Canadian International College (CIC)

Course Name :Engineering Economics. Course Code : IEN 351

Suprvisor: Prof. Magdy Abdelaziz Zahw
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Assignment # 3CH3: Equivalent and Ind.- Specify cash flow Variable
interest rates

Susan borrows EGP 1000 from a bank at t=0 at 10% simple interest for 3 years. She pays
the total interest due for the 3-year period at t=0 and thus receives EGP 700 f : 0. If she
pays back EGP 1000 at t :3, Susan is, in effect, paying an interest rate of X%
compounded annually. Solve for X.

What single deposit of size EGP X into a fund paying 10% compounded annually is
required at t=0 in order to make withdrawals of EGP 700 each at t = 4,5, 6, and 7 and a
single withdrawal of EGP 1000 at t : 10?

Given the cash flow profiles shown below, determine the value of X such that the two,
Cash flow profiles are equivalent at 20% compounded annually.

Consider the net cash flows (NCF) and salvage values (SV) for each of Alternatives 1
and 2 having lives of 3 and 5 years, respectively.
 Assume each alternative can be renewed indefinitely with the same NCF and SV profiles.

a) If a least common multiple of lives approach is to be used, specify the planning horizon and
the complete set of cash flows for each alternative.
(b) Repeat part (a) using the shortest life among alternatives.
(c) Repeat part (a) using the longest life among alternatives.
(d) Repeat part (a) using a planning horizon of 2 years.
(e) Repeat part (a) using a planning horizon of 4 years.

Three investment proposals have been selected for further evaluation. Proposals A and C
are mutually exclusive; Proposal A is contingent on Proposal B; and Proposal B is
contingent on Proposal C.A budget limitation of EGP 200,000 exists. The net cash flow
profiles for the three investment proposals are given below for the 4-year planning
horizon.

a. Specify the alternatives to be considered.

b. Clearly show the net cash flow profile associated with each alternative.

For the following uniform cash flows of EGP 200 that lasts for 9 years, determine:

A single sum at t=0 that is equivalent to the cash flows.

A single sum at t=9 that is equivalent to the cash flows.

An equivalent constant interest rate over the periods (0=9)