Assignment: Engineering Economy

1. Sara decided to invest KD4000 now for 5 years to increase her income. She has two options. The first option is to invest her money in a bank that pays 8% per year compounded interest and the second option is to invest in a fund that pays 8% simple interest. Where should Sara invest her money and why?

2. Ahmad is planning to buy a car 10 years from now, so he decided to invest KD5,750 in saving account that pays 6% annually. How much would he earn at the end of 10 years? Draw the cash flow diagram.

3. How many years will it take an investment to double itself if interest is 8% compounded annually? How many years will it take an investment to triple itself if interest is 11 % compounded annually?

4. Suppose that you have invested KD5000 now in a project for 7 years. At the end of year 7, you earned KD12,000. What was the value of interest rate of the project? Draw the cash flow diagram

5. For the following cash flow diagram, if you earn a 5% interest, find the value of F?

6. Consider a series of equal payments of $3,250 per year that was invested for 15 years. If the investment earned 7% annually, find:

a. Present value(P)
b. Future value (F)

7. A Family won a prize of $100,000 in America's Funniest Home Videos. The family decided to invest the whole amount in a project that promised to yield a yearly income for 5 years with an interest of 8% per year. What is the amount of the promised yearly income?

8. A company that manufactures sand tiles expects to purchase a new production-line equipment in 3 years. If the new units will cost $350,000, how much should the company set aside each year, if the account earns 10% per year?