Economics

Question 1 (5 points)

 

When you are evaluating projects by the present worth method, how do you know which one(s) to select if the projects are independent?

Question 1 options:a) 

For independent projects, select all that have a PW >=$100.

b) 

For independent projects, select all that have a PW >=0.

c) 

For independent projects, select all that have a PW = $1

d) 

For all independent projects, select all that have PW < $0.

Question 2 (5 points)

 

When you are evaluating projects by the present worth method, how do you know which one(s) to select if the projects are mutually exclusive?

Question 2 options:a) 

For mutually exclusive projects, select the one that represents the happy medium between the highest and lowest numerical values

b) 

For mutually exclusive projects, select the one that has no numerical value

c) 

For mutually exclusive projects, select the one that has the highest numerical value

d) 

For mutually exclusive projects, select the one that has the lowest numerical value

Question 3 (5 points)

 

Two methods can be used for producing expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year. Method B will have a first cost of $120,000, an operating cost of $8000 per year, and a $40,000 salvage value after its 3-year life. At an interest rate of 12% per year, which method should be used on the basis of a present worth analysis?

Question 3 options:a) 

Select Method D

b) 

Select Method C

c) 

Select Method A

d) 

Select Method B

Question 4 (5 points)

 

Two processes can be used for producing a polymer that reduces friction loss in engines. Process K will have a first cost of $160,000, an operating cost of $7000 per quarter, and a salvage value of $40,000 after its 2-year life. Process L will have a first cost of $210,000, an operating cost of $5000 per quarter, and a $26,000 salvage value after its 4-year life. Which process should be selected on the basis of a present worth analysis at an interest rate of 8% per year, compounded quarterly?

Question 4 options:a) 

Process J

b) 

Process K

c) 

Process L

d) 

Process M

Question 5 (5 points)

 

The cost of extending a certain road at Yellowstone National Park is $1.7 million. Resurfacing and other maintenance are expected to cost $350,000 every 3 years. What is the capitalized cost of the road at an interest rate of 6% per year?

Question 5 options:a) 

CC = $-3,532,308

b) 

CC = $0

c) 

CC = $-4,483,556

d) 

CC = $-1,577,309

Question 6 (5 points)

 

What is the bond interest rate on a $20,000 bond that has semiannual interest payments of $1500 and a 20-year maturity date?

Question 6 options:a) 

15%

b) 

16%

c) 

13%

d) 

14%

Question 7 (5 points)

 

What is the present worth of a $50,000 municipal bond that has an interest rate of 4% per year, payable quarterly? The bond matures in 15 years, and the market interest rate is 8% per year, compounded quarterly.

Question 7 options:a) 

PW = $27,612

b) 

PW = $32,620

c) 

PW = $45,325

d) 

PW = $23,620

Question 8 (5 points)

 

For the mutually exclusive alternatives shown below, determine which one(s) should be selected.

Alternative

Present Worth, $

A

–25,000

B

–12,000

C

10,000

D

15,000

Question 8 options:a) 

Only A and B

b) 

Only D

c) 

Only A

d) 

Only C and D

Question 9 (5 points)

 

A consulting engineering firm is considering two models of SUVs for the company principals. A GM model will have a first cost of $26,000, an operating cost of $2000, and a salvage value of $12,000 after 3 years. A Ford model will have a first cost of $29,000, an operating cost of $1200, and a $15,000 resale value after 3 years. At an interest rate of 15% per year, which model should the consulting firm buy? Conduct an annual worth analysis.

Question 9 options:a) 

Select Honda SUV

b) 

Select Toyota SUV

c) 

Select GM SUV

d) 

Select Ford SUV

Question 10 (5 points)

 

A mechanical engineer is considering two types of pressure sensors for a low-pressure steam line. The costs are shown below. Which should be selected based on an annual worth comparison at an interest rate of 12% per year?

Type X

Type Y

First cost, $

–7,650

–12,900

Maintenance cost, $/year

–1,200

–900

Salvage value, $

0

2,000

Life, years

2

4

Question 10 options:a) 

Select Plan Y

b) 

Select Plan W

c) 

Select Plan Z

d) 

Select Plan X

Question 11 (5 points)

 

Two processes can be used for producing a polymer that reduces friction loss in engines. Process K will have a first cost of $160,000, an operating cost of $7000 per month, and a salvage value of $40,000 after its 2-year life. Process L will have a first cost of $210,000, an operating cost of $5000 per month, and a $26,000 salvage value after its 4-year life. Which process should be selected on the basis of an annual worth analysis at an interest rate of 12% per year, compounded monthly?

Question 11 options:a) 

Select Process M

b) 

Select Process K

c) 

Select Process J

d) 

Select Process L

Question 12 (5 points)

 

Determine the perpetual equivalent annual worth (in years 1 through infinity) of an investment of $50,000 at time 0 and $50,000 per year thereafter (forever) at an interest rate of 10% per year.

Question 12 options:a) 

AW = $60,000

b) 

AW = $50,000

c) 

AW = $55,000

d) 

AW = $45,000

Question 13 (5 points)

 

How much must you deposit in your retirement account each year for 10 years starting now (i.e., years 0 through 9) if you want to be able to withdraw $50,000 per year forever beginning 30 years from now? Assume the account earns interest at 10% per year.

Question 13 options:a) 

$5471

b) 

$4974

c) 

$4239

d) 

$4662