ENGINEERING ECONOMY - EXAMPLE 7.3 : There are 2 alternatives of investment. Choice 1 : A trader offers you an investment opportunity where your investment of A$15000 presently will be A$18000 after 4 years. Choice 2 : A bank offers you 5 % annual return for your initial investment of A$15000. Question a : What is the equivalent bank payment after 4 years? Question b : By using the concept of equivalence in engineering economy, which is the better choice, between 1 and 2, that will be more profitable after 4 years?
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Answer Posted / kangchuentat
ENGINEERING ECONOMY - ANSWER 7.3 : (a) For Choice 2, A$15000 x 1.05 = A$15750 after 1 year, A$15750 x 1.05 = A$16537.50 after 2 years, A$16537.50 x 1.05 = A$17364.375 after 3 years, A$17364.375 x 1.05 = A$18232.6 after 4 years. (b) The gain of Choice 2 > Choice 1 with A$18232.6 > A$18000, then Choice 2 is preferred. The answer is given by Kang Chuen Tat; PO Box 6263, Dandenong, Victoria VIC 3175, Australia; SMS +61405421706; chuentat@hotmail.com; http://kangchuentat.wordpress.com.
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