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fundamentals engineering economics

Questions and Answers of Fundamentals Engineering Economics

2. Income taxes are calculated based on gross income less certain allowable deductions. They are also assessed on gains resulting from the disposal of property. What is a 10 word or less defi nition
1. What are the various taxes paid in the USA by corporations? Which of those has the most signifi cant impact upon economic analyses?
10. Consider the following data for 2010 from an after tax cash fl ow analysis.What is the after tax cash fl ow for 2010?Before Tax Cash Flow 5 $23,000 Loan Principal Payment 5 $3,203 Loan Interest
9. Consider the following data for 2011 from an after tax cash fl ow analysis.What is the taxable income for 2011?Before Tax Cash Flow 5 $23,000 Loan Principal Payment 5 $3,203 Loan Interest Payment
8. Consider the following data for 2012 from an after-tax cash fl ow analysis.What is the loan interest payment for 2012?Before Tax Cash Flow 5 $20,000 Loan Principal Payment 5 $4,018 Depreciation
7. Consider the following data extracted from an after-tax cash fl ow calculation.Before Tax Cash Flow 5 $22,500 Loan Principal Payment 5 $5,926 Loan Interest Payment 5 $2,400 MACRS Depreciation
6. Consider the following data extracted from an after-tax cash fl ow calculation.Before-Tax Cash Flow 5 22,500 Loan Principal Payment 5 7,434 Loan Interest Payment 5 892 MACRS Depreciation Deduction
5. When considering the use of debt capital to fi nance a project, the upper limit for the interest rate on an attractive loan can be determined by which of the following?a. MARRb. MARR * (1 1 tax
4. When a business calculates taxable income from gross income, which of the following is true?a. depreciation, interest, and principal are all subtractedb. depreciation and interest are subtracted,
3. The correctly calculated taxes due on a corporate taxable income of$13,000,000 are closest to which of the following? (Table 9.1 or similar is required for this question.)a. $3,400,000c.
2. The average tax rate on a corporate income of $87,000 is closest to which of the following? (Table 9.1 or similar is required for this question.)a. 15.0%c. 25.0%b. 20.5%d. 34.0%
1. The marginal tax rate on a corporate income of $87,000 is closest to which of the following? (Table 9.1 or similar is required for this question.)a. 15.0%c. 25.0%b. 20.5%d. 34.0%
57. Ultra-clean special handling devices used in the fi lling process for the manufacture of baby food are placed into use at a cost of $850,000. These devices are expected to be useful for 4 years
56. A building with business offi ces, a reception area, and numerous small diagnosis rooms is placed in service by a group of three orthopedic surgeons on January 4 for $650,000.a. What is the
55. Video Solution Equipment for manufacturing vegetable oil products is purchased from Alfa. Items such as oil expellers, fi lter presses, and a steam generator are purchased for $1.2 million. These
54. A residential rental apartment complex is placed in service by a calendar year taxpayer on February 27 for $530,000. The apartments are kept for slightly more than 6 years and sold on March 6.a.
53. A permanent steel building used for the overhaul of dewatering systems(engines, pumps, and wellpoints) is placed in service on July 10 by a calendar year taxpayer for $240,000. It is sold almost
52. Now that you are making the big bucks, your spouse has decided to venture into the rental property business. He purchases a rental house and after making some improvements it has a basis of
51. A nonresidential business building is placed in service by a calendar year taxpayer on March 3 for $300,000.a. What is the MACRS-GDS property class?b. Calculate the depreciation deduction for
50. Suppose the IRS has decided to institute a new MACRS-GDS property class of 4 years. It will follow the usual depreciation conventions, determined in the same way as 3, 5, 7, and 10-year property.
