods 331341 After-tax economic life 400
Allocation of capital 548, 567
Alternative Depreciation System (ADS)

Annual percentage rate (APR) 169

Annual worth (AW) method 213, 254,
339 spreadsheet example 220, 257, 618
unequal lives 279, 283
Annuity 142 d
deferred 149
fixed and responsive (to inflation) 360

ANSWER TO SELECTED PROBLEMS

310, 311 Alternatives

comparison of 247, 270, 339, 387, 482

ordinary 149
Answers to problems 660

basic philosophy 248, 251

Arithmetic sequences

by benefit/cost ratio method 482

interest formulas for 158-159

by capitalized worth method 211, 259

modeling expenses 281

by equivalent worth methods 253 3

spreadsheet example 617

by rate of return methods 260, 283

Assets 71, 327 Assumed certainty 424

with different useful lives 274

Attributes 582

contingent 572

selection of 584

cost 249, 339

weighting of 595

coterminated assumption 252, 274, 396

decision (selection) 14

Augmentation versus replacement 383,

410 Avoidable difference 136

return to 129, 201

Balance sheet 71, 74

sources 550

Base alternative 248, 262 Base time

period 354 Basis (cost) 304, 316
Before-tax cash flow 328 Before-tax MARK
322
Benefit-cost ratio method 486, 473 :)
after-the-fact justifications 487
case study 489
conventional ratio 474-476 criticisms of
487

155

Capital allocation 548-550, 567

Capital asset pricing model (CAPM) 553555 Capital financing 548-550 Capital
gains and losses 327
Capital investment, fundamental purpose
of 248 Capital rationing 203, 480 Capital
recovery
depreciation plus interest 214 factor
147
Capital sources 550

distributional considerations 488

borrowed (debt) capital 129, 551

independent projects /alternatives 480

modified ratio 474-476 mutually

equity capital 129, 552

ANSWER TO SELECTED PROBLEMS

exclusive alternatives 482

omitting qualitative (no monetary)
information 489
spreadsheet example 485
Beta (volatility) 554
Bibliography 657
Bond rate 209
Bond valuation 209
Book cost (value) 29, 304 Borrowed
capital 129, 551 Borrowing-lending
terminology 139 Brainstorming 12, 115
Breakeven analysis 38, 43, 339, 427, 615
Breakeven chart 38, 43, 341, 431, 433,
616 Breakeven life 230, 428 Breakeven
point 38, 43, 341, 427
Budget constraints 568, 572
Budget (semi-detailed) estimates 88
Burden 28, 74

leasing 564-567
Capitalized cost 211
Capitalized worth (CW) method 211, 259,
397 Case (comprehensive) studies
after taxes 338
automobile financing 575
benefit-cost ratio 489
cost estimating 116
decision tree analysis 535
depreciation 317
economic equivalence 179
incremental analysis 285
inflation 371, 410
no monetary attributes 60, 587
present economy 60
process yield 231
replacement 410
sensitivity 450

C
Capacity utilization 428, 452
Capital 128
allocation 548-550, 567
average weighted cost of 322, 552, 555
borrowed 129, 322, 551

Cash flow(s)
after-tax 328
approach 13
developing 79, 81, 116
diagrams 133-135

budgets 568, 572, 564

estimating 79, 81, 91

debt 129, 322, 551

tables 133, 136

equity 129, 322, 552

Certainty (assumed) 424

financing 548-550

Challenger (new asset) 383

investment 33, 248

156

economic life 386, 390, 400

ANSWER TO SELECTED PROBLEMS

157

Charts
breakeven 38, 43, 341, 431, 433, 616
sensitivity 435, 438, 440, 442
Class life 305, 310, 311, 314
Combinations, mutually exclusive 568
Combined (market) interest rate 354
Common errors

nonrecurring 28

in inflation analyses 357

operation and maintenance 33

in rate of return analyses 265

opportunity 30, 129, 385

in replacement analyses 412, 414

overhead 28, 74

Common unit of measurement 7

prime 76

Communication 562

recurring 28

Comparison of alternatives 247, 339, 387,

482 Compensatory models 586, 591

standard 29

Competition 36
Compound interest 131, 168
Compounding

sunk 29, 385

target 110
terminology 24
variable 24

continuous, with discrete cash flows

172, discrete 149

Cost accounting 72

more often than cash flows 170

Cost alternatives 249, 339

more often than yearly 170

Cost and revenue structure 82, 87

Conditional probability 532

Cost-capacity factor 97

Constant dollars 354

Cost basis 304, 316

Constant percentage method 307

Cost-driven design optimization 45

Consumer Price Index 93, 353

Cost driver 45, 96

Consumer goods (services) 34

Cost estimating (see Estimating)

