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business
economics 14th global
Questions and Answers of
Economics 14th Global
Two mutually exclusive alternatives are being compared. The planning horizon is 10 years, and MARR is 12 percent. The cash flows for the alternatives are shown in the table below. All cash flows are
A \(\$ 5,000\) process improvement project is expected to increase annual expenses for the next 3 years by an average of \(\$ 20,000\), with a standard deviation of \(\$ 3,000\). The annual savings
An investment alternative requires an initial investment of \(\$ 19,000\) and has a life of 6 years. The annual returns for the investment are independent and defined by the discrete probability
Your company is trying to decide whether to buy or lease snow-removal equipment. You have gathered all the relevant cost data and converted them to equivalent uniform annual costs (EUACs), as shown
A factory modernization team is considering a new compressor that costs \(\$ 9,000\) and has a 6-year useful life. The compressor's salvage value at the end of its 6-year life is zero. MARR is 20
A company is evaluating the potential of a new product. Pursuing the new product can be implemented fully, partially, or not at all. The success of the new product depends upon consumer acceptance,
The manager of a university bookstore is trying to determine whether or not to advance purchase copies of a popular textbook. Her uncertainty is caused by the changing popularity of the course that
We must decide between purchasing an automatic machine that costs \(\$ 100,000\) and will last 10 years and have a zero salvage value, or purchasing a manual machine that costs \(\$ 40,000\) and will
Consider an investment decision problem with two decision points. At the first decision point, the investor can select between Options A, B, or C, each of which has an uncertain outcome with the
True or False: Benefit-cost analysis is primarily used by regulated utilities.
When using the benefit/cost ratio measure of worth, what benchmark is the calculated ratio compared to in determining if an individual investment is attractive?a. 0.0b. MARRc. 1.0d. IRR
Identify a public project that has been performed by a government unit at any level in your city, state, or country. Identifya. The main thrust or nature of the project.b. Who benefits from the
True or False: Build-Operate-Transfer (BOT) makes use of a public-private partnership.
Do an Internet search on "build operate transfer." Identify a BOT project, preferably from your home continent (e.g., AF, AS, EU, Pacific, NA, SA), and copy a small portion of what you find (a page
Consider a situation in which you do not know the timing or amounts of individual cash flows. However, you do know the discounted and summed values of the revenues, \(\sum R t^{*}(P \mid F, M A R R,
True or False: Benefits and disbenefits must be converted to monetary values to use benefit-cost analysis.
Elm City is considering a replacement for its police radio. The benefits and costs of the replacement are shown below. What is the replacement's benefit/cost ratio if the effective annual interest
Using an Internet-based search on 'build operate transfer," find an additional definition from a source other than used in Section 14.2. Copy and paste it, as well as any graphics, examples,
True or False: OMB's Circular No. A-94, Revised is the definitive document for benefit-cost analysis.
A library shelving system has a first cost of \(\$ 20,000\) and a useful life of 10 years. The annual maintenance is expected to be \(\$ 2,500\). The annual benefits to the library staff are expected
Identify one benefit and one disbenefit that would be realized by the public for the following projects:a. A monument memorializing a particularly unfortunate eventb. A public libraryc. A Web site
True or False: The seven step SEAT is only applicable to public sector evaluation after extensive modification.
The two most common forms of benefit-cost analysis area. \(B / C\) and \(B-C\).b. \(B / C\) and \(B^{*} C\).c. \(B+C\) and \(B-C\).d. \(B-C\) and \(B^{*} C\)
Identify one each (1) benefit, (2) disbenefit, and (3) monetary cost that would impact each of the following projects:a. A new electrical distribution station in a developing part of the city, with
True or False: The B/C ratio is directly applicable to evaluation of one or many alternatives.