49. Suppose the IRS has decided to institute a new MACRS-GDS property class of only 2 years. It will follow the usual depreciation conventions, determined in the same way as 3, 5, 7, and 10-year
48. Pretend that you have misplaced your MACRS tables. Develop the tables for a property class of 5 years assuming 200% DB depreciation switching to straight line; half-year convention; salvage value
47. Pretend that you have misplaced your MACRS tables. Develop the tables for a property class of 3 years assuming 200% DB depreciation switching to straight line; half-year convention; salvage value
46. A tractor for over-the-road hauling is purchased for $90,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for$4,000. Calculate the depreciation
45. GO Tutorial A gas-powered electric generator is purchased by a public utility as part of an expansion program. It is expected to be useful, with proper maintenance, for an estimated 30 years. The
44. Video Solution A surface mount PCB placement/soldering line for the manufacture of electronic components is to be installed for $1.6 million with an expected life of 6 years. Determine the
43. A manufacturing system for fabricated metal products is purchased in the middle of the fi scal year for $800,000. The estimated salvage value after 10 years is $130,000.a. What is the MACRS-GDS
42. A hydroprocessing reactor, an asset used in petroleum refi ning, is placed into service at a cost of $2.7 million. It is thought to have a useful life, with turnarounds and proper maintenance, of
41. A mold for manufacturing powdered metal fi rearm parts is purchased by Remington at the beginning of the fi scal year for $120,000. The estimated salvage value after 8 years is $10,000. Calculate
40. A portable concrete test instrument used in construction for evaluating and profi ling concrete surfaces (MACRS-GDS 5-year property class) is purchased in December by a calendar-year taxpayer for
39. GO Tutorial Englehard purchases a slurry-based separator for the mining of clay that costs $700,000 and has an estimated useful life of 10 years, a MACRS-GDS property class of 7 years, and an
38. Material handling equipment used in the manufacture of sugar is purchased and installed for $250,000. It is placed in service in the middle of the tax year and removed from service 5.5 years
37. GO Tutorial A high-precision programmable router for shaping furniture components is purchased by Henredon for $190,000. It is expected to last 12 years. Calculate the depreciation deduction and
36. Milliken uses a digitally controlled “dyer” for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. It is purchased on April 1 for $350,000.
35. A virtual mold apparatus for producing dental crowns permits an infi nite number of shapes to be custom constructed based upon mold imprints taken by dentists. It costs $28,500 and is purchased
34. Bell’s Amusements purchased an expensive ride for their theme and amusement park situated within a city-owned Expo Center. Bell’s had a multi-year contract with Expo Center. The ride cost
32. For each of the following assets, state both the MACRS-GDS property class, if applicable, and the specifi c depreciation method to be used (e.g., 15-year property, 150 percent DBSLH).a. A tractor
31. For each of the following assets, state both the MACRS-GDS property class, if applicable, and the specifi c depreciation method to be used (e.g., 15-year property, 150 percent DBSLH).a. A
30. For each of the following assets, state both the MACRS-GDS property class, if applicable, and the specifi c depreciation method to be used (e.g., 15-year property, 150 percent DBSLH).a. A cell
29. For each of the following assets, state both the MACRS-GDS property class, if applicable, and the specifi c depreciation method to be used (e.g., 15-year property, 150 percent DBSLH).a. A
28. A rental house (MACRS-GDS 27.5-year property) is placed in service by a calendar-year taxpayer during July for $70,000. Determine the depreciation deduction and resulting book value for each
27. A rental apartment complex (MACRS-GDS 27.5-year property) is placed in service by a calendar-year taxpayer on January 4 for $200,000. If the apartments are kept for 5 years and 2 months (sold on
26. A building used for the overhaul of dewatering systems (MACRS-GDS 39-year property) is placed in service on October 10 by a calendar-year taxpayer for$140,000. It is sold almost 4 years later on
25. A business building (MACRS-GDS 39-year property) is placed in service by a calendar-year taxpayer on January 4 for $300,000. Calculate the depreciation deduction for years 1 and 10, assuming the
24. Electric utility transmission and distribution equipment (MACRS-GDS 20-year property) is placed in service at a cost of $300,000. It is expected to last 30 years with a salvage value of $15,000.
23. Repeat the previous problem (problem 22) if the material-handling equipment is removed just after the tax year, again using MACRS-GDS allowances.
