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Solution Manual for Engineering Economy, 17th Edition

Solution Manual for Engineering Economy, 17th Edition is the ultimate guide to solving textbook questions, offering easy-to-follow solutions.

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    Solutions to Chapter 1 Problems A Note To Instructors: Because of volatile energy prices in today's world, the instructor is encouraged to vary energy prices in affected problems (e.g. the price of a gallon of gasoline) plus and minus 50 percent and ask students to determine whether this range of prices changes the recommendation in the problem. This should make for stimulating in- class discussion of the results. 1-1 (a) 62 million tons per year × (0.05) = 3.1 million tons per year of reduced greenhouse gas $1.2 billion ÷ 3.1 million tons per year = $387.10 per ton (b) 3 billion tons per year × (0.03) = 90 million tons per year of reduced greenhouse gas $1.2 billion 3.1 million tons = $X billion 90 million tons X = $34.84 billion

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    1-2 The primary disadvantage is the installed cost of $8,000 (rather expensive!). A key advantage of synthetic turf is the annual savings due to lawn maintenance. This may be worth up to $1,000 per year when periodic lawn mowing, watering, and feeding are avoided. See what other monetized advantages and disadvantages members of your class can identify. Be creative!

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    1-3 Cost per Watt-hour = $0.75/1.5 Watt-hours = $0.50 per Watt-hour At a cost of $0.50 per Watt-hour, it would cost (1,000)($0.50 per Watt-hour) = $500 per kilo Watt-hour for power from a single AAA battery. This is 5,000 times more costly than energy from your local utility. No wonder we turn off our battery operated devices when we're not using them!

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    1-4 At first glance, Tyler’s options seem to be: (1) immediately pay $803 to the owner of the other person’s car or (2) submit a claim to the insurance company. If Tyler keeps his Nissan for five more years (an assumption), the cost of option 2 is $500 + ($60 × 2 payments/year) × 5 years = $1,100. This amount is more than paying $803 out-of-pocket, so Tyler appears to have made the most economical choice. What we don’t know in this problem is the age and condition of the other person’s car. If we assume it’s a clunker, another option for Tyler is to offer to buy the other person’s car and fix it himself and then sell it over the internet. Or Tyler could donate the unrepaired (or repaired) car to his favorite charity.

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    1-5 (a) 15,000 miles per year / 25 mpg = 600 gallons per year of E20 Savings = 600 gallons per year ($4.00 − $3.37) = $378 per year (b) Gasoline saved = 0.20 (600 gal/yr)(1,000,000 people) = 120 million gallons per year

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    1-6 An economic tradeoff is trading (exchanging) one economic outcome for another. Examples include (a) whether to ride the bus or drive your car to campus today, (b) whether to pack your lunch or eat at a local fast food restaurant and (c) whether to carry an umbrella (an inconvenience) or hope for no rain if you don’t take your umbrella.

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    1-7 The cost of a wood-framed home is 2,000 ft 2 × $120/ ft 2 = $240,000. The ICF home will cost $240,000 (1.10) = $264,000. So the cost difference to construct an ICF home is $24,000. The energy savings per month is 5% × $200 = $100 per month. Therefore, it will take 240 months to pay back the extra ICF construction cost through monthly energy savings.

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    1-8 Increased lifetime earnings of a college graduate = $1,200,000(0.75) = $900,000

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    1-9 Strategy 1: Change oil every 3,000 miles. Cost = (15,000/3,000)($30) = $150 / year Strategy 2: Change oil every 5,000 miles. Cost = (15,000/5,000)($30) = $90 / year Savings = $60 per year

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    1-10 In six months you will spend approximately (180)(2)($1.15) = $414 on bottled water. The cost of the filter is $60, so you will save $354 every six months. This amounts to $708 over a year, and you don't need to bother recycling all those plastic bottles! An up-front expenditure of $60 can indeed save a lot of money each year.

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    1-11 110 gallons x $4.00 per gallon = $440 saved over 55,000 miles of driving. This comes down to $440 / 55,000 = $0.008 per mile driven. So Brand A saves 8/10 of a penny for each mile driven.

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    1-12 (a) Problem: To find the least expensive method for setting up capacity to produce drill bits. (b) Assumptions: The revenue per unit will be the same for either machine; startup costs are negligible; breakdowns are not frequent; previous employee’s data are correct; drill bits are manufactured the same way regardless of the alternative chosen; in-house technicians can modify the old machine so its life span will match that of the new machine; neither machine has any resale value; there is no union to lobby for in- house work; etc. (c) Alternatives: (1) Modify the old machine for producing the new drill bit (using in-house technicians); (2) Buy a new machine for $450,000; (3) Get McDonald Inc. to modify the machine; (4) Outsource the work to another company. (d) Criterion: Least cost in dollars for the anticipated production runs, given that quality and delivery time are essentially unaffected (i.e., not compromised). (e) Risks: The old machine could be less reliable than a new one; the old machine could cause environmental hazards; fixing the old machine in-house could prove to be unsatisfactory; the old machine could be less safe than a new one; etc. (f) Non-monetary Considerations: Safety; environmental concerns; quality/reliability differences; “flexibility” of a new machine; job security for in-house work; image to outside companies by having a new technology (machine); etc. (g) Post Audit: Did either machine (or outsourcing) fail to deliver high quality product on time? Were maintenance costs of the machines acceptable? Did the total production costs allow an acceptable profit to be made?