Which of the following would be least likely to use public sector economic analysis?a. A library boardb. A public housing authorityc. A travel agencyd. A veteran's hospital
A new airport addition is under consideration. Five different proposals have all been "qualified" as satisfactory from functional, environmental, and aesthetic standpoints and now the airport board
True or False: The B-C evaluation is directly applicable to evaluation of one or many alternatives.
Which of the following are typical characteristics of public sector projects?i. Large first costs ii. Benefits that may be hard to quantify iii. Benefits that are realized quicklya. I and III onlyb.
Flood damage in the Brush Creek area averages \(\$ 7,000\) annually. Civil engineers with floodplain expertise have designed a series of small dams to restrain the flow. They will cost \(\$ 25,000\)
True or False: Some in the public sector recommend using an interest rate of \(0 \%\) on any money from outside sources.
An integrated public-private partnership to deliver public projects is known by which of the following acronyms?a. EOQb. \(D C F\)c. IRRd. BOT
The Oklahoma City Zoo has proposed adding to their Web site a major segment providing a virtual tour of the grounds and animals, suitable for both routine enjoyment and educational purposes in
True or False: The Revenue Requirements method is not economically equivalent to the industrial ATCF approach.
An approach to justifying public sector projects that minimizes revenues while still allowing a business to earn a fair return for its shareholders isa. Revenue requirements.b. Revenue effectivity.c.
Ten cavemen with a remaining average life expectancy of 10 years use a path from their cave to a spring some distance away. The path is not easily traveled due to 100 large stones that could be
True or False: The Revenue Requirements method determines the income that exactly "pays" for costs, depreciation, interest on borrowed money, taxes, and a desirable return to owners.
When using a benefit-cost analysis to evaluate multiple alternatives, which of the following approaches is acceptable?a. Ranking approach onlyb. Incremental approach onlyc. Either incremental or
The Logan Public Library in IA serves long-term residents, 'bedroom community' residents who work in Omaha, and all of Harrison County. A renovation is planned, especially to include access to more
Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of \(\$ 1,800,000\). Addition of new species will cost another \(\$ 310,000\). Additional
The Boundary Waters Canoe Area Wilderness (BWCA) located in northeastern Minnesota has 1 million acres of wilderness, 1,000 waterways, and 1,500 miles of canoe routes. While some youth, for example
Recent development near Eugene, Oregon, has identified a need for improved access to Interstate 5 at one location. Civil engineers and public planners are considering three alternative access plans.
A highway is to be built connecting Maud and Bowlegs. Route A follows the old road and costs \(\$ 4\) million initially and \$210,000/year thereafter. A new route, B, will cost \(\$ 6\) million
The city of Columbus has identified three options for a public recreation area suitable for informal family activities and major organized events. As with most alternatives today, there are benefits,
An improvement to the roadway is desired from Philmont Scout Ranch to Springer in northeastern New Mexico. Alternative N (for north) costs \(\$ 2,400,000\) initially and \(\$ 155,000 /\) year
A relocation of a short stretch of rural highway feeding into Route 390 northwest of Dallas is to be made to accommodate new growth. The existing road is now unsafe, and improving it is not an
Lynchburg has two old four-lane roads that intersect, and traffic is controlled by a standard green, yellow, red stoplight. From each of the four directions, a left turn is permitted from the inner
The Great Plains Authority is trying to decide between coal, fuel oil 3, low-sulphur fuel oil, and natural gas for powering their electrical generators. Fuel forecasts indicate the following needs
Highway 51 west of Stillwater is to undergo a major renovation due to growth patterns of the city and increased traffic due to university sporting events. The road used to be two lanes and has a
A water distribution system using a new source of water is under consideration and found to have an unfortunately high net annual cost of \(\$ 5,750,000\) and net benefits of \(\$ 4,250,000\).
