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Tutorial 4

The document provides instructions and 7 exercises for an engineering economy tutorial. The exercises involve calculating loan payments, bond investments, equivalent annuity values, cash flows, and uniform annual costs given interest rates and cash flows over multiple years.

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zhi yi lee
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69 views

Tutorial 4

The document provides instructions and 7 exercises for an engineering economy tutorial. The exercises involve calculating loan payments, bond investments, equivalent annuity values, cash flows, and uniform annual costs given interest rates and cash flows over multiple years.

Uploaded by

zhi yi lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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FACULTY OF ENGINEERING TECHNOLOGY, UTHM

SUBJECT : ENGINEERING ECONOMY (BNP 30402)


CHAPTER : CHAPTER 4 (PART 2) – TUTORIAL 4
INSTRUCTIONS:
1. Answer all the questions clearly with a pen. Write down the number of exercises
clearly before answering the question.
2. On the first page of your answer sheet, write down your name, matric number, section
AND insert your matric card on top of the page.
3. Scan your documents clearly using a scanner app that can be downloaded from your
mobile Appstore. Taking pictures of your documents using your mobile camera and
convert them into pdf formats are NOT ALLOWED.
4. Please name your file “MATRIC NO_TUTORIAL 4” in capital letters. E.g.,
AN12345_TUTORIAL 5.
5. All the best.

Exercise 1
A bank makes a loan to a company to purchase a new building for office space. The loan in
for RM500,000 with an annual interest rate of 5%. It is a 20-year loan. Calculate the monthly
payment to the bank to pay off this loan.
(6 marks)

Exercise 2
A person with money to invest wants to purchase a fixed rate bond that will allow him to
receive RM500 annually in interest payments over the next 10 years, with the bond paid off
at the end of tenth year. The current rate for bonds is 4%. How much money does the person
have to invest in this bond for this to happen?
(3 marks)
FACULTY OF ENGINEERING TECHNOLOGY, UTHM

Exercise 3
What is the equivalent annuity value of an investment that returns RM500 at the end of the
first year, then returns RM50 more each year thereafter for a total of 10 years, if the annual
interest rate is 5%?
(5 marks)

Exercise 4
How much money must a company initially invest to provide for ten annual withdrawals that
starts at RM50,000 and decrease by RM5,000 every year, if the investment pays 7% per year?
(5 marks)

Exercise 5
Major overhaul expenses of RM5,000 each are anticipated for a large piece of earthmoving
equipment. The expenses will occur at end of year 4 and will continue every three years
thereafter up to and including year 13. The interest rate is 12% per year.
i. Draw a cash-flow diagram of this scenario.
(5 marks)

ii. What is the present equivalent of the overhaul expenses at time 0?


(5 marks)

Exercise 6
You are currently investing your money in a bank account which has a nominal annual rate of
8% compounded annually. If you invest RM2,000 today, how many years will it take for your
account to grow RM10,000?
(3 marks)
FACULTY OF ENGINEERING TECHNOLOGY, UTHM

Exercise 7
Maintenance cost for a small bridge with an expected 50-year life are estimated to be
RM1,000 each year for the first 5 years, followed by a RM10,000 expenditure in the year 15
and a RM10,000 expenditure in the year 30. If i=10% per year, what is the equivalent uniform
annual cost over the entire 50-year period?
(8 marks)

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