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business
economics 14th global

Questions and Answers of Economics 14th Global

True or False: The capital recovery cost is the uniform annual cost of the investment less the uniform annual worth of the salvage value.
The annual worth of an alternative is 0 . Which of the following is (are) also true?(1) \(\mathrm{PW}=0\)(2) \(\mathrm{FW}=0\)a. (1) onlyb. (2) onlyc. Both (1) and (2)d. Neither (1) nor (2)
True or False: If AW > 0, then PW > 0, and FW > 0.
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 first year is \(\$
True or False: If AW(A) > AW(B), then PW(A) > PW(B).
The operating and maintenance expenses for a mining machine are expected to be \(\$ 11,000\) in the first year and increase by \(\$ 800\) per year during the 15 year life of the machine. What uniform
True or False: If AW(A) < AW(B), then AW(B-A) > 0.
A successful alumnus gives a state university \(\$ 2\) million to establish an endowed scholarship fund. If the university can invest at 5 percent/ year and gives \(\$ 100,000\) in scholarships each
Consider cash flows given below. With \(\mathrm{i}=8 \%\), what is the annual worth of these costs?a. \(\$ 418\)b. \(\$ 436\)c. \(\$ 502\)d. \(\$ 536\) End of Year Cost 0 $1,000 1 $100 2 $200 3 $300
True or False: IfAW(A)>AW(B), thenCW(A)>CW(B) and DPBP(A)
True or False: AW can be applied as either a ranking method or as an incremental method.
A grinding machine has a first cost of \(\$ 24,000\) with an expected useful life of 13 years. Salvage value at the end of its useful life is estimated to be \(\$ 8,000\). Annual maintenance expenses
True or False: To compute capital recovery cost using Excel, enter = PMT(i%,n,-P,F) in any cell in a spreadsheet.
Reconsider the grinding machine from the previous question. What is the capital recovery cost of the grinding machine?a. \(\$ 2,020\)b. \(\$ 2,665\)c. \(\$ 2,980\)d. \(\$ 3,010\)
True or False: When using annual worth analysis with mutually exclusive alternatives having unequal lives, always use a planning horizon equal to the least common multiple of lives.
What is the equivalent uniform annual cost of the following cash flow profile? Assume an interest rate of 15 percent.a. \(\$ 45,130\)b. \(\$ 53,125\)c. \(\$ 62,100\)d. \(\$ 79,050\) End of Year Cost
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 illustrate this point,
Financial planners (and engineering economists) unanimously encourage people to start early in planning for retirement.To illustrate this point, they frequently produce a table similar to the one
On your child’s first 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
You have $10,000 that you must invest for a period of 4 years. The following account is available at your bank. The account pays 14 percent/year/year for years one and three, 15.5 percent/year/year
Your local bank is offering a new type of retirement savings account. An initial deposit is made to the account when it is opened. This money and any accumulated interest must be left in the account
You decide to open an individual retirement account (IRA) at your local bank that pays 8 percent/year/month. For the next 30 years, you will deposit $225 per month into the account. Assume that all
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 account
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
You decide to open an individual retirement account (IRA) at your local bank that pays 9 percent/year/month. For the next 30 years, starting 1 month from today, you will deposit $200 per month into
Jeff has \(\$ 10,000\) to invest for a period of 5 years. The following account is available at his bank. The account pays 4 percent/year for year one, 6 percent/year for year two, 8 percent/year for
An investment has the following cash flow profile. 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
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 more of
Reconsider the situation described in Problem 4. Assume that rather than annual deposits, she makes monthly deposits. The first deposit will be 1 month from today, and the last deposit will be 40
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
What do you know about the mathematical value of a project's future worth, relative to zero, under each of the following conditions?a. The present worth of the project is greater than 0.b. The
Determine whether each of the following is true or false. In each case, assume \(P\) is located at \(t=0\) and \(F\) is located at \(t=n\).a. \(F=F(P \mid F i \%, n)(F \mid P i \%, n)\)b. \(F=P(F
Compare and contrast the terms discounting and compounding.