Contingency 426

Cost estimating relationships (CERs) 96

development of 102

Contingent projects 572 Continuous

compounding

Cost indexes (see Indexes)

ANSWER TO SELECTED PROBLEMS

discrete cash flows, interest formulas

for 172-174

Cost of capital 550-551, 555

debt 552

Continuous random variables 501

equity 555

evaluation of projects with 512

Conventional B-C ratio 474-476
Correlation coefficient 107
Cost(s) 24

158

weighted average 322, 552, 555

Cost recovery percentages 312
Cost terminology 24

basis 304, 316

Coterminated assumption 252, 274,

396,397 Criteria 7, 14

book 29, 304

Current dollars 354

capital recovery 213-214

Cycle time 55

cash 29
concepts 24

depreciation 302 direct 28, 74

Data sources for cost estimating 89

disposal 34

Debt capital 129, 551

driver 45, 96

Decision analysis, multiple objectives in

583 Decision reversal (sensitivity to) 444

fixed 24
general elements of 74 incremental 25,
57 index (see Indexes) indirect 28, 74

Decision trees
case study 535

investment 32

definition 526

life cycle 31, 87, 585 marginal 387,

390, 393, 401

deterministic example 526

noncash 29, 302

general principles of diagramming 528

with random outcomes 529
Declining balance method 307
Defender (old asset) 383
economic life of 387, 393, 400
investment value 385, 402

Deferred annuities 150

Disjunctive resolution 587

Deferred investments 394, 413

Disposal cost 34

Definitive (detailed) estimates 88

Disposal price (of bonds) 209 Dollars

ANSWER TO SELECTED PROBLEMS

Deflation (general price) 353, 354, 355

Delphi method 90

actual 354
constant 354

Dependence between pairs of projects 561

Depreciable life. 305

current 354

Depreciable property 302, 387

real 354

Depreciation 72, 302

accounting for 72, 302
Alternative Depreciation System (ADS)
310, 311
basis 304, 316
class lives (MACRS) 305, 310, 311, 314
classical methods 303, 305

159

Dominance 586
Do-nothing alternative 6, 263, 566

E
Economic breakeven analysis 38, 43, 339,
427,615

comprehensive example 317

Economic decision studies, importance of

4 Economic equivalence (case study) 179

constant percentage method 307

Economic life 384, 386-387

declining percentage method 307

General Depreciation System (GDS)
311 half-year convention 312
historical methods 303, 305

after-tax 400
of challenger 386, 390
of defender 387, 393
spreadsheet example 392

illustration in after-tax analysis 330

MACRS method 310

Economic value 583

MACRS rates 313

Economic value added (EVA) 341

Matheson formula 307

Economy

present worth of 320, 330

engineering (definition) 4

property class 313, 315

present (studies) 50

recapture 327, 332

recovery period 304, 311

Effective income tax rate 322, 325

corporate rates 324

recovery rate 305, 313

Effective interest rate 168, 172

straight-line method 305

Elective projects 202

switchover option 308

End-of-period cash flows 134, 202, 611

Engineering (definition of) 4

units-of-production method 308

useful life guidelines 311

Engineering design

ANSWER TO SELECTED PROBLEMS

Design (see Engineering design)

cost-driven optimization 45

Design to cost 110

definition 9

Design to price 108

for the environment 45, 285

Developing cash flows 79

process 9

Developing cost estimating relationships

(CERs) 102

target costing 110

Dimensionality 585
Direct costs 28, 74

value engineering 114

Engineering economic analysis procedure
8 Engineering economy

Disbenefits 467, 477

definition 4

Discounted cash flow rate of return

method 217 Discounted payback period
230

and the design process 8 7

Discrete compounding 149

origins of 5

Discrete random variables 500

principles of 5-8

evaluation of projects with 503

160

interest rate to use 357

Equity capital 71, 129, 552

Equivalence 132,152

case study 179

Exponential model (for estimating) 97

terminology 139

External of return (ERR) method 227, 245246, 269

Equivalent uniform annual cost (EUAC)

