B. Tech.
(Civil) VII Semester (2024)
C.E. 704 Engineering Economics & Construction Management
Use of F/P, P/F, P/A, A/P, A/F & F/A Factors
Tutorial No 1
Source: Engineering Economy by Leland T. Blank, Anthony J. Tarquin, McGraw-Hill Book Company, New Delhi.
1 A commercial real estate developer plans to borrow money to finance an upscale
mall in an exclusive area of the city. The developer plans to get a loan that will be
repaid with uniform payments of $400,000 over a 15-year period beginning in
year 2 and ending in year 15. How much will a bank be willing to loan at an
interest rate of 10% per year?
2 A small consulting firm entered into a fixed-price contract with a spec home
builder, resulting in a stable income of $320,000 per year in years 1 through 4. At
the end of that time, a mild recession slowed the development, so the parties
signed another contract for $150,000 per year for two more years. Determine the
present worth of the two contracts at an interest rate of 10% per year.
3 AutomationDirect, which makes 6-inch TFT color touch screen HMI panels, is
examining its cash flow requirements for the next 5 years. The company expects
to replace office machines and computer equipment at various times over the 5-
year planning period. Specifically, the company expects to spend $7000 two years
from now, $9000 four years from now, and $15,000 five years from now. What
is the annual worth over years 1 through 5 of the planned expenditures at an
interest rate of 10% per year? Also, write the single-cell spreadsheet function to
find A.
4 For the cash flows shown, find the value of x that makes the equivalent annual
worth in years 1 through 7 equal to $300 per year. Use an interest rate of 10% per
year
5 A construction management company is examining its cash flow requirements for
the next 7 years. The company expects to replace software and infield computing
equipment at various times over a 7-year planning period. Specifically, the
company expects to spend $6000 one year from now, $9000 three years from now,
and $10,000 each year in years 6 through 10. What is the future worth in year 10
of the planned expenditures, at an interest rate of 12% per year?
6 A manufacturer of industrial grade gas handling equipment wants to have
$500,000 in an equipment replacement contingency fund 10 years from now. If
the company plans to deposit a uniform amount of money each year beginning
now and continuing through year 10 (total of 11 deposits), what must be the size
of each deposit? Assume the account grows at a rate of 10% per year.
Source: Engineering Economy by Leland T. Blank, Anthony J. Tarquin, McGraw-Hill Book Company, New Delhi.
