a).
To choose:An option from the given options.
a).
Answer to Problem 59P
The driver will choose the option (1) return the car with full tank.
Explanation of Solution
The driver has three options to pick given that local price is $3.5 per gallon and the car has a mileage of 25 miles per gallon and the capacity of the tank is 16 gallons and Stopping at filling station takes 20 minutes and the worth of time is $15 per hour.
The following options are as follows:
(1) return the car with full gas tank,
(2) return it without filling it and pay $5.75 per gallon or
(3) accept a fixed price of $60 for gas.
When the driver drives 150 miles.
The gas consumed and cost to filling the emptied tank is calculated as follows:
Therefore, the driver will choose to return the car with a full tank as the cost of filling the emptied tank is less than the fixed cost of $60.
b).
To choose:An option from the given options.
b).
Answer to Problem 59P
The driver will choose option (1) return car with full tank.
Explanation of Solution
The driver has three options to pick given that local price is $3.5 per gallon and the car has a mileage of 25 miles per gallon and the capacity of the tank is 16 gallons and Stopping at filling station takes 20 minutes and the worth of time is $15 per hour.
The following options are as follows:
(1) return the car with full gas tank,
(2) return it without filling it and pay $5.75 per gallon or
(3) accept a fixed price of $60 for gas.
When the driver drives 300 miles.
The gas consumed and cost to filling the emptied tank is calculated as follows:
Therefore, the driver will choose to return the car with a full tank as the cost of filling the emptied tank is less than the fixed cost of $60.
c).
To choose:An option from the given options.
c).
Answer to Problem 59P
The driver will choose option (3) accept a fixed price of $60 for gas.
Explanation of Solution
The driver has three options to pick given that local price is $3.5 per gallon and the car has a mileage of 25 miles per gallon and the capacity of the tank is 16 gallons and Stopping at filling station takes 20 minutes and the worth of time is $15 per hour.
The following options are as follows:
(1) return the car with full gas tank,
(2) return it without filling it and pay $5.75 per gallon or
(3) accept a fixed price of $60 for gas.
When the driver drives 450 miles.
The gas consumed and cost to filling the emptied tank is calculated as follows:
Therefore, the driver will choose to accept a fixed cost of $60 as this is less than the cost of filling the tank.
d).
To choose:An option from the given options.
d).
Explanation of Solution
The driver has three options to pick given that local price is $3.5 per gallon and the car has a mileage of 25 miles per gallon and the capacity of the tank is 16 gallons and Stopping at filling station takes 20 minutes and the worth of time is $15 per hour.
The following options are as follows:
(1) return the car with full gas tank,
(2) return it without filling it and pay $5.75 per gallon or
(3) accept a fixed price of $60 for gas.
When stopping at filling station takes 20 minutes and the worth of time is $15 per hour how it will affect the decision of driver.
The cost of stopping at the gas station is calculated as follows:
Part (a) When the driver drives 150 miles.
The gas consumed and cost to filling the emptied tank is calculated as follows:
Even after considering the cost of stopping at gas station driver will choose option (1) return with a full tank.
Part (b) When the driver drives 300 miles.
The gas consumed and cost to filling the emptied tank is calculated as follows:
Even after considering the cost of stopping at gas station driver will choose option (1) return with a full tank.
Part (c)When the driver drives 450 miles.
The gas consumed and cost to filling the emptied tank is calculated as follows:
Therefore, the driver will choose to accept a fixed cost of $60 as this is less than the cost of filling the tank.
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Chapter 1 Solutions
ENGR.ECONOMIC ANALYSIS
- Bill’s father read that each year a car’s value declines by 10%. He also read that a new car’s value declines by 12% as it is driven off the dealer’s lot. Maintenance costs and the costs of “car problems” are only $200 per year during the 2-year warranty period. Then they jump to $750 per year, with an annual increase of $500 per year.Bill’s dad wants to keep his annual cost of car ownership low. The car he prefers cost $30,000 new, and he uses an interest rate of 8%. For this car, the new vehicle warranty is transferrable.(a) If he buys the car new, what is the minimum cost life? What is the minimum EUAC?(b) If he buys the car after it is 2 years old, what is the minimum cost life? What is the minimum EUAC?(c) If he buys the car after it is 4 years old, what is the minimum cost life? What is the minimum EUAC?(d) If he buys the car after it is 6 years old, what is the minimum cost life? What is the minimum EUAC?(e) What strategy do you recommend? Why? Please show each step and formula,…arrow_forwardO’Leary Engineering Corp. has been depreciating a $50,000 machine for the last 3 years. The asset was just sold for 60% of its first cost. What is the size of the recaptured depreciation or loss at disposal using the following depreciation methods?(a) Straight-line with N = 8 and S = 2000(b) Double declining balance with N = 8(c) 40% bonus depreciation with the balance using 7-year MACRS Please show every step and formula, don't use excel. The answer should be (a) $2000 loss, (b) $8000 deo recap, (c) $14257 dep recap, thank you.arrow_forwardThe cost of garbage pickup in Green Gulch is $4,500,000 for Year 1. The population is increasing at 6%, the nominal cost per ton is increasing at 5%, and the general inflation rate is estimated at 4%.(a) Estimate the cost in Year 4 in Year-1 dollars and in nominal dollars.(b) Reference a data source for trends in volume of garbage per person. How does including this change your answer? Please show every step and formula, don't use excel. The answer should be $6.20M, $5.2M, thank you.arrow_forward