22. Material-handling equipment used in the manufacture of grain products(MACRS-GDS 10-year property) is purchased and installed for $180,000.It is placed in service in the middle of the tax year. If
21. A digitally controlled plane for manufacturing furniture (MACRS-GDS 7-year property) is purchased on April 1 by a calendar-year taxpayer for$66,000. It is expected to last 12 years and have a
20. A panel truck (MACRS-GDS 5-year property) is purchased for $17,000. The truck is expected to be of use to the company for 6 years, after which it will be sold for $2,500. Calculate the
19. A mold for manufacturing medical supplies (MACRS-GDS 5-year property)is purchased at the beginning of the fi scal year for $30,000. The estimated salvage value after 10 years is $3,000. Calculate
18. Which of the following statements are TRUE?a. MACRS-GDS uses a half-year convention, whereas MACRS-ADS does not.b. The half-year convention has the effect of depreciating over n – 1 full years
17. Which of the following statements are FALSE?a. MACRS is the only depreciation method approved by the IRS for computing income-tax liability and it is also the most commonly used method in the
16. A fi le server and peripherals are purchased in December by a calendar-year taxpayer for $8,000. The server will be used for 6 years and be worth $200 at that time. Calculate the depreciation
15. A digitally controlled plane for manufacturing furniture is purchased on April 1 by a calendar-year taxpayer for $66,000. It is expected to last 12 years and have a salvage value of $5,000.
14. WindPower Inc designs and commissions the manufacture of a wind powered inverter-based constant voltage generator for research and experimentation with low-rated, highly variable, wind fi elds as
13. GO Tutorial A tractor for over-the-road hauling is purchased for $90,000.It is expected to be of use to the company for 6 years, after which it will be salvaged for $4,000. Calculate the
12. Video Solution A surface mount PCB placement/soldering line is to be installed for $1.6 million. It will have a salvage value of $100,000 after 5 years.Determine the depreciation deduction and
11. A small truck is purchased for $17,000. The truck is expected to be of use to the company for 6 years, after which it will be sold for $3,500.a. Use straight-line depreciation.b. Use declining
10. A land grant university has upgraded its Course Management System(CMS), integrating the system throughout all of its main campus and branch campuses around the state. It has purchased a set of 15
9. Video Solution A high-precision programmable router for shaping furniture components is purchased by Henredon for $190,000. It is expected to last 12 years and have a salvage value of $5,000.
8. For each of the following assets, state whether the asset is tangible/intangible property, personal/real property, and depreciable/nondepreciable property.a. A computer used for personal e-mail,
7. For each of the following assets, state whether the asset is tangible/intangible property, personal/real property, and depreciable/nondepreciable property.a. A tractor (part of tractor-trailer rig
6. For each of the following assets, state whether the asset is tangible/intangible property, personal/real property, and depreciable/nondepreciable property.a. A melt-indexer used in a company
5. For each of the following assets, state whether the asset is tangible/intangible property, personal/real property, and depreciable/nondepreciable property.a. A cell phone tower.b. A plot of land
4. Which of the following statements are TRUE?a. The reason for including a treatment of depreciation in this book is to allow you to develop a reasonably accurate report to the owners of a business
3. SteelTubes had sales of $300 million this year. Expenses were $250 million.Aside from these fi gures, the company also invested in new mills for carbon steel tubing, complete with peripheral
2. Taxes are paid each year on some measure of fi nancial gain. We typically think of fi nancial gain as “cash infl ows minus cash outfl ows,” and yet simply subtracting outfl ows due to capital
1. Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real
11. Which of the following is (are) required to calculate MACRS-GDS depreciation deductions?I. Property Class III. First Cost II. Salvage Value IV. Annual Maintenance Costsa. I and III onlyc. I, II,
10. An x-ray machine at a dental offi ce is MACRS 5-year property. The x-ray machine costs $6,000 and has an expected useful life of 8 years. The salvage value at the end of 8 years is expected to be
9. A lumber company purchases and installs a wood chipper for $200,000.The chipper is classifi ed as MACRS 7-year property. The chipper’s useful life is 10 years. The estimated salvage value at the
8. The depreciation allowance for a $100,000 MACRS-GDS asset was$8,550 after its third year. What was the depreciation allowance after its second year?a. $8,550c. $18,000b. $9,500d. Cannot be
7. Production equipment used in the bottling of soft drinks (MACRS-GDS, 10 year property) is purchased and installed for $630,000. What is the depreciation deduction in the 4th year under