Reconsider the data from Problem 57 (Orpheum Productions lighting enhancement). Assume that any money not invested in the lighting enhancements will be placed in an interest-bearing account earning
An investor has \($100,000\) to invest in a business venture, or she can earn 10 percent/year with a \($100,000\) certificate of deposit for 4 years. Three possible business ventures have been
This problem is related to Problem 8. Jeff has $10,000 to invest for a period of 5 years. The following three alternatives are available at his bank:Data from problem 8Jeff has $10,000 to invest for
Reconsider the data of Problem 31.Data from Problem 31The following three investment opportunities are available. The returns for each investment for each year vary, but the first cost of each is
The following three investment opportunities are available. The returns for each investment for each year vary, but the first cost of each is $20,000. Based on a future worth analysis, which
True or False: Future worth analysis is the most popular DCF measure of economic worth.
True or False: Unless non-monetary considerations dictate otherwise, choose the mutually exclusive investment alternative that has the greatest future worth, regardless of the lives of the
True or False: If \(F W>0\) when the \(M A R R=20 \%\), then \(D P B P
True or False: If \(F W
True or False: If \(F W(\mathrm{~A})>F W(\mathrm{~B})\), then \(D P B P(\mathrm{~A})
True or False: When using future worth analysis with mutually exclusive alternatives having unequal lives, always use a planning horizon equal to the least common multiple of lives.
Moving money forward in time while accounting for the time value of money is referred to asa. weighted average cost of capital.b. minimum attractive rate of return.c. discounting.d. compounding.
When using future worth to evaluate the attractiveness of a single investment alternative, what value is the calculated FW compared to?a. 0.0b. 1.0c. MARRd. WACC
If you invest \(\$ 3,000\) three years from now, how much will be in the account 15 years from now if \(i=8\) percent compounded annually?a. \(\$ 3,500\)b. \(\$ 7,555\)c. \(\$ 9,415\)d. \(\$ 9,516\)
Consider a palletizer at a bottling plant that has a first cost of \(\$ 150,000\), has operating and maintenance costs of \(\$ 17,500\) per year, and an estimated net salvage value of \(\$ 25,000\)
Five thousand dollars is deposited in an account that pays 6 percent interest per WILEY \(\oplus\) year. Two years from today, another \(\$ 5,000\) is deposited. Five years from today, \(\$ 10,000\)
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
Which of the following expressions will correctly determine the future worth of the following general cash flow series at time 7 ? W W W W W W 0 1 2 3 4 5 6 7 10% W a. W(FA 10%,3) (F|P 10%,4) W(FP
A piece of machinery costs \(\$ 20,000\) and has an estimated life of 8 years and a scrap value of \(\$ 2,000\). What uniform annual amount must be set aside at the end of each of the 8 years for
How much money would be accumulated in 5 years with an initial deposit of \(\$ 10,000\) if the account earned interest at 12 percent per year for the first 3 years and at 15 percent per year for the
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
Consider the time value of money factors \((F \mid P i \%, n)\) and \((F \mid P i / 12 \%, 12 n)\).Assume \(i>0\) and \(n>0\). What can be said about the value of these factors?a. These factors are
The present worth of an alternative is 0 . What do we know about the value of the future worth?a. \(\mathrm{FW}0\)d. Cannot be determined without cash flows
On the day your daughter is born, you deposit \(\$ 1,000\) in a college savings WILEY \(\oplus\) account that earns 8 percent compounded annually. On each of her birthdays thereafter, up to and
Use the Internet to access Home Depot's most recent annual report.a. What evidence did you find that Home Depot continues to rely on present worth analysis in its corporate decision making?b. Does
Use the Internet to access ConocoPhillips's most recent annual report.a. What evidence do you find that ConocoPhillips continues to rely on present worth analysis in its corporate decision making?b.
Use an Internet search engine to identify three companies or agencies that use present worth analysis to make business decisions as evidenced in their annual reports.
