Question 1

If one project cannot be done by itself, a second project can be done alone, and both of them can be done together then the first project is said to be

Accepted Answer

A) independent from the second project. 
B) related but not mutually exclusive to the second project. 
C) mutually exclusive to the second project. 
D) contingent on the second project. 
E) interrelated with the second project. 
A) independent from the second project. 
B) related but not mutually exclusive to the second project. 
C) mutually exclusive to the second project. 
D) contingent on the second project. 
E) interrelated with the second project.

Question 2

REMAX Development owns a parcel of land in a city and wants to sell it to the highest bidder. One of the requirements is that REMAX will be involved in the construction and maintenance on that land. Three bidders submitted their proposals. From a standpoint of REMAX information is as follows:
   Evaluate these projects on the basis of their present worth if the interest rate is 12% and the assessment horizon is 25 years.

Accepted Answer

PW(Project 1)= -3.0 - 0.75 × (P/A, 12%,

Question 3

For comparison purposes, in order to evaluate alternatives with unequal lives one should

Accepted Answer

A) repeat service life of each alternative at least three times. 
B) assume some certain study period for evaluation by introducing salvage values for each alternative. 
C) assume that the service life of each project is indefinite. 
D) apply only annual worth comparison method for each alternative. 
E) apply only present worth comparison method for each alternative. 
A) repeat service life of each alternative at least three times. 
B) assume some certain study period for evaluation by introducing salvage values for each alternative. 
C) assume that the service life of each project is indefinite. 
D) apply only annual worth comparison method for each alternative. 
E) apply only present worth comparison method for each alternative.

Question 4

I can invest for a pension in either the Senex or the Geriatrix pension plan. Senex requires me to invest $1500 a year for the next 15 years (beginning one year from now), whereas Geriatrix requires an immediate deposit of $5 000 and 15 subsequent annual investment of $1 200 a year (also starting one year from now ). Senex pays 10% on my investments, whereas Geriatrix pays 9%. How much more money will I have in my pension plan in 15 years time if I invest in Geriatrix?

Accepted Answer

A) $1 500 
B) $3 380 
C) $10 610 
D) $5 790 
E) I will have less money than if I had invested in Senex. 
A) $1 500 
B) $3 380 
C) $10 610 
D) $5 790 
E) I will have less money than if I had invested in Senex.

Question 5

What is the payback period?

Accepted Answer

A) a period of time over which an initial investment can be recovered fully assuming market interest rate to be equal to the MARR 
B) a period of time after which a project starts generating profit 
C) a period of time over which an initial investment cannot be recovered 
D) a period of time over which an initial investment can be recovered fully 
E) a period of time over which an initial investment can be recouped assuming zero interest rate 
A) a period of time over which an initial investment can be recovered fully assuming market interest rate to be equal to the MARR 
B) a period of time after which a project starts generating profit 
C) a period of time over which an initial investment cannot be recovered 
D) a period of time over which an initial investment can be recovered fully 
E) a period of time over which an initial investment can be recouped assuming zero interest rate

Question 6

What is the present worth of an independent project that requires initial investment of $50 000 and annual maintenance costs of $4 000 for 10 years at a 4% minimum acceptable rate of return?

Accepted Answer

A) -$4 000 
B) -$32 444 
C) -$54 000 
D) -$82 444 
E) -$17 556 
A) -$4 000 
B) -$32 444 
C) -$54 000 
D) -$82 444 
E) -$17 556

Question 7

By using the payback period method a decision-maker

Accepted Answer

A) equally treats short- and long-term projects. 
B) takes into account the timing of cash flows. 
C) accounts for time value of money. 
D) disregards the need for a fast capital recovery. 
E) favours long-term projects over the short-term projects. 
A) equally treats short- and long-term projects. 
B) takes into account the timing of cash flows. 
C) accounts for time value of money. 
D) disregards the need for a fast capital recovery. 
E) favours long-term projects over the short-term projects.

Question 8

The annual worth of a project is measured in terms of

Accepted Answer

A) dollars. 
B) dollars per unit. 
C) dollars per year. 
D) dollars per unit per year. 
E) percentage. 
A) dollars. 
B) dollars per unit. 
C) dollars per year. 
D) dollars per unit per year. 
E) percentage.

Question 9

What is the basis for decision-making using the present worth comparison method?