214,384 Equivalent worth methods 205216, 253
ERR method (see External rate of
return) Essential projects 202, 250
Esteem value 583
Estimates
accounting data (as a source) 89

advantages over IRR method 228

F
Face value of bonds 209
Factor technique (for
estimating) 94 Feasible
alternatives 10
Financing

accuracy versus costs 89

with debt capital 551

needed for typical g engineering

economy study 87

with equity capital 552

installment 222

ANSWER TO SELECTED PROBLEMS

types of 88
ways to accomplish 90
Estimating,
by analogy 90
baseline 84
bottom-up approach 80, 108, 116
case study 116
cash flows 79, 116
comparison technique
90
components of an integrated approach
82
data (sources)
89, 93 Delphi
method 90 factor
technique 94
indexes 91
learning and improvement 98

161

through leasing 564-567

Fixed costs 24
Future worth (FW) method 212,
254 spreadsheet example 220,
257, 618
G
Gains and losses on capital 327
General Depreciation System (GDS) 311
General economic environment 34
General price inflation rate 353, 354
calculation of 353
Geometric sequences 143,163
modeling price changes 372
spreadsheet example 166, 617
Gradients

parametric 96

arithmetic (uniform) sequences 157, 28i,

617 geometric sequences 163, 372, 617

power-sizing technique 97

spreadsheet example 617

product costs
108 purpose 88

Graphical sensitivity displays 431, 433,

435, 438, 440,442

ratio technique
91 relationships
96, 103 selling
price 110

Graphical breakeven point solutions 38, 43,

341, 431,433

spreadsheet example 100, 105, 109, 113

target costing 110
techniques (models)
88, 91
top-down approach 80, 110
unit technique 93

Green engineering 45, 285

Gross income 323
H
Hurdle rate 203, 231
Hurwicz procedure 593

ANSWER TO SELECTED PROBLEMS

EUAC method (see Equivalent uniform

annual cost)

Exchange rates
366 Excise taxes
322

Imputed market value 284

162

Improvement (see Learning)

Expected value 501

Expected value of perfect information
(EVPI) 531, 536
Expenses (see Costs)
Experience curve (see Learning curve)
In-lieu payments 468 Income statement
71, 74 Income taxes 301, 321
cash flow for 328
corporate federal tax rates 324
effect of, on average cost of capital
322, 555 effective rate 325
gains and losses 327 inflation's effect
on 362 replacement studies 387, 400,
410
Inconsistent ranking problem 260
Incremental analysis of alternatives 50
benefit-cost method 483 case study
285

compound 131,168
definition 129
factor relationships 149
origins of 130 real rate 354
simple 130
Interest factors
for continuous compounding 174
for discrete compounding 150
relationships 148
Interest rate
constant 206

rate of return methods 262

effective 168

spreadsheet example 268, 485

inflation-free 354

unequal lives 277, 283

nominal 168

Incremental cash flow 249, 260, 263

public projects 472

fundamental role 261 Incremental cost 25,

57 Incremental revenue 25

real versus combined, definition 354

Independent investment opportunities

/projects
480,568

risk adjusted 445

risk-free 554 time varying 167
Interest symbols 150,174

ANSWER TO SELECTED PROBLEMS

Indexes 91

Interest tables

Indirect costs 28, 74

continuous compounding 650

Inflation (and price changes) 353

discrete compounding 631

analogy to foreign exchange rates 366

case studies 371, 410 common errors
357

163

Internal rate of return 217, 260, 332, 450,

570 assumption 227
common errors 265

fixed and responsive annuities 360

difficulties 227 modified 227

general price (inflation) 353, 354

multiple rates of return problem 227,

244 selecting trial rates 219

impact of general price inflation on

after-tax studies 362
interest rate to use in engineering
economy studies 357
modeling with geometric cash flow
sequences 372

spreadsheet example 220, 221, 268,

618
Internal Revenue Service (IRS) 304
Interpolation 219, 223
Investment alternatives 248

relationship between actual dollars and

real dollars 355

Investment classification 560

relationship between combined and real

Investment balance diagram 217, 223

interest rates 358

Investment cost 32

in replacement studies 410

IRR method (see Internal rate of return)

spreadsheet example 364, 413, 414

terminology and basic concepts 354
Installment financing 222

J
Joint probability 533-534

Intangible property 303

Interest

combined (nominal) rate 354

Labor costs 75
Learning

and improvement 98

Minimum attractive rate of return (MARK)

202-204, 557-559

ANSWER TO SELECTED PROBLEMS

curve 98
Leasing of assets 339, 383, 410, 564-567
true lease v. conditional sale 565
Lexicography 587 Liabilities 71
tax 326
Life
of challenger 386, 390
of defender 387, 393
depreciable 305
economic 384, 386, 387,400
guideline periods 311
ownership 384 physical 384
useful 251, 274, 305, 384
Life cycle 31, 87
phases of 31-32
relationship to design 32
Life cycle cost 31, 412, 585
Linear interpolation 219, 223
Linear programming and capital allocation
571-575