- Please show each step with formulas, don't use Excel. The answer should be 4 years, $16,861.arrow_forwardAssume general inflation is 2.5% per year. What is the price tag in 8 years for an item that has an inflation rate of 4.5% that costs $700 today? Please show every step and formula, don't use excel. The answer should be $1203, thank you.arrow_forwardThe average cost of a certain model car was $22,000 ten years ago. This year the average cost is $35,000.(a) Calculate the average monthly inflation rate (fm) for this model.(b) Given the monthly rate fm, what is the effective annual rate, f, of inflation for this model?(c) Estimate what these will sell for 10 years from now, expressed in today’s dollars. Please show all steps and formulas, don't use excel. The answer should be (a) 0.3877%, (b) 4.753%, (c) $55,682arrow_forward
- A mining corporation purchased $120,000 of production machinery and depreciated it using 40% bonus depreciation with the balance using 5-year MACRS depreciation, a 5-year depreciable life, and zero salvage value. The corporation is a profitable one that has a 22% combined incremental tax rate. At the end of 5 years the mining company changed its method of operation and sold the production machinery for $40,000. During the 5 years the machinery was used, it reduced mine operation costs by $32,000 a year before taxes. If the company MARR is 12% after taxes, was the investment in the machinery a satisfactory one? Please show every step with formulas and don't use excel. The answer should be 14.8%, thank you.arrow_forwardAn engineer is working on the layout of a new research and experimentation facility. Two operators will be required. If, however, an additional $100,000 of instrumentation and remote controls were added, the plant could be run by a single operator. The total before-tax cost of each plant operator is projected at $35,000 per year. The instrumentation and controls will be depreciated by means of a modified accelerated cost recovery system (MACRS). If this corporation (22% combined corporate tax rate) invests in the additional instrumentation and controls. how long will it take for the after-tax benefits to equal the $100,000 cost? In other words, what is the after-tax payback period? Please write out every step and formula, don't use excel. The answer should be 3.08 years, thank you.arrow_forwardThe effective combined tax rate in a firm is 28%. An outlay of $2 million for certain new assets is under consideration. Over the next 9 years, these assets will be responsible for annual receipts of $650,000 and annual disbursements (other than for income tax) of $225,000. After this time, they will be used only for stand-by purposes with no future excess of receipts over disbursements. (a) What is the prospective rate of return before income taxes? (b)What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 9 years? (c) What is the prospective rate of return after taxes if it is assumed that these assets must be written off for tax purposes over the next 20 years, using straight-line depreciation? Please write out each step with formulas and don't use Excel. The answers should be (a)15.4% (b) 11.5% (c) 10.0%, thank youarrow_forward
- - 1. (Maximum length one page) Consider an infectious disease with the following characteristics: Individuals can exist in three states, susceptible, infected, and recovered. Once recovered, an individual cannot be re-infected and remains immune for life. The transmission rate, t, is 1/20. The recovery rate, k, is 1/5. Each person interacts randomly with others in the population and has contacts with 10 people each time period. There is no birth or death in the population. -Initially all people are susceptible. - No one dies from the disease and there is no treatment. a) Draw a compartmental model for this infectious disease.arrow_forwardConsider an obstetrician who can perform two types of deliveries: normal deliveries and cesarean deliveries. Each typeof delivery provides different levels of income for the physician, and the physician has some ability to induce patientsto opt for cesarean deliveries. The model is as follows:The physician’s utility is defined as:U = U(Y, I)where:• Y is the income from performing deliveries.• I is the total disutility from inducementThe income Y from deliveries depends on the type of delivery:Y = Yn · N + YC · Cwhere:• Yn is the income per normal delivery, Yn = 1, 000• YC is the income per cesarean delivery, Yc = 1, 500,• Initial number of births Binitial = 100,• Post-shock number of births Bshock = 90,• a(i) = 0.1 + 0.05i is the fraction of total births that are cesareans, which increases with inducement level i,• the physician sets the inducement level to i = 2.• N = B · (1 − a(i)) is the number of normal deliveries,• C = B · a(i) is the number of cesarean deliveriesDue to a…arrow_forwardConsider an obstetrician who can perform two types of deliveries: normal deliveries and cesarean deliveries. Each typeof delivery provides different levels of income for the physician, and the physician has some ability to induce patientsto opt for cesarean deliveries. The model is as follows:The physician’s utility is defined as:U = U(Y, I)where:• Y is the income from performing deliveries.• I is the total disutility from inducementThe income Y from deliveries depends on the type of delivery:Y = Yn · N + YC · Cwhere:• Yn is the income per normal delivery, Yn = 1, 000• YC is the income per cesarean delivery, Yc = 1, 500,• Initial number of births Binitial = 100,• Post-shock number of births Bshock = 90,• a(i) = 0.1 + 0.05i is the fraction of total births that are cesareans, which increases with inducement level i,• the physician sets the inducement level to i = 2.• N = B · (1 − a(i)) is the number of normal deliveries,• C = B · a(i) is the number of cesarean deliveriesDue to a…arrow_forward
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co