Instruction: For each of the following problems, select the alternative that is the best solution 1. In evaluating three mutually exclusive alternatives by the B/C ratio method, the alternatives were ranked in terms of increasing total equivalent cost (X, Y, and Z respectively), and the following results were obtained for the B/C ratios: 1.1, 0.9, and 1.3 for XY and Z respectively. On the basis of these results, you should: A. Select X B. Select Z (C. Select X and Z D. Must do incremental analysis 2. How long would it take for money to double itself at a simple interest rate of 12.5% per year? A. 10years B. 9 years C. 8 years D. 7 years 3. An engineer deposits $8000 in year 1, $8500 in year 2, and amounts increasing by $500 per year through year 10. At an interest rate of 10% per year, the future worth in year 10 is approximately: A. $173,400 B. $157,200 C. $98,300 D. $60,600 4 At a compound interest rate of 10% per year, S10000 next year was equivalent to how much 1 year ago? A. $8,264 B. $9,091 C.$11,000 D. $12,100 5. A company is considering three mutually exclusive alternatives for acquiring a protective control system. ach alternative has a 4-yr life and MARR is 12% per year. Data for the alternatives are given below. Capital Individual Annual Receipts IRR, % | Less Expenses Altern ative Investment $12,000 $15,800 $8,000 19.2 18.0 23.0 $4000 $5200 $3000 Value $3000 $3500 $1500 Which alternative should the company select? A. Alternative C B. Alternati ve A C. Alternative B D. Do nothing For a market interest rate of 12% per year and an inflation rate of 7% per year, the real interest rate per year is closest to? 6. B.790 C.12% D. 19.896 7, A deposit of $10,000 now at an interest rate of 10% per year will accumulate in 20 years to an amount closest to: A. $51,000 B. $54,600 C.$61,500 D. $67,300 ET331 Finals - page I 8. An investment of S100,000 resulted in income of $25,000 per year for 10 years. The rate of return on the investment was closest to: A. 25% B. 21% C.17% D. 15% 9. The incremental cash flow between two alternatives is shown below Year 1-10 10 Incremental Cash Flow -20,000 +$3,000/yT + $400 The equation(s) that can be used to correctly solve for the incremental B-C ratio, (BC), is(are): A. 3000 (P/A, MARR, 10V (20000-400 (P/F, MARR, 10) B. 20,000 (F/P, MARR, 10)/ 3000(F/A, MARR, 10)+ 400) C. -20,000 / { 3000(P/A, MARR, 10) + 400 (P/F, MARR, io) D. All of the above. 10. An alternative has the following cash flows: benefits $50,000 per year; disbenefits $23,000 per year; costs- $25,000 per year. The B/C ratio is closest to: A. 0.92 B. 0.96 D. 1.08 11 A construction company invests $50,000 in a new bulldozer. If the income from temporary leasing of the bulldozer is expected to be $10,000 per year, how long would it take to recover the investment at an interest rate of 18% per year? A. 14 years B. 11 years C. 8 years D. 5 years. Alternative l requires an initial investment of $20,000 and will yield a rate of return of25% per year. Alternative 2, which requires a S30.000 initial investment, will yield 20% per year, which of the following statements is true about the rate of return on the $10,000 increment? A. It is greater than 20% per year C. It is between 20 and 25% per year 12. B. It is exactly 20% per year D. It is less than 20% per year