The county commissioner is considering three alternatives to spread gravel over a rough dirt road leading to a public astronomical observatory associated with the local university. The first cost of
Three government projects are being considered today, one each in education, health, and welfare. Only one of the three projects may be selected, and multiple investments in the same alternative
A city has proposed a new waste treatment plant that would eliminate contractor charges of \(\$ 300,000\) each year starting at the beginning of the first year. It will, however, require an
A county commissioner has eight projects available as summarized below. The remaining budget for the year is \(\$ 243,000\) for new projects. Operating and maintenance costs are separately funded and
Three public works projects, each having a first cost of \(\$ 770,000\) and annual operating costs of \(\$ 80,000\), are proposed. The lives of Projects 1,2, and 3 are 10,15, and 20 years,
A municipal government has two alternatives under consideration. Both include short-term use of land that otherwise will just sit unused for 5 years, after which it will be developed as a recycling
A public recreation area is under planning. The initial cost of the area is \(\$ 1,800,000\), and it will have maintenance costs of \(\$ 200,000 /\) year. It is estimated that 90,000 persons will
Suppose Lincoln Park Zoo decided to charge admission just for the newly renovated area described in Problem 11. Suppose the price is set at the average perceived benefit per visit, reasoning that the
Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of \(\$ 1,800,000\). Addition of new species will cost another \(\$ 310,000\). Additional
The Boundary Waters Canoe Area Wilderness (BWCA) located in northeastern Minnesota has 1 million acres of wilderness, 1,000 waterways, and 1,500 miles of canoe routes. While some youth, for example
Near the state capitol, a heritage center houses historical artifacts of significance to the state dating from pre-statehood to the present. The center is particularly well done and serves as both a
Opponents to charging an entrance fee as described in Problem 32 note that only 15,000 visitors will utilize the heritage center, and the benefits of \(\$ 5(14,000)+\$ 3(12,000)=\$ 106,000\) derived
For the heritage center described in Problem 32, note that a survey that has determined that annual benefits of \(\$ 3\) each are now received by 12,000 visitors, \(\$ 5\) each by 14,000 visitors,
The federal government is planning a hydroelectric project for a river basin. The project will provide electrical energy to the local area and to the grid. With some enhancements to the basic plan,
The following costs and benefits have been listed for a government-built, owned, and operated dam and reservoir that will be used for both flood control and electrical power generation.The planning
A new public school in Knoxville is proposed and will replace one older facility and affect school changes for several middle school students. The following estimates apply:a. Calculate the \(B / C\)
Consider 1 year of a utility company's financial results. The company pays income tax of \(\$ 9,000,000\), where the tax rate is 40 percent. Debt is \(\$ 80,000,000\) and the interest rate on debt is
Consider 1 year of a utility company's financial results. The company pays income tax of \(\$ 6,000,000\), where the tax rate is 40 percent. Debt is \(\$ 75,000,000\) and the interest rate on debt is
Consider 1 year of a utility company's financial results. The company pays income tax of \(\$ 5,500,000\), where the tax rate is 40 percent. Debt is \(\$ 70,000,000\) and the interest rate on debt is
Consider year 7 of a utility company's financial results. The company pays income tax of \(\$ 7,112,000\), where the tax rate is 40 percent. Debt is \(\$ 100,000,000\) and the interest rate on debt
A utility is preparing documentation for the Corporation Commission regarding revenue requirements during the next year. The company is 30 percent debt financed at an average interest rate of 6
The first 5 years of a revenue requirements analysis for a public utility is presented below. The fraction of total capitalization that is debt is 35 percent. Answer the following questions.a. What
A utility is submitting their petition to their regulatory agency to justify rates for the upcoming year. Their proposal is based upon revenue requirements. The company has 45 percent of their
Virginia Natural Gas Company (VNGC) must provide a regulation and metering unit to a new subdivision near Norfolk. They already own right-of-way and must now install the equipment at a cost of \(\$
True or False: When several independent, indivisible investments are available, form the investment portfolio so that the present worth of the portfolio is maximized.