Allister Company uses both debt capital and equity capital to fund new projects. The before-tax cost of debt capital is 12 percent. The cost of equity capital is 10 percent. Allister's effective tax
Reconsider the results you obtained for the Allister Company in Problem 4. Assume that Allister's uses the WACC for MARR.a. For each case (a through e), use the estimation equation given in Equation
GeoWorld Systems uses a subset of the following questions during the interview process for new engineers. For each of the following cases, determine if "the project" or "do nothing" is preferred. The
Match the measures of worth in the first column with an appropriate definition from the second column. Measure of Worth (a) Annual worth Definitions (1) Converts all cash flows to a single sum
Match the measures of worth in the first column with an appropriate decision rule for preferring a project over "do nothing.', Measure of Worth (a) Annual worth (b) Benefit/cost ratio (c) External
Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of \(\$ 100,000\) and a useful life of 15 years. At
Repeat Problem 9 assuming that floor support and vibration dampening must be added for the gang punch. These one-time first costs are estimated to be \(\$ 35,000\).Data From Problem 9Bailey, Inc., is
Repeat Problem 9 assuming that the cost of capital has increased due to weak market conditions and MARR is now 6 percent/year.Data from problem 9Bailey, Inc., is considering buying a new gang punch
Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of \(\$ 18,500\) per year. An emission reduction filter will cost \(\$ 75,000\) and will have
Repeat parts (a) through (c) of Problem 12 assuming that Carlisle's board of directors has decided that since this action is based on a Federal government citation, no financial gain should be
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 present
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
Fabco, Inc., is considering purchasing flow 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 a present worth
Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of \(\$ 100,000\). Galvanized Products is
Quilts R Us (QRU) is considering an investment in a new patterning attachment with the cash flow profile shown in the table below. QRU's MARR is 13.5 percent/year.a. What is the present worth of this
Imagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash flow profile shown in the table below. Imagineering's MARR is 18 percent/year.a. What is the
Jupiter's 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 flow
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs \(\$ 40,000\). It has an expected life of 7 years at which time its
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 present worth of
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 \(\$ 2,000\)
Nancy's Notions pays a delivery firm 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 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
Reconsider Problem 25. Determine which ERP system should be purchased based on an incremental present worth analysis.Data from problem 25The engineering team at Manuel's Manufacturing, Inc., is
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 single
Octavia Bakery is planning to purchase one of two ovens. The expected cash flows for each oven are shown below.MARR is 8 percent/year.a. Based on a 10-year planning horizon, what is the present worth
Reconsider Problem 28. Determine which oven should be purchased based on an incremental present worth analysis.Data from problem 28 Octavia Bakery is planning to purchase one of two ovens. The
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 from
Reconsider Problem 30. Determine which insulation (if any) should be purchased based on an incremental present worth analysis.Data from problem 30 Parker County Community College (PCCC) is trying to
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
Reconsider Problem 32.Determine which city should be recommended based on an incremental present worth analysis.Data from problem 32Quantum Logistics, Inc., a wholesale distributor, is considering
DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of \($10\),000, an estimated life of 10 years, a salvage value of \($1\),000, and annual
Reconsider Problem 34. Determine which machine should be recommended based on an incremental present worth analysis.Data from problem 34DelRay Foods must purchase a new gumdrop machine. Two machines
Two storage structures, given code names Y and Z, are being considered for a military base located in Sontaga. The military uses a 5 percent/year expected rate of return and a 24-year life for
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
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
Xanadu Mining is considering three mutually exclusive alternatives, as shown in the table below. MARR is 10 percent/year.a. What is the present worth of each alternative?b. Which alternative should
Yani has \($12\),000 for investment purposes. His bank has offered the following three choices:a. A special savings certificate that will pay \($100\) each month for 5 years and a lump sum payment at
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 10
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
On-Site Testing Service has received four investment proposals for consideration. Two of the proposals, X1 and X2, are mutually exclusive. The other two proposals, Y1 and Y2 are also mutually

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