Multiple choice

1) A new machine was purchased for $10,000 with a life of 4 years and an expected $1,500 salvage value. Its annual operating costs were as follows:

If the MARR is 10%, the ANNUAL equivalent cost of the machine is 

closest to:
a.            $11,725
b.            $10,659
c.             $8,620
d.            $11,384

2) The following table gives the net cash flows that each of the mutually exclusive projects (A and B) generate over their useful life of 2 years. At MARR 10%, we have to select one alternative.

N   Project A      Project B

0   –$1,200        –$2,000

1        $600         $1,150

2    $1,000        $1,350

ROR       19.6%            15.8%

Which project is better?
a)  Project A
b)  Project B
c)  Neither project is acceptable
d)  Not enough information to make a decision

3) Using the rule of 72, how many years will it take to double your investment if the nominal interest rate is 12% compounded continuously?
a.  7.20 years
b.  5.65 years
c.   5.68 years
d.   6.00 years

4) Assume that you have the following annual cash flows for which the ROR=10%.  Find the missing value for the third cash flow

a) $218
b) $283
c) $267
d) $255