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Civl 395 Homework 4 Spring 2022 CH 2 - Problems 18, 23, 34 CH 3 - Problems 22, 35, 36, 45, 48 Due Thursday 2/10/22

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CIVL 395 Homework 4 Spring 2022

Ch 2 – Problems 18, 23, 34


Ch 3 – Problems 22, 35, 36, 45, 48
Due Thursday 2/10/22

Chapter 2

2- Quatro Hermanas, Inc. is investigating implementing some new production machinery as part of its
18 operations. Three alternatives have been identified, and they have the following fixed and variable
costs:

Alternativ
Annual Fixed Costs Annual Variable Costs per Unit
e

A $70,000 $14.00

B 115,000 7.00

C 150,000 4.00

Determine the ranges of production (units produced per year) over which each alternative would be
recommended up to 30,000 units per year.

2-23 A firm believes a product’s sales volume (S) depends on its unit selling price (P) as S = $100 − P.
The production cost (C) is $1000 + 10S.

(a)Graph the sales volume (S) from 0 to 100 on the x axis, total cost and total income from $0 to $2500
on the y axis, C = $1000 + 10S, and plot the curve of total income. Mark the breakeven points on the
graph.

(b)Determine the breakeven point (lowest sales volume at which total sales income just equals total
production cost).

(c)Determine the sales volume (S) at which the firm’s profit is a maximum.

2- A pump has failed in a facility that will be completely replaced in 3 years. A brass pump costing
34 $6000 installed will last 3 years. However, a used stainless steel pump that should last 3 more years
has been sitting in the maintenance shop for a year. The pump cost $13,000 new. The accountants
say the pump is worth $7000 now. The maintenance supervisor says that it will cost an extra $500 to
reconfigure the pump for the new use and that he could sell it used (as is) for $4000.
(a)What is the book cost of the stainless steel pump?
(b)What is the opportunity cost of the stainless steel pump?
(c)How much cheaper or more expensive would it be to use the stainless steel pump rather than a
new brass pump?

Chapter 3

3-22 Alvin’s Uncle Arnold gave him $16,000 from selling the old family farm. Alvin wants to
start college and have $12,000 available to buy a used car when he graduates in 4 years. Alvin
earns 2% in his savings account. How much can he spend on a motorcycle now and still have
enough to grow to the $12,000 he needs when he graduates?

3- 35 An R&D lab will receive $250,000 when a proposed contract is signed, a $200,000
progress payment at the end of Year 1, and $400,000 when the work is completed at the end of
Year 2. What is the present worth of the contract at 15%?

3-36 An engineer invested $5000 in the stock market. For the first 6 years the average return was
9% annually, and then it averaged 3% for 4 years. How much is in the account after 10 years?

3-45 A student bought a $75 used guitar and agreed to pay for it with a single $80 payment at the
end of 3 months. What is the nominal annual interest rate? What is the effective interest rate?

3-48 Steelgrave Financing offers payday loans. The firm charges a $10 interest fee for a one-week
period on a $250 loan. What are the nominal and effective annual interest rates on this loan?
Contributed by Gillian Nicholls, Southeast Missouri State University

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