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fundamentals engineering economics

Questions and Answers of Fundamentals Engineering Economics

14. Eddie’s Precision Machine Shop is insured for $700,000. The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage
13. Bailey, Inc. is considering buying a new gang punch that would allow them to produce circuit boards more effi ciently. The punch has a fi rst cost of$100,000 and a useful life of 15 years. At the
12. A project has been selected for implementation. The net cash fl ow (NCF)profi le associated with the project is shown below. MARR is 10%/yr.EOY NCF 0 2$70,000 1 $30,000 2 $30,000 3 $30,000 4
11. Home Innovation is evaluating a new product design. The estimated receipts and disbursements associated with the new product are shown below. MARR is 10%/yr.a. What is the internal rate of return
10. A design change being considered by Mayberry, Inc. will cost $6,000 and will result in an annual savings of $1,000 per year for the 6 year life of the project. A cost of $2,000 will be avoided at
9. DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6%/yr.a. What is the internal rate
8. Imagineering, Inc. is considering an investment in CAD-CAM compatible design software with the cash fl ow profi le shown in the table below. Imagineering’s MARR is 18%/yr.EOY Cash Flow (M$)0
7. Fabco, Inc. is considering the purchase of fl ow valves that will reduce annual operating costs by $10,000 per year for the next 12 years. Fabco’s MARR is 7%/yr. Using an internal rate of return
6. Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fi nes of $18,500 per year. An emission reduction fi lter will cost $75,000 and have an expected
5. Nu Things, Inc. is considering an investment in a business venture with the following anticipated cash fl ow results:Assume MARR is 20% per year. Based on an internal rate of return analysis (1)
4. An investment has the following cash fl ow profi le. For each value of MARR below, what is the minimum value of X such that the investment is attractive based on an internal rate of return measure
3. Draw a cash fl ow diagram of any investment that has both of the following properties:(1) the investment has a four-year life,(2) the investment has a 10%/yr internal rate of return
2. Match the measures of worth in the fi rst column with the appropriate unit of measure that results from the analysis.Measure of Worth Resulting Units of Measure(a) Annual Worth (1) dollars(b)
1. Match the measures of worth in the fi rst column with one (or more) of the analysis approaches that is (are) appropriate for that measure.Measure of Worth Analysis Approach(a) Annual Worth (1)
13. Consider the calculation of an external rate of return (ERR). The positive cash fl ows in the cash fl ow profi le are moved forward to t 5 n using what value of i in the (FZP,i,n–t) factors?a.
12. Consider the IRR and ERR measures of worth. If we defi ne a “root” to mean a value for the measure that results in PW 5 0, then which of the following statements is true?a. IRR can have
11. When conducting an incremental analysis, what step must always be taken immediately prior to beginning the pairwise comparisons?a. order the alternatives from highest to lowest initial
10. If the IRR of Alternative A is 18%, the IRR of Alternative B is 16%, and MARR is 12%, which of the following is correct?a. alternative B is preferred over alternative Ab. alternative A is
9. Using an incremental internal rate of return (IRR) analysis the decision to replace the “current best” by the “challenger” is based on what decision rule?a. the internal rate of return of
8. A company is considering two alternatives, one of which must be implemented.Of the two projects, A has the higher maintenance cost, but B has the higher investment cost. The appropriate (and
7. The IRR of this investment is located at which point?a. Ac. Db. Cd. E
6. If the interest rate at B is 20%, then which of the following best describes the analysis of the investment?a. the IRR of the investment is less than 20%b. the IRR of the investment is equal to
5. A snow cone machine at an ice cream shop costs $15,000. The machine is expected to generate profi ts of $2,500 each year of its 10 year useful life. At the end of the 10 years the machine will
4. What is the internal rate of return of the following cash fl ow diagram?a. 20.0%c. 17.5%b. 18.2%d. 15.0% $30 $31 0 1 2 3 $30 $15
3. An investment is guaranteed to have a unique value of IRR if which of the following is true?a. alternating positive and negative cash fl owsb. an initial negative cash fl ow followed by all
2. If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR, which of the following statements about the other measures of worth for this alternative must be
1. Consider the following cash fl ow diagram. What is the value of X if the internal rate of return is 15%?a. $246c. $281b. $255d. $290 X X 0 1 2 $400
56. Reconsider data from Problem 53 (Orpheum Productions lighting enhancement).Assume that any money not invested in the lighting enhancements will be placed in an interest-bearing account earning
55. An investor has $100,000 to invest in a business venture, or she can earn 10 percent/year with a $100,000 certifi cate of deposit for 4 years.Three possible business ventures have been identifi
