Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Question
Chapter 2, Problem 9P
a.
To determine
The
b.
To determine
The opportunity cost when investment on a common stock is made.
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Assume that your rich aunt has given you $25,000 in a gift. You have come up with three ways to spend (or invest) the capital. First, you want (but do not need) a new car to make your home and social life brighter. Second, you can invest the money in the common stock of a high-tech company. Price is expected to grow by 20 percent a year, but this option is very risky. Third, you can put the money into a three-year deposit certificate with a local bank and receive 6 percent annually. The third alternative carries little risk.
a. If you plan to buy the new vehicle, what is the cost of that option for the opportunity? Explain what you think in your own words.b. If you invest in the popular high-tech stock, what is the cost of that option for the opportunity? Explain what you think in your own words.
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In early 2008, you purchased and remodeled a 120-room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that the recession would kill the demand for conventions. Now, you forecast that you will be able to sell only 10,000 room-nights, which cost $70 per room per night to service. You spent $25.00 million on the hotel in 2008, and your cost of capital is 10%. The current going price to sell the hotel is $20 million.If the estimated demand is 10,000 room-nights, the break-even price is $per room, per night. (Hint: Remember that the cost of capital is the opportunity cost, or true cost, of making an investment.)
A certain investment opportunity available to you will double your money in the next six years. You have $2,000.00 to invest, how much will you have in 12 years-assuming the interest rate is guaranteed for the time period?
Chapter 2 Solutions
Engineering Economy
Ch. 2 - An experimental composite engine block for an...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10P
Ch. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - Prob. 17PCh. 2 - Prob. 18PCh. 2 - Prob. 19PCh. 2 - Prob. 20PCh. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - Prob. 30PCh. 2 - Prob. 31PCh. 2 - An automobile dealership offers to fill the four...Ch. 2 - Prob. 33PCh. 2 - Prob. 34PCh. 2 - Prob. 35PCh. 2 - Prob. 36PCh. 2 - Prob. 37PCh. 2 - Prob. 38PCh. 2 - Prob. 39PCh. 2 - Prob. 40PCh. 2 - Prob. 41PCh. 2 - Prob. 42PCh. 2 - Prob. 43PCh. 2 - Prob. 44PCh. 2 - A hot water leak in one of the faucets of your...Ch. 2 - Prob. 46PCh. 2 - Prob. 47PCh. 2 - Prob. 48SECh. 2 - Prob. 49SECh. 2 - Prob. 50CSCh. 2 - Prob. 51CSCh. 2 - What is the optimal number of units that should be...Ch. 2 - Prob. 53FECh. 2 - Prob. 54FECh. 2 - Prob. 55FECh. 2 - Prob. 56FECh. 2 - Prob. 57FECh. 2 - Prob. 58FE
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