Solution Manual For Engineering Economy, 15th Edition

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ENGINEERINGECONOMYFIFTEENTH EDITIONSolutions ManualWILLIAM G. SULLIVANELIN M. WICKSC. PATRICK KOELLINGVirginia Polytechnic InstituteWicks and Associates, L.L.P.Virginia Polytechnic Instituteand State Universityand State University

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1Solutions to Chapter 1 ProblemsA Note To Instructors:Because of volatile energy prices in today's world, the instructor is encouraged to vary energyprices in affected problems (e.g. the price of a gallon of gasoline) plus and minus 50 percent and ask students todetermine whether this range of prices changes the recommendation in the problem. This should make for stimulating in-class discussion of the results.1-1Because each pound of CO2has a penalty of $0.20,Savings = (15 gallons$0.10/gallon)(8 lb)($0.20/lb) = $1.34If Stan can drive his car for less than $1.34/8 = $0.1675 per mile, he should make the trip. The cost ofgasoline only for the trip is (8 miles25 miles/gallon)($3.00/gallon) = $0.96, but other costs of driving,suchas insurance, maintenance, and depreciation, may also influence Stan’s decision. What is the costof an accident, should Stan have one during his weekly trip to purchase less expensive gasoline? If Stanmakes the trip weekly for a year, should this influence his decision?

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21-2Other information needed includes total number of miles driven each year and the gas consumption(miles per gallon) of the average delivery vehicle.

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31-3Some non-monetary factors (attributes) that might be important are:SafetyReliability (from the viewpoint of user service)Quality in terms of consumer expectationsAesthetics (how it looks, and so on)Patent considerations

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41-4At first glance, Tyler’s options seem to be: (1) immediately pay $803 to the owner of the other person’scar or (2) submit a claim to the insurance company.If Tyler keeps his Nissan for five more years (anassumption), the cost of option 2 is ($803 − $500) + $60 × 5 years = $603.This amount is less thanpaying $803 out-of-pocket, so Tyler probably should have submitted an insurance claim.But if hispremiums go higher and higher each subsequent year (another assumption!), Tyler ought to pursueoption 1.What we don’t know in this problem is the age and condition of the other person’s car. If we assume it’sa clunker, another option for Tyler is to offer to buy the other person’s car and fix it himself and then sellit over the internet. Or Tyler could donate the unrepaired (or repaired) car to his favorite charity.

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51-5(a)15,000 miles per year / 25 mpg = 600 gallons per year of E20Savings = 600 gallons per year ($3.00−$2.55) = $270 per year(b)Gasoline saved = 0.20 (600 gal/yr)(1,000,000 people) = 120 million gallons per year

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61-6The environmental impact on the villagers is unknown, but their spring and summer crop yields could beaffected by more than normal snow melt. Let's assume this cost is $10 million. Then the total cost of theplan is $6 million (180 million rubles) plus $10 million and the plan is no longer cost-effective when thisadditional externality is considered.

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71-7There are numerous other options including a nuclear plant, a 100% gas-fired plant and a windmill bankat a nearby mountain pass. Also, solar farms are becoming more cost competitive nowadays.

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81-8Increased lifetime earnings of a college graduate = $1,200,000(0.75) = $900,000

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91-9Strategy 1: Change oil every 3,000 miles. Cost = (15,000/3,000)($30) = $150 / yearStrategy 2: Change oil every 5,000 miles. Cost = (15,000/5,000)($30) = $90 / yearSavings = $60 per year

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101-10In six months you will spend approximately $360 on bottled water. The cost of the filter is $50, so youwill save $310 every four months. This amounts to $620 over a year, and you don't need to bother re-cycling all those plastic bottles!An up-front expenditure of $50 can indeed save a lot of money eachyear.

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111-11110 gallons x $3.00 per gallon = $330 saved over 55,000 miles of driving. This comes down to $330 /55,000 = $0.006 per mile driven. So Brand A saves 6/10 of a penny for each mile driven.

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121-12(a)Problem:To find the least expensive method for setting up capacityto produce drill bits.(b)Assumptions: The revenue per unit will be the same for either machine; startup costs arenegligible; breakdowns are not frequent;previous employee’s data are correct; drillbits are manufactured the same way regardless of the alternative chosen; in-housetechnicians can modify the old machine so its life span will match that of the newmachine; 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-housetechnicians);(2) Buy a new machine for $450,000;(3) Get McDonald Inc. tomodify the machine; (4) Outsource the work to another company.(d)Criterion:Least cost in dollars for the anticipated production runs, given that quality anddelivery 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 causeenvironmentalhazards;fixingtheoldmachinein-housecouldprovetobeunsatisfactory; 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; jobsecurity for in-house work; image to outsidecompanies 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 costsallow an acceptable profit to be made?

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131-13(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'sProblem 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 thesummer.(2)Quit partying and devote her extra time and limited funds to the task of graduating in thespring 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)Workforherbrotherandtakeoverthecompanytoenablehimtostartanotherentrepreneurial venture.(2)Work part-time for her brother and continue to take courses over the next couple of years inorder to graduate.(3)Work for her brother for one or two semesters to build up funds for her senior year. Whileinterviewing, bring up the real life working experience and request a higher starting salary.

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141-14A Typical Discussion/Solution:(a)One problem involves how to satisfy the hunger of three students -- assume a piping hot deliciouspizza will satisfy this need.(Another problem is to learn enough about Engineering Economy topass --or better yet earn an “A” or a “B”-- on the final examination and ace the course. Maybe apizzawillsolvethisproblemtoo?)Let’suse“hungersatisfactionwithapizza”astheproblem/need definition.(b)Principle 1 - Develop the Alternativesi)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 alternativesPrinciple 2 - Focus on the DifferencesDifference in delivery time could be an issue.A perceived difference in the quality of theingredients used to make the pizza could be another factor to consider.We’ll concentrate ourattention on cost differences in part (c) to follow.Principle 3 - Use a Consistent ViewpointConsider your problem from the perspective of three customers wanting to get a good deal. Does itmake sense to buy a pizza having a crust that your dog enjoys, or ordering a pizza from a shop thatemploys only college students?Use the customer’s point of view in this situation rather than thatof the owner of the pizza shop or the driver of the delivery vehicle.Principle 4 - Use a Common Unit of MeasureMost people use “dollars” as one of the most important measures for examining differencesbetween alternatives. In deciding which pizza to order, we’ll use a cost-based metric in part (c).Principle 5 - Consider All Relevant CriteriaFactors other than cost may affect the decision about which pizza to order.For example, varietyand quality of toppings and delivery time may be extremely important to your choice. Dynamics ofgroup decision making may also introduce various “political” considerations into the final selection(can you name a couple?)Principle 6 - Make Uncertainty ExplicitThe variability in quality of the pizza, its delivery time and even its price should be carefullyexamined in making your selection. (Advertised prices are often valid under special conditions --call first to check on this!)Principle 7 - Revisit Your DecisionAfter you’ve consumed your pizza and returned to studying for the final exam, were you pleasedwith the taste of the toppings? On the downside, was the crust like cardboard? You’ll keep thesesorts of things in mind (good and bad) when you order your next pizza!

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