6. MACRS-GDS deductions are a combination of which other methods of depreciation?a. Sum of Years Digits and Straight Lineb. Sum of Years Digits and Declining Balancec. Double Declining Balance and
5. The depreciation deduction for year 11 of a 15-year property with a 20-year class life is $4,000. If the salvage value of the asset is estimated to be $5,000 and MACRS-GDS is used to calculate the
4. The depreciation deduction for year 11 of an asset with a 20-year useful life is $4,000. If the salvage value of the asset was estimated to be zero and straight line depreciation was used to
3. Which of the following is not true about depreciation?a. Depreciation is not a cash fl owb. To be depreciable, an asset must have a life longer than one yearc. A 5-year property will generate a
2. A lumber company purchases and installs a wood chipper for $200,000.The chipper is classifi ed as MACRS 7-year property. The chipper’s useful life is 10 years. The estimated salvage value at the
1. Which of the following is not a requirement for an asset to be depreciable?a. It must have a life longer than 1 yearb. It must have a basis (initial purchase plus installation cost) greater
50. True or False: Consider an optimum replacement interval problem of the type considered in this chapter. If the ORI equals 5 years based on a salvage value equal to 0.60n, where n is the years
49. True or False: Consider an optimum replacement interval problem of the type considered in this chapter. If O&M costs are a geometric series, then decreasing the magnitude of the O&M cost in the
48. True or False: Consider an optimum replacement interval problem of the type considered in this chapter. If salvage value is negligible regardless of how long the equipment is used and O&M cost is
47. True or False: Consider an optimum replacement interval problem of the type considered in this chapter. If the annual O&M cost is an increasing gradient series“sitting on top of ” a base
46. True or False: Consider an optimum replacement interval problem of the type considered in this chapter. If O&M costs are a gradient annual series, the optimum replacement interval tends to
45. $500,000 is invested in equipment having a salvage value equal to$500,000(0.65n) after n years of use. O&M costs equal $125,000 the fi rst year and increase 10% per year. Based on a MARR of 10%,
44. $500,000 is invested in equipment having a salvage value equal to$500,000(0.75n) after n years of use. O&M costs equal $125,000 the fi rst year and increase 15% per year. Based on a MARR of 10%,
43. $500,000 is invested in equipment having a salvage value equal to$500,000(0.80n) after n years of use. O&M costs equal $125,000 the fi rst year and increase $15,000 per year. Based on a MARR of
42. $500,000 is invested in equipment having a negligible salvage value regardless of the number of years used. O&M costs equal $125,000 the fi rst year and increase $25,000 per year. Based on a MARR
41. $225,000 is invested in equipment having a salvage value equal to$200,000(0.75n) after n years of use. O&M costs equal $45,000 the fi rst year and increase $15,000 per year. Based on a MARR of
40. $250,000 is invested in equipment having a salvage value equal to$250,000(0.80n) after n years of use. O&M costs equal $60,000 the fi rst year and increase $8,000 per year. Based on a MARR of
39. $250,000 is invested in equipment having a negligible salvage value regardless of the number of years used. O&M costs equal $60,000 the fi rst year and increase $12,000 per year. Based on a MARR
38. $100,000 is invested in equipment having a negligible salvage value regardless of when the equipment is replaced. O&M costs equal $25,000 the fi rst year and increase 15% per year. Based on a
37. $100,000 is invested in equipment having a negligible salvage value regardless of when the equipment is replaced. O&M costs equal $25,000 the fi rst year and increase $5,000 per year. Based on a
36. Given an infi nite planning horizon, identical cash fl ow profi les for successive life cycles, and the following functional relationships for Ct, the operating and maintenance cost for the ith
35. A particular unit of production equipment has been used by a fi rm for a period of time suffi cient to establish very accurate estimates of its operating and maintenance costs. Replacements can
34. A fi rm is presently using a machine that has a market value of $11,000 to do a specialized production job. The requirement for this operation is expected to last only 6 years more, after which
33. GO Tutorial Milliken uses a digitally controlled “dyer” for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. It is purchased for $400,000.
32. A granary purchases a conveyor used in the manufacture of grain for transporting, fi lling, or emptying. It is purchased and installed for $70,000 with a market value for salvage purposes that
31. Polaris Industries wishes to purchase a multiple-use in-plant “road test”simulator that can be used for ATVs, motorcycles, and snow mobiles. It takes digital data from relatively short drives
30. Griffi n Dewatering purchases a wellpoint pump connected to a skid-mounted diesel engine for $14,000. Its market value for salvage purposes decrease by 30% each year. When installed on a

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