Problem Set 9

EMA 4714 - Materials Selection and Failure Analysis

Due Monday, April 7, 2008– 8:30 am

Dieter Exercise 13.4

A father desires to establish a fund for his new child’s college education. He estimates that the current cost of a year of college education is $12,000 and that the cost will escalate at an annual rate of 4 percent.

[a] What amount is needed on the child’s eighteenth, nineteenth, twentieth and twenty-first birthdays to provide for a 4-year college education?

[b] If a rich aunt gives $5000 on the day the child is born, how much must be set aside at 10 percent on each of the first through seventeenth birthdays to build up the college fund?

Dieter Exercise 13.6

Machine A costs $8500 and has annual operating costs of $4500. Machine B costs $7000 and has an annual operating cost of $4800. Each machine has an economic life of 10 years. If the minimum rate of return is 10 percent, compare the advantages of machine A by [a] the present worth method, [b] the annual cost method and [c] the rate of return on investment.

Dieter Exercise 13.15

At what mileage is it cheaper to provide your field representatives with cars than to pay them $0.32 per mile for the use of their own cars? The costs of furnishing a car are as follows:

Purchase price $9000

Life 4 years

Salvage $1500

Storage $150 per year

Maintenance $0.08 per mile

[a] assume i = 10 percent

[b] assume i = 16 percent