54. Deep Seas Submarine must implement a new engine in its submarines to meet the needs of clients who desire quieter operation. Two designs, both technologically feasible, have been created, and
53. Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios.Each enhancement will increase revenues by attracting
52. RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an
51. The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no
50. Video Solution Alpha Electronics can purchase a needed service for $90 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of zero at
49. Two numerically controlled drill presses are being considered by the production department of Zunni’s Manufacturing; one must be selected. Comparison data is shown in the table below. MARR is
48. Yani has $12,000 for investment purposes. His bank has offered the following three choices.a. A special savings certifi cate that will pay $100 each month for 5 years and a lump sum payment at
47. Xanadu Mining is considering three mutually exclusive alternatives, as shown in the table below. MARR is 10 percent/year.a. What is the future worth of each alternative?b. Which alternative
46. Video Solution Final Finishing is considering three mutually exclusive alternatives for a new polisher. Each alternative has an expected life of 10 years and no salvage value. Polisher 1 requires
45. Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama–Georgia border. There are three
44. Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate
43. Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss
42. The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially
41. The following three investment opportunities are available. The returns for each investment for each year vary, but the fi rst cost of each is $20,000.Based on a future worth analysis, which
40. Jupiter is considering investing time and administrative expense on an effort that promises one large payoff in the future, followed by additional expenses over a 10-year horizon. The cash fl ow
39. Video Solution Imagineering, Inc., is considering an investment in CADCAM compatible design software with the cash fl ow profi le shown in the table below. Imagineering’s MARR is 18
38. Quilts RUs (QRU) is considering an investment in a new patterning attachment with the cash fl ow profi le shown in the table below. QRU’s MARR is 13.5 percent/year.a. What is the future worth
37. Galvanized Products is considering the purchase of a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is
36. DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6 percent/year.a. What is the
35. Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fi nes of $18,500 per year. An emission reduction fi lter will cost $75,000 and have an expected
34. Video Solution Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more effi ciently. The punch has a fi rst cost of $100,000 and a useful life of
33. Video Solution Financial planners (and engineering economists) unanimously encourage people to seek out the highest rate of return possible within their personal level of risk tolerance. To
32. Video Solution Financial planners (and engineering economists) unanimously encourage people to start early in planning for retirement. To illustrate this point, they frequently produce a table
31. On your child’s fi rst birthday, you open an account to fund his college education.You deposit $300 to open the account. Each year, on his birthday, you make another deposit. Each subsequent
30. You decide to open an individual retirement account (IRA) at your local stockbroker that pays 10 percent/year/year for the life of the account. You deposit $2,000 today to open the account. For
29. You decide to open an individual retirement account (IRA) at your local bank that pays 8 percent/year/year. At the end of each of the next 40 years, you will deposit $2,000 per year into the
28. You decide to set up a college fund for your 10-year-old child and plan to make annual deposits into the account each year on your child’s birthday.Because “other things” consistently use
27. Reconsider the situation described in Problem 26. Assume that rather than annual deposits, she makes monthly deposits. The fi rst deposit will be 1 month from today, and the last deposit will be
26. A 22-year-old engineering graduate wants to accumulate $2,000,000 to be available when she retires 40 years from today. She investigates several investment options and decides to invest in a
25. An investment has the following cash fl ow profi le. MARR is 12 percent/year. What is the minimum value of X such that the investment is attractive based on a future worth measure of merit?End of
24. RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an
23. Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios. Each enhancement will increase revenues by attracting
22. Packaging equipment for Xi Cling Wrap costs $60,000 and is expected to result in end of year net savings of $23,000 per year for 3 years. The equipment will have a market value of $10,000 after 3
21. Alpha Electronics can purchase a needed service for $90 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of 0 at the end of 10 years.