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    1-13 (a) Problem A: Subject to time, grade point average and energy that Mary is willing/able to exert, Problem A might be "How can Mary survive the senior year and graduate during the coming year (earn a college degree)?" Problem B: Subject to knowledge of the job market, mobility and professional ambition, Mary's Problem B could be "How can I use my brother's entry-level job as a spring board into a higher- paying position with a career advancement opportunity (maybe no college degree)?" (b) Problem A - Some feasible solutions for Problem A would include: (1) Get a loan from her brother and take fewer courses per term, possibly graduating in the summer. (2) Quit partying and devote her extra time and limited funds to the task of graduating in the spring term (maybe Mary could get a scholarship to help with tuition, room and board). Problem B - Some feasible solutions for Problem B would include: (1) Work for her brother and take over the company to enable him to start another entrepreneurial venture. (2) Work part-time for her brother and continue to take courses over the next couple of years in order to graduate. (3) Work for her brother for one or two semesters to build up funds for her senior year. While interviewing, bring up the real life working experience and request a higher starting salary.

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    1-14 A Typical Discussion/Solution: (a) One problem involves how to satisfy the hunger of three students -- assume a piping hot delicious pizza will satisfy this need. (Another problem is to learn enough about Engineering Economy to pass -- or better yet earn an “A” or a “B” -- on the final examination and ace the course. Maybe a pizza will solve this problem too?) Let’s use “hunger satisfaction with a pizza” as the problem/need definition. (b) Principle 1 - Develop the Alternatives i) Alternative A is to order a pizza from “Pick - Up Sticks” ii) Alternative B is to order a pizza from “Fred’s” Other options probably exist but we’ll stick to these two alternatives Principle 2 - Focus on the Differences Difference in delivery time could be an issue. A perceived difference in the quality of the ingredients used to make the pizza could be another factor to consider. We’ll concentrate our attention on cost differences in part (c) to follow. Principle 3 - Use a Consistent Viewpoint Consider your problem from the perspective of three customers wanting to get a good deal. Does it make sense to buy a pizza having a crust that your dog enjoys, or ordering a pizza from a shop that employs only college students? Use the customer’s point of view in this situation rather than that of the owner of the pizza shop or the driver of the delivery vehicle. Principle 4 - Use a Common Unit of Measure Most people use “dollars” as one of the most important measures for examining differences between alternatives. In deciding which pizza to order, we’ll use a cost-based metric in part (c). Principle 5 - Consider All Relevant Criteria Factors other than cost may affect the decision about which pizza to order. For example, variety and quality of toppings and delivery time may be extremely important to your choice. Dynamics of group decision making may also introduce various “political” considerations into the final selection (can you name a couple?) Principle 6 - Make Uncertainty Explicit The variability in quality of the pizza, its delivery time and even its price should be carefully examined in making your selection. (Advertised prices are often valid under special conditions -- call first to check on this!) Principle 7 - Revisit Your Decision After you’ve consumed your pizza and returned to studying f or the final exam, were you pleased with the taste of the toppings? On the downside, was the crust like cardboard? You’ll keep these sorts of things in mind (good and bad) when you order your next pizza!

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    1-14 continued (c) Finally some numbers to crunch -- don’t forget t o list any key assumptions that underpin your analysis to minimize the cost per unit volume (Principles 1, 2, 3, 4 and 6 are integral to this comparison) Assumptions: (i) weight is directly proportional to volume (to avoid a “meringue” pi zza with lots of fluff but meager substance), (ii) you and your study companions will eat the entire pizza (avoids variable amounts of discarded leftovers and hence difficult-to-predict cost of cubic inch consumed) and (iii) data provided in the Example Problem are accurate (the numbers have been confirmed by phone calls). Analysis: Alternative A “Pick -Up- Sticks” Volume = 20  x 20  x 1 ¼  = 500 in. 3 Total Cost = $15 (1.05) + $1.50 = $17.25 Cost per in. 3 = $0.035 Alternative B “Fred’s” Volume = (3.1416)(10  ) 2 (1.75  ) = 550 in. 3 Total Cost = $17.25 (1.05) = $18.11 Cost per in. 3 = $0.033 Therefore, order the pizza from “Fred’s” to minimize total cost per cubic inch. (d) Typical other criteria you and your friends could consider are: (i) cost per square inch of pizza (select “Pick -Up- Sticks”), (ii) minimize total cost regardless of area or volume (select “Pick -Up- Sticks”), and (iii) “Fred’s” can deliver in 30 minutes but “Pick -Up- Sticks” cannot deliver for one hour because one of their ovens i s not working properly (select “Fred’s”).

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