Accepted Answer

A) to maximize the present worth of a project at the minimum acceptable rate of return 
B) to maximize the benefits of a project at the minimum acceptable rate of return 
C) to minimize the costs of a project at the minimum acceptable rate of return 
D) to maximize the difference between the project's benefits and costs at the minimum acceptable rate of return 
E) to minimize the difference between the project's costs and benefits at the minimum acceptable rate of return 
A) to maximize the present worth of a project at the minimum acceptable rate of return 
B) to maximize the benefits of a project at the minimum acceptable rate of return 
C) to minimize the costs of a project at the minimum acceptable rate of return 
D) to maximize the difference between the project's benefits and costs at the minimum acceptable rate of return 
E) to minimize the difference between the project's costs and benefits at the minimum acceptable rate of return

Question 10

Morris paid $500 per month for 20 years to pay off a bank mortgage on his house. If his down payment was $5 000, and the interest rate was 6% compounded monthly, how much did his house cost?

Accepted Answer

The house price can be found a

Question 11

A new computer system costs $20 000 and saves $5 000 per year over a five year service life. Resale value of the computer is estimated at $5 000 at the end of its service life. If the MARR is 4%, what is the annual net benefits of the computer system?

Accepted Answer

The present worth of the system is:
PW =

Question 12

I have 3 possible choices for a lawnmower. They have expected working lives of 3, 4 and 5 years. If I expect lawnmower technologies to be stable for the foreseeable future, over what period of time should I compare the equivalent uniform annual costs of the three choices?

Accepted Answer

A) 12 years 
B) 20 years 
C) 30 years 
D) 45 years 
E) 60 years 
A) 12 years 
B) 20 years 
C) 30 years 
D) 45 years 
E) 60 years

Question 13

I can invest for a pension in either the Senex or the Geriatrix pension plan. Senex requires me to invest $1500 a year for the next 15 years (beginning one year from now), whereas Geriatrix requires an immediate deposit of $5 000 and 15 subsequent annual investment of $1 200 a year (also starting one year from now ). If my MARR is 15%, how much greater is the equivalent uniform annual cost to me of the series of payments I would make to Geriatrix versus the series of payments I would make to Senex?

Accepted Answer

A) $333 
B) $444 
C) $555 
D) $666 
E) $777 
A) $333 
B) $444 
C) $555 
D) $666 
E) $777

Question 14

Explain how related but not mutually exclusive projects are compared in terms of the present worth and the annual worth comparison methods

Accepted Answer

Evaluation of related but not mutually e

Question 15

MMM Consulting is evaluating two oil pumps with the same operating costs. The first pump lasts three years and costs $12 000. The second one lasts 4 years and costs $15 000. Current market interest rate is 8%. Compare the two using the repeated lives method.

Accepted Answer

The least common multiple of two lives i

Question 16

The annual worth method is

Accepted Answer

A) similar to the present worth method but transforms all annuities to a uniform series at the minimum acceptable rate of return. 
B) similar to the present worth method but transform all annuities to arithmetic gradient series at the minimum acceptable rate of return. 
C) methodologically different from the present worth method since it does not convert all annuities to the present worth at the minimum acceptable rate of return. 
D) similar to the present worth method since it transforms all annuities to the present worth as a single payment. 
E) similar to the present worth method except that all payments are converted into a geometric gradient series. 
A) similar to the present worth method but transforms all annuities to a uniform series at the minimum acceptable rate of return. 
B) similar to the present worth method but transform all annuities to arithmetic gradient series at the minimum acceptable rate of return. 
C) methodologically different from the present worth method since it does not convert all annuities to the present worth at the minimum acceptable rate of return. 
D) similar to the present worth method since it transforms all annuities to the present worth as a single payment. 
E) similar to the present worth method except that all payments are converted into a geometric gradient series.

Question 17

It was discovered by geologists that an oil deposit can produce oil commercially for 5 years. In order to develop this deposit $100 million is required in initial investment with the sale value of the equipment of $20 million at the end of the deposit's life. In addition, $4 million annually is required for operating and maintenance costs. Current price of oil is $90 per barrel. How much oil must this deposit produce per year in order to cover all the costs under 2% interest rate?

Accepted Answer

Let us define annual productio

Question 18

What is the exact payback period for a 10-year project that requires $12 000 in initial investment, $1 000 in annual maintenance costs and generates annual revenue of $2 600 per year under 5% MARR?

