20. PROFIT OVER THE USEFUL LIFE OF A MACHINE Suppose that when it is t
years old, and a particular industrial machine generates revenue at the rate R0 (t) = 6025 8t2
dollars per year and that operating and servicing costs accumulate at the rate C 0 (t) = 4681 + 13t2
dollars per year.
a. How many years pass before the profitability of the machine begins to decline?
b. Compute the net profit generated by the machine over its useful lifetime.
c. Sketch the revenue rate curve y = R0 (t) and the cost rate curve y = C 0 (t) and shade the region
whose area represents the net profit computed in part (b).
Solution(e.g.5.5.1)
a. To find the machines useful life T , solve
C 0 (t) = R0 (t)
4681 + 13t2 = 6025 8t3
t2 = 64
t = 8
Thus, the machine has a useful life of T = 8 years.
b. Since profit P (t) is given by P (t) = R(t) C(t), we have P 0 (t) = R0 (t) C 0 (t), and the net
profit generated by the machine over its useful life 0 t 8 is
Z
N P = P (8) P (0) =
Z
0
P (t)dt =
c.
6200
R(t)
6000
5800
5600
5400
5200
5000
C(t)
4800
4600
21. PROFIT OVER THE USEFUL LIFE OF A MACHINE Answer the questions in
Problem 20 for a machine that generates revenue at the rate R0 (t) = 7250 18t2 dollars per year
and for which costs accumulate at the rate C 0 (t) = 3620 + 12t2 dollars per year.
Solution(e.g.5.5.1)
a. To find the machines useful life T , solve
C 0 (t) = R0 (t)
3620 + 12t2 = 7250 18t2
t2 = 121
t = 11
Thus, the machine has a useful life of T = 11 years.
b. Since profit P (t) is given by P (t) = R(t) C(t), we have P 0 (t) = R0 (t) C 0 (t), and the net
profit generated by the machine over its useful life 0 t 8 is
Z
N P = P (8) P (0) =
11
11
11
Z
0
P (t)dt =
11
= 3630t 10t3
= $ 26620
c.
7500
7000
R(t)
6500
6000
5500
5000
4500
C(t)
4000
3500
10
11
12
FV = e100.1
10
1000 e0.1t dt
e0.1t 10
= 1000e
0.1 0
= 10000(e 1)
$17182.82
31. INVESTMENT ANALYSIS Adam is trying to choose between two investment opportunities. The first will cost $ 50,000 and is expected to produce income at the continuous rate of
$15,000 per year. The second will cost $30,000 and is expected to produce income at the rate
of $9,000 per year. If the prevailing rate of interest stays constant at 6% per year compounded
continuously, which investment is better over the next 5 years?
Solution(e.g.5.5.3)
The net value of each investment over the 5 years time period is the present value of the investment
less its initial cost. For each investment, we have r = 0.06 and T = 5.
For the first investment:
Z
PV-cost =
15000e0.06t dt 50000
Z
= 15000
= 15000
e0.06t dt 50000
e0.06t 5
50000
0.06 0
$14795
For the second investment:
Z
PV-cost =
9000e0.06t dt 30000
= 9000
e0.06t dt 30000
e0.06t 5
= 9000
30000
0.06 0
$8877
Thus, the net value of the first investment is $ 14795 and of the second is $ 8877. The second is
better.
33. CONSUMERS SURPLUS A manufacturer of machinery parts determines that q units of
a particular piece will be sole when the price is p = 110 q dollars per unit. The total cost of
producing those q units is C(q) dollars, where
C(q) = q 3 25q 2 + 2q + 3000
a. How much profit is derived from the sale of the q units at p dollars per unit? [Hint: First find
the revenue R = pq; then profit = revenue cost.]
3
CS =
18
18
1
=
110q q 2 1656
2
0
= 1818 1656 = $162
35. DEPLETION OF ENERGY RESOURCES Oil is being pumped from an oil field t years
after its opening at the rate of P 0 (t) = 1.3e0.04t billion barrels per year. The field has a reserve of
20 billion barrels, and the price of oil holds steady at $ 56 per barrel.
a. Find P (t), the amount of oil pumped from the field at time t. How much oil is pumped from
the field during the first 3 years of its operation? The next 3 years?
b. For how many years T does the field operate before it runs dry?
c. If the prevailing annual interest rate stays fixed at 5% compounded continuously, what is the
present value of the continuous income stream V = 56P 0 (t) over the period of operation of the field
0 t T?
d. If the owner of the oil field decides to sell on the first day of operation, do you think that the
present value determined in part(c) would be a fair asking price? Explain your reasoning.
Solution
a. The amount of oil pumped from the field P (t) is founded by integrating P 0 (t) with respect to t.
Z
1.3e0.04t dt
P (t) =
= 32.5e0.04t + C
Since P = 0 when t = 0, that is
0 = 32.5e0.040 + C
C = 32.5
4
so
P (t) = 32.5e0.04t 32.5
Since
P (3) P (0) = 32.5e0.043 32.5 4.14
P (6) P (3) = (32.5e0.046 32.5) (32.5e0.043 32.5) 4.67
there is 4.14 billion barrels oil pumped during the first 3 years, and there is 4.67 billion barrels oil
pumped during the next 3 years.
b. To find T , solve the equation
P (T ) = 20
32.5e0.04T 32.5 = 20
ln(53.5)/(32.5)
12
T =
0.04
So the field operates before it runs dry for 12 years.
c. The present value is given by the definite integral
Z
PV =
56P 0 (t)e0.05t dt =
72.8e0.01t dt
72.8 0.01t T
=
e
0.01
0
$ 823.22
P (3) = P0 S(3) +
R(3)S(3 t)dt
Z
= 500000 e0.0113 +
0.033
= 500000 e
486130
800 e0.011(3t) dt
800 0.011(3t) 3
+
e
0.011
0
VOLUME OF A SOLID OF REVOLUTION In problems 9 and 11, find the volume of the
solid of revolution formed by rotating the region R about the x axis.
9. R is the region under the curve y = x2 + 2 from x = 1 tox = 3.
Solution(e.g.5.6.6)
The solid has volume
Z
(x + 2) dx =
3
1
4
= ( x5 + x3 + 4x)
5
3
1
1532
320.86 cubic units
=
15
Solution(e.g.5.6.6)
The solid has volume
Z
( 4 x2 )2 dx =
(4 x2 )dx
2
1
= (4x x3 )
3
2
32
=
33.51 cubic units
3
17.GROUP MEMBERSHIP A national consumers association has compiled statistics suggesting that the fraction of its members who are still active t months after joining is given by
f (t) = e0.2t . A new local chapter has 200 charter members and expects to attract new members
at the rate of 10 per month. How many members can the chapter expect to have at the end of 8
months?
Solution(e.g.5.6.1)
At the end of 8 months, there will be
Z
= 200e0.28 +
10e0.2(8t) dt
10 0.2(8t) 8
= 200e1.6 +
e
0.2
0
80 members