Question 14 (6 points)

An investment of $30,000 increased to $80,000 over a 8-year period. What was the compound rate of return on the investment?

Question 14 options:

	10.8%
	The interest rate cannot be determined.
	13.0%
	9.0%

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Question 15 (6 points)

The Present Value (value in year 0) of MT Companys cash flows listed below at a compound interest rate of 10% per year is:

Year	0	1	2	3	4	5	6	7
Cash Flow ($)	0	0	0	+100	+100	+100	+100	+100

Comments:

Before starting calculations, make sure you can see all the cash flows in the table from year 0 to 7.

All the answers listed were calculated based on compound interest factor tables.

Question 15 options:

	$379
	$313
	$285
	$610

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Question 16 (6 points)

A cost savings project on an aircraft manufacturing process generates savings of $100,000 per year. Your boss wants you to calculate the present worth of this savings over a 5-year period at a compound interest rate of 12% per year.

Assume that the process generates savings every year starting in year 1 and continue to year 5.

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

Question 16 options:

	$176,230
	$635,280
	$379,080
	$360,480

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Question 17 (6 points)

In order to update a production process, a company can spend money now or four years from now. If the amount now would be $25,000 , what equivalent amount could the company spend four years from now at a compound interest rate of 10% per year?

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

Question 17 options:

	$40,263
	$14,641
	$116,025
	$36,603

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Question 18 (6 points)

SMS Inc. wants to have enough money to purchase a new tractor-trailer in 8 years. If the unit will cost $800,000, how much should the company set aside each year (starting at the end of year 1 and continue until year 8) if the account earns a compound interest of 10% per year?

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

Question 18 options:

	$373,200
	$69,952
	$149,952
	$58,912

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Question 19 (6 points)

The right expression to calculate how much money will be in an investment account 15 years from now if you deposit $4,000 now and $7,000 nine years from now and the account earns a compound interest rate of 12% is;

Question 19 options:

	F= 4,000 (F/P, 12%, 15) + 7,000 (F/P, 12%, 6)
	F= 4,000 (F/P, 12%, 15) + 7,000 (F/P, 12%, 15)
	F= 4,000 (P/F, 12%, 15) + 7,000 (P/F, 12%, 6)
	F= 4,000 (F/P, 12%, 15) + [7,000 (F/P, 12%, 6) * (F/P,12%,15)]

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Question 20 (6 points)

If $1,000 is borrowed at 15% per year simple interest, the total amount due at the end of eight years is equal to:

Question 20 options:

	$2,800
	$2,200
	$1,200
	$3,059

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Bonus Questions

Select the "best answer" to the following questions.

Question 21 (2.5 points)

Indicate if the following statement is True or False.

The MARR is not a rate that is calculated like a ROR. The MARR is established by (financial) managers and is used as a criterion against which an alternative's ROR is measured, when making the accept/reject investment decision.

Question 21 options:

	True
	False

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Question 22 (5 points)

Your table for i=17% is missing few factors. The A/F for n=2 is closest to:

17%
n	F/P	P/F	A/F	F/A	A/P	P/A
1	1.1700	0.85470	1.0000	1.0000	1.1700	0.8547
2	1.3689	0.73051			0.6308	1.5852
3	1.6016	0.62437	0.2826	3.5389	0.4526	2.2096
4	1.8739	0.53365	0.1945	5.1405
5	2.1924	0.45611	0.1426	7.0144	0.3126	3.1993

Question 22 options:

	A/F= 2.2057
	A/F cannot be determined with data provided
	A/F= 0.4608
	A/F= 0.4526

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