164

after-tax 322
definition 202
guidelines for 202-203
opportunity cost principle 203, 558 risk
adjusted 445, 557
Modified ACRS 303,310
flow diagram 315
Modified B-C ratio 474-476
Modified internal rate of return (MIRK) 227
Monopoly 36
Monte Carlo simulation 518
spreadsheet example 522-524 Mortgages
(see Installment financing) Multiple
alternatives
independent 480, 569
mutually exclusive 247, 482, 569
Multiple attributes, methods for considering
582, 586,591
Multiple internal rates of return 227,244
Multiple objectives 7, 13, 582
Multiple-purpose projects 468

Liquidity 229, 233

Mutually exclusive alternatives 247, 482,

569 analysis of (see Comparison of
alternatives) ranking errors 260, 482

Lives, different, repeatability v.

coterminated assumptions 252, 274,
396-397

Mutually exclusive combinations 569

Loan repayment schemes 132

Luxuries 35

N
Necessities 35

M
Make versus purchase (studies) 57

Net cash flow 13, 134, 248

Net operating profit after taxes 341, 552

ANSWER TO SELECTED PROBLEMS

Manufacturing example of cost estimating

109
Manufacturing progress function (see
Learning curve)
Marginal cost 387, 390, 393, 401
Marginal probability 533-534
Market premium 555
Market value 304,385-386

Net salvage value 305 Net worth 71

Nominal Group Technique 12,115
Nominal interest rate 168
No compensatory models 586
No dimensional scaling 591
No monetary factors (attributes) 7, 13,
415, 489,
582

Material selection 52

case study 60, 587

Mathematical expectation 501

choice of 584

Matheson formula 307

selecting a measurement scale 585

Maximin and maximax rules 593-594

Nonrecurring costs 28

Measures of economic worth 34

Normal probability distribution 513, 515

Notation 626

Method of feasible ranges 586

Method of least squares 104

Price index (see Indexes)

Objectives

Prime costs 76

multiple 7,13, 582

setting minimum return 202-204
OBRA 321 Obsolescence 383 )
Operation and maintenance costs 33
Opportunity cost 30, 129
in determination of interest rates 202204, 472, 558
in replacement analysis 385 Optimisticpessimistic estimates 441
Order of magnitude estimates 88

Principles of engineering economy 5-8

Probabilistic risk analysis 499
an application perspective 512
Probabilities
conditional 532
joint 533-534
marginal 533-534
revised 532
Probability functions 500
Probability tree diagram 510

165

ANSWER TO SELECTED PROBLEMS

166

Ordinal ranking 589

Problem solving, efficiency 10

Ordinary annuity 149

Producer goods (services) 34

Outsider viewpoint 385-386, 387, 402

Producer Price Index 93, 353

Overhead costs 28, 74-75

Profit 38-42, 53, 55, 71, 80, 110, 129,

341, 540, 549 Profit and loss statement
71

Overhead rate 75
Ownership life 385

Profitability 202, 217, 229, 233, 262, 321,

327, 343, 570
index 217

P
Parametric cost estimating 96
Par value (of bonds) 209
Payback (payout) period method
discounted 230
simple 229

Project (investment) portfolio 553, 571

Project selection 559-563
Projects
dependence between pairs of 561
elective 202 essential 202

Perfect competition 36

independent (comparisons among)

480,

Perpetual series of uniform payments 211

Personal property 303

569-571

Perspective (viewpoint)
in engineering economy studies 6, 84,
137
life cycle 45

multiple-purpose 468
public 465
public versus privately owned 466
Property

outsider 385

depreciable 302, 387

public projects 467

intangible 303 personal 303

systems 10
Physical life 384

real 303

Planning horizon 202, 252

Portfolios 553, 571
Post evaluation (of results) 8, 14, 72, 563
Postmortem project review 563
Postponement (of investment) 395
Power-sizing technique (for estimating) 97

tangible 303
Property class 304, 310-311
Property taxes 321 Public projects 465
additional benefits v. reduced costs
477,479
benefit-cost ratio 473

ANSWER TO SELECTED PROBLEMS

Present economy studies 50

case study 60
Present worth (PW) method 205, 254, 331
spreadsheet example 220, 257, 332,
436, 618
Price 34

benefits 467 costs 467

difficulties inherent in 470
disbenefits 467, 477
interest rate 472

167