20. Tempura, Inc., is considering two projects. Project A requires an investment of $50,000. Estimated annual receipts for 20 years are $20,000; estimated annual costs are $12,500. An alternative
19. Final Finishing is considering three mutually exclusive alternatives for a new polisher. Each alternative has an expected life of 10 years and no salvage value. Polisher 1 requires an initial
18. GO Tutorial DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a fi rst cost of $10,000, an estimated life of 10 years, a salvage value of $1,000, and
17. Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate
16. GO Tutorial Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama–Georgia border.
15. Final Finishing is considering three mutually exclusive alternatives for a new polisher. Each alternative has an expected life of 10 years and no salvage value. Polisher 1 requires an initial
14. GO Tutorial Video Solution Parker County Community College (PCCC)is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its
13. The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially
12. Nancy’s Notions pays a delivery fi rm to distribute its products in the metro area. Delivery costs are $30,000 per year. Nancy can buy a used truck for$10,000 that will be adequate for the next
11. Mayberry, Inc., is considering a design change that will cost $6,000 and will result in an annual savings of $1,000 per year for the 6-year life of the project. A cost of $2,000 will be avoided
10. Home Innovation is evaluating a new product design. The estimated receipts and disbursements associated with the new product are shown below. MARR is 10 percent/year.a. What is the annual worth
9. Video Solution Aerotron Electronics is considering the purchase of a water fi ltration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years
8. Jupiter is considering investing time and administrative expense on an effort that promises one large payoff in the future, followed by additional expenses over a 10-year horizon. The cash fl ow
7. Imagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash fl ow profi le shown in the table below.Imagineering’s MARR is 18 percent/year.a. What is the
6. Quilts R Us (QRU) is considering an investment in a new patterning attachment with the cash fl ow profi le shown in the table below. QRU’s MARR is 13.5 percent/year.a. What is the annual worth
5. Galvanized Products is considering the purchase of a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is
4. Fabco, Inc., is considering the purchase of fl ow valves that will reduce annual operating costs by $10,000 per year for the next 12 years. Fabco’s MARR is 7 percent/year. Using an annual worth
3. Video Solution Eddie’s Precision Machine Shop is insured for $700,000.The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years
2. DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6 percent/year.a. What is the
1. Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fi nes of $18,500 per year. An emission reduction fi lter will cost $75,000 and have an expected
10. Consider a palletizer at a bottling plant that has a fi rst cost of $150,000, has operating and maintenance costs of $17,500 per year, and an estimated net salvage value of $25,000 at the end of
9. If you invest $3,000 three years from now, how much will be in the account 15 years from now if i 5 8 percent compounded annually?a. $3,500c. $9,415b. $7,555d. $9,516
8. A deposit of $800 is planned for the end of each year into an account paying 8 percent/year compounded annually. The deposits were not made for the tenth and eleventh years. All other deposits
7. On the day your daughter is born, you deposit $1,000 in a college savings account that earns 8 percent compounded annually. On each of her birthdays thereafter, up to and including her eighteenth
6. Scott wants to accumulate $2,500 over a period of 7 years so that a cash payment can be made for roof maintenance on his summer cottage. To have this amount when it is needed, he will make annual
5. The operating and maintenance expenses for a mining machine are expected to be $11,000 in the fi rst year and increase by $800 per year during the 15-year life of the machine. What uniform series
4. The overhead costs in a highly automated factory are expected to increase at an annual compound rate of 10 percent for the next 7 years. The overhead cost at the end of the fi rst year is
3. The annual worth of an alternative is 0. Which of the following is (are)also true?(1) PW 5 0(2) FW 5 0a. (1) onlyc. Both (1) and (2)b. (1) onlyd. Neither (1) nor (2)
2. When using annual worth to evaluate the attractiveness of a single alternative, what value is the calculated AW compared to?a. PWc. 0.0b. FWd. MARR
1. Consider a palletizer at a bottling plant that has a fi rst cost of $150,000, operating and maintenance costs of $17,500 per year, and an estimated net salvage value of $25,000 at the end of 30
59. You decide to open an individual retirement account (IRA) at your local bank that pays 8 percent/year compounded annually. At the end of each of the next 40 years, you will deposit $4,000 into
58. A prospective venture has the following cash fl ow profi le over a 5-year horizon. What is the capitalized worth at 6 percent/year assuming the pattern repeats indefi nitely? End of Year Receipts
57. Reconsider the data from Problem 56. Plot a graph of scholarship dollars versus number of years, where the number of years varies from 1 year to 100 years by 2-year increments. Dollars should be
56. A generous benefactor donates $500,000 to a state university. The donation is to be used to fund student scholarships. Determine the dollar amount of scholarships that can be given out each year
55. GO Tutorial The gaming commission is introducing a new lottery game called Infi nite Progresso. The winner of the Infi nite Progresso jackpot will receive $1,000 at the end of January, $2,000 at
54. Video Solution A fl ood control project at Pleasant Valley dam is projected to cost $2,000,000 today, have annual maintenance costs of $50,000, and have major inspection and upkeep after each
53. Video Solution Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,500,000, has annual operating and maintenance costs of $800,000, and

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