ISE 402-1 (Fall '02) - Mercer University



EGR 312-3 (Spring '20)

Fundamentals of Engineering Economy

Excel Lab

Exercise 1 – In Excel, create the following table comparing simple and compound interest.

|Rate of Return |8.00% | | | | |

| | | | | | |

|  |  |Simple Interest |Compound Interest |

|  |  |  |Cumulative |  |Cumulative |

|End of year |  |Interest Earned |equivalent |Interest Earned |equivalent |

|(EOY) |Cash Flow |during year |EOY cash flow |during year |EOY cash flow |

|0 |$0 |  |$0 |  |$0 |

|1 |$200,000 |$0 |$200,000 |$0 |$200,000 |

|2 |$200,000 |$16,000 |$416,000 |$16,000 |$416,000 |

|3 |$300,000 |$32,000 |$748,000 |$33,280 |$749,280 |

|4 |$300,000 |$56,000 |$1,104,000 |$59,942 |$1,109,222 |

|Total | |$104,000 | |$109,222 | |

Make extensive use of formulas to create table, and try to do so without referring to formulas indicated in the text. Explain why use of formulas is important when doing sensitivity analysis. (If having trouble, download Excel file).

a) What will be the interest earned if the ROR is only 6%? 4%? 2%?

b) Assume again an 8% ROR, what is the interest earned if EOY 3 cash flow increases to $400,000? What is the interest if EOY 4 also increases to $400,000?

Exercise 2 – Using Excel, create a table, similar to Exercise 1, to help answer the

following:

If you were to invest $2000 today in a CD paying 8% per year, how much would the CD be worth at the end of year four?

a) Assuming simple interest

b) Assuming compound interest

Exercise 3 – Using Excel, create a table, similar to Exercise 1, to help answer the

following:

How much would you need to invest today in a CD paying 5% if you needed $2000 four years from today?

a) Assuming simple interest

b) Assuming compound interest

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