QUESTION 1

Consider a set of economic alternatives, in which neither the inputs nor the outputs are fixed for each alternative. The rule defining the economic goal is:

		Maximize the output
		Minimize inputs
		Choose the alternative with the largest difference between inputs and outputs (largest profit margin)
		assume some fixed value for the inputs of all alternatives, then choose the alternative with the greatest output.

QUESTION 2

Consider a set of project alternatives with 2,3, and 6 year lifetimes. The best analysis period to consider the projects over is:

		2 years
		6 years
		12 years
		1 year

QUESTION 3

UOIT signs a contract with a supplier to buy $2M worth of services up-front for this year to be followed by 10 more such annual cycles. What is the present worth of the contract, assuming a MARR of 7%? Answer in millions of dollars (eg 11 for $11M).

QUESTION 4

Wally's Trucks wants to buy a new dump truck. MARR is 9%. Two possibilities are at hand:

Cost AOC Annual Income Salvage Life

$50,000 $2,000 $9,000 $10,000 10

$80,000 $1,000 $12,000 $30,000 10

What is the PV of the better option?

QUESTION 5

The Catlovers Forever Society of Oshawa wants to donate a marble bird bath to the McLaughlan Park as a memorial (and automatic feeder) for cats. The CFSO wants to set up a perpetual care fund to cover future expenses for 75 years. The initial cost is $5,000 and routine maintenance will cost $200 per year. Every 5^th year, a major cleaning must be done, at an extra cost of $300. The bath is to be demolished after 75 years, with the last $500 covering the demolition costs. If the MARR is 8%, what is the capitalized cost of this project?

3 points

QUESTION 6

A 6% coupon rate bond has a face value of $1,000, pays interest semi-annually and matures in 10 years. If the current market rate is 8%, compounded semi-annually, what is the bonds value today?

QUESTION 7

Four projects are being considered:

A B C D

Cost 75K 50K 15K 90K

Annual Benefit 18.8K 13.9K 4.5K 23.8K

Each alternative has a five-year useful life, no salvage value and the MARR is 10%.

What is the best option, using Payback? Answer in years to 1 decimal place (eg 4.4).

QUESTION 8

Which of the following formulae is used to calculate the Net Present Worth (NPW) of a project alternative:

		(PW of benefits) - (PW of Costs)
		PW of (benefits - costs)
		(PW of benefits) - costs
		benefits - (PW of costs)