Sarah is considering two investment proposals. Proposal A is to purchase a new computer. Proposal B is to purchase a new printer. She will not buy the printer unless she buys the computer. The
True or false: In solving a classical capital budgeting problem using binary linear programming (BLP), the objective function can be either the sum of present worths or the sum of annual worths
Determine the annual revenue requirements for the experimental trial of an environmentally friendly waste separator used to segregate burnable, glass, ferrous, nonferrous metals, and plastic items.
Consolidated Rural Electric Coop (CREC) provides reliable electrical service to a large rural community. "Reading" the meters is very troublesome and costly due to the distance between service
True or False: If independent, indivisible investments 3 and 4 are mutually exclusive, then X3 + X4
Consider a capital budgeting formulation where the binary variables \(x_{1}\) and \(x_{2}\) are used to represent the acceptance \(\left(x_{i}=1\right)\) or rejection \(\left(x_{i}=0\right)\) of each
Aerotron Radio Inc. has \(\$ 250,000\) available, and its engineering staff has proposed the following indivisible investments. With each, Aerotron can exit at the end of its planning horizon of 5
True or False: If indivisible investment 2 is contingent on indivisible investment 1 being funded, then X2 - X1
Polaris Industries has \(\$ 1,250,000\) available for additional innovations on the Victory Vision motorcycle. These include the five indivisible, equal-lived alternatives, each of which guarantees
Consider a capital budgeting formulation where the binary variables \(x_{1}\) and \(x_{2}\) are used to represent the acceptance \(\left(x_{i}=1\right)\) or rejection \(\left(x_{i}=0\right)\) of each
True or False: When multiple independent, divisible investments are available, form the investment portfolio so that the internal rate of return is maximized.
Consider a capital budgeting formulation where the binary variables \(x_{1}\) and \(x_{2}\) are used to represent the acceptance \(\left(x_{i}=1\right)\) or rejection \(\left(x_{i}=0\right)\) of each
CustomMetalworks is considering expanding their cable fabrication business for towers, rigging, winches, and many other uses. They have available \(\$ 250,000\) for investment and have identified the
True or False: When multiple independent divisible investments with a special structure are available, add investments to the portfolio on the basis of their IRR, moving from the largest to the
Sebastian is about to compare a set of mutually exclusive and indivisible alternatives using a ranking approach. Which of the following is not an appropriate measure of worth?a. Present worthb.
Gymnastics4Life (G4L) is a high-end facility for beginning, intermediate, and elite gymnasts. The latter are drawn from the nearby region for exclusive and dedicated training. In order to maintain
If six investment proposals are under consideration, how many investment combinations must be evaluated if a complete enumeration approach is being used?a. 6b. \(2^{*} 6=12\)c. \(6^{2}=36\)d.
Yaesu America wishes to enhance their already fine line of electronic equipment for commercial and individual use. Their engineering staff has proposed five independent, indivisible, equal-lived
Your consulting firm has been doing well, and you believe it is time to add a new, related area of engineering services. To do so, you have identified the following five independent, indivisible,
Which of the following is not an approach that can be used to perform a capital budgeting economic analysis?a. Box-Jenkins algorithmb. Excel® SOLVERc. Exhaustive enumerationd. Lori-Savage
A laboratory within Bayer is considering the five indivisible investment proposals below to further upgrade their diagnostic capabilities to ensure continued leadership and state-of-the-art
To determine an optimal portfolio of investments when the available choices are divisible, the investment choices should first be ranked in increasing order based on which of the following?a.
A division of ConocoPhillips is involved in their periodic capital budgeting activity, and the engineering and operations staffs have identified 10 indivisible investments with cash flow parameters
Consider the following binary linear programming formulation of a capital budgeting problem.\[\begin{array}{ll}\text { Max } & 1,200 x_{1}+600 x_{2}+950 x_{3}+1,650 x_{4} \\\text { s.t. } & 15,000
A lending firm is considering six independent and indivisible investment alternatives that can be exited with a full refund of the initial investment at any time the firm chooses. A total of \(\$
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