Accepted Answer

A) 7.5 years 
B) 7.9 years 
C) 8.4 years 
D) 9.2 years 
E) 10 years 
A) 7.5 years 
B) 7.9 years 
C) 8.4 years 
D) 9.2 years 
E) 10 years

Question 19

How is the payback period defined and what is its economic interpretation?

Accepted Answer

The payback period is the ratio of the f

Question 20

Consider the following investment alternatives:   If MARR is 20%, which one is the best based on PW comparison method?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

If one project cannot be done by itself, a second project can be done alone, and both of them can be done together then the first project is said to be

For comparison purposes, in order to evaluate alternatives with unequal lives one should

What is the payback period?

What is the present worth of an independent project that requires initial investment of $50 000 and annual maintenance costs of $4 000 for 10 years at a 4% minimum acceptable rate of return?

By using the payback period method a decision-maker

The annual worth of a project is measured in terms of

What is the basis for decision-making using the present worth comparison method?

Morris paid $500 per month for 20 years to pay off a bank mortgage on his house. If his down payment was $5 000, and the interest rate was 6% compounded monthly, how much did his house cost?

A new computer system costs $20 000 and saves $5 000 per year over a five year service life. Resale value of the computer is estimated at $5 000 at the end of its service life. If the MARR is 4%, what is the annual net benefits of the computer system?

I have 3 possible choices for a lawnmower. They have expected working lives of 3, 4 and 5 years. If I expect lawnmower technologies to be stable for the foreseeable future, over what period of time should I compare the equivalent uniform annual costs of the three choices?

Explain how related but not mutually exclusive projects are compared in terms of the present worth and the annual worth comparison methods

MMM Consulting is evaluating two oil pumps with the same operating costs. The first pump lasts three years and costs $12 000. The second one lasts 4 years and costs $15 000. Current market interest rate is 8%. Compare the two using the repeated lives method.

The annual worth method is

What is the exact payback period for a 10-year project that requires $12 000 in initial investment, $1 000 in annual maintenance costs and generates annual revenue of $2 600 per year under 5% MARR?

How is the payback period defined and what is its economic interpretation?

Consider the following investment alternatives: If MARR is 20%, which one is the best based on PW comparison method?

Engineering Decision Making

Time Value of Money

Cash Flow Analysis

Comparison Methods: Part Ii

Financial Accounting and Business Plans

Replacement Decisions

Taxes

Inflation

Public Sector Decision Making

Project Management

Dealing With Uncertainty and Risk

Filters

Exam 4: Comparison Methods: Part I

If one project cannot be done by itself, a second project can be done alone, and both of them can be done together then the first project is said to be

For comparison purposes, in order to evaluate alternatives with unequal lives one should

What is the payback period?

What is the present worth of an independent project that requires initial investment of $50 000 and annual maintenance costs of $4 000 for 10 years at a 4% minimum acceptable rate of return?

By using the payback period method a decision-maker

The annual worth of a project is measured in terms of

What is the basis for decision-making using the present worth comparison method?

Morris paid $500 per month for 20 years to pay off a bank mortgage on his house. If his down payment was $5 000, and the interest rate was 6% compounded monthly, how much did his house cost?

A new computer system costs $20 000 and saves $5 000 per year over a five year service life. Resale value of the computer is estimated at $5 000 at the end of its service life. If the MARR is 4%, what is the annual net benefits of the computer system?

I have 3 possible choices for a lawnmower. They have expected working lives of 3, 4 and 5 years. If I expect lawnmower technologies to be stable for the foreseeable future, over what period of time should I compare the equivalent uniform annual costs of the three choices?

Explain how related but not mutually exclusive projects are compared in terms of the present worth and the annual worth comparison methods

MMM Consulting is evaluating two oil pumps with the same operating costs. The first pump lasts three years and costs $12 000. The second one lasts 4 years and costs $15 000. Current market interest rate is 8%. Compare the two using the repeated lives method.

The annual worth method is

What is the exact payback period for a 10-year project that requires $12 000 in initial investment, $1 000 in annual maintenance costs and generates annual revenue of $2 600 per year under 5% MARR?

How is the payback period defined and what is its economic interpretation?

Consider the following investment alternatives: If MARR is 20%, which one is the best based on PW comparison method?

Engineering Decision Making

Time Value of Money

Cash Flow Analysis

Comparison Methods: Part Ii

Financial Accounting and Business Plans

Replacement Decisions

Taxes

Inflation

Public Sector Decision Making

Project Management

Dealing With Uncertainty and Risk

Filters