Multiple Questions Answers
Validated Tutorials1) 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:
Year | 1 | 2 | 3 | 4 |
Cashflow | $8,000 | $8400 | $8800 | $9200 |
N | ProjectA | ProjectB |
0 | –$1,200 | –$2,000 |
1 | $600 | $1,150 |
2 | $1,000 | $1,350 |
ROR | 19.6% | 15.8% |
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.
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
N | Cashflow |
0 | –$1,200 |
1 | $200 |
2 | $1,000 |
3 | X |
a) $218
b) $283
c) $267
d) $255
10 years ago
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