Question 1

If Carter expects a guaranteed ROR to triple his investment in 9 years, the nominal interest rate that he got is 30%.

Accepted Answer

A) True 
 B)False  False

Question 2

Kruber company located Tennessee is considering two different makes of a blow molding machine for one of its automotive products. The cost data for the two alternatives are provided in table below. MARR =12%.
$$\begin{array} { | l | l | l | } 
\hline & \text { Machine } X & \text { Machine } Y \
\hline \text { Iritial cost } & \$ 150 K & \$ 275 K \
\hline \text { Annuul operating cost } & 55 \mathrm {~K} & 60 K \
\hline \text { Benefits /Year } & 100 K & 120 K \
\hline \text { Salvage value } & 20 K & 40 K \
\hline \text { Life } & { 10 \text { Years } } \
\hline
\end{array}$$

Accepted Answer

A)  Machine X 
B)  Machine Y 
A)  Machine X 
B)  Machine Y A

Question 3

The table below provides cash flows for two mutually exclusive alternatives for developing a "Pay for Recreation" facility being considered by a county government in Georgia. If money can be borrowed issuing bonds at the rate of 7% per year, using the RoR analysis, find the attractive alternative between the two given proposals.
$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \text { Alt. A } & \text { Alt B } \
\hline 0 & - 1 \mathrm { OM } & - 37 \mathrm { M } \
\hline 1 - 10 & 1 \mathrm { M } & 4 \mathrm { M } \
\hline 11 - \infty & 1.5 \mathrm { M } & 2.5 \mathrm { M } \
\hline
\end{array}$$

Accepted Answer

A)  Alt. A 
B)  Alt. B 
A)  Alt. A 
B)  Alt. B B

Question 4

Determine the ROR for a project that has an initial cost of $82,000 and would provide positive cash flows of $12,000 the first year, $14,000 the second year, $16,000 the third year, $18,000 the fourth year, $20,000 the fifth year, and $15,000 the sixth year.

Accepted Answer

A)  4.12% 
B)  2.78% 
C)  4.95% 
D)  4.49% 
A)  4.12% 
B)  2.78% 
C)  4.95% 
D)  4.49%

Question 5

In a capital equipment investment project, the smallest possible rate of return is 0%.

Accepted Answer

A) True 
 B)False

Question 6

An equipment costing $60,000 is being evaluated for a production process at Don Jones Co. The expected benefits per year is $4,500 and estimated salvage value is $20,000. Determine the rate of return the company can get in this equipment proposal. Equipment life = 20 years.

Accepted Answer

A)  4.92% 
B)  5.96% 
C)  5.62% 
D)  4.18% 
A)  4.92% 
B)  5.96% 
C)  5.62% 
D)  4.18%

Question 7

An investment of $100,000 today, will pay 10 annual payments of $15,000 each. Compute the rate of return on this investment to the second decimal place.

Accepted Answer

A)  8.15% 
B)  8.85% 
C)  8.52% 
D)  8.37% 
A)  8.15% 
B)  8.85% 
C)  8.52% 
D)  8.37%

Question 8

Tara purchases a 20-year, 5 percent savings bond with a face value of $10,000 at a premium price of $11,000. She gets the dividend paid yearly. Determine the rate of return on the bond if the bond is kept till maturity.

Accepted Answer

A)  3.79% 
B)  4.62% 
C)  5.33% 
D)  2.38% 
A)  3.79% 
B)  4.62% 
C)  5.33% 
D)  2.38%

Question 9

Pam promises to pay Sandy $4,000 in year 4 and another $6,000 in year 8 for a loan of $4,000 from Sandy today. What is the ROR that Sandy is getting? Assume interest is compounded monthly.

Accepted Answer

A)  14.75% 
B)  16.72% 
C)  15.39% 
D)  18.08% 
A)  14.75% 
B)  16.72% 
C)  15.39% 
D)  18.08%

Question 10

Determine the IRR for an equipment that costs $250,000 and would provide positive cash flows of $100,000, $90,000, $80,000, and $20,000 at the end of each year for the next four years.

Accepted Answer

A)  9.75% 
B)  7.53% 
C)  10.90% 
D)  9.38% 
A)  9.75% 
B)  7.53% 
C)  10.90% 
D)  9.38%

Question 11

MARR is minimum attractive rate of return.

Accepted Answer

A) True 
 B)False

Question 12

Given the cash flows described in table below. Determine the ROR.
$$\begin{array} { | l | l | l | l | } 
\hline \text { Year } & 0 & 1 - 2 & 3 - 5 \
\hline \text { Cash flow } & - \$ 12,300 & 4,000 & 3,000 \
\hline
\end{array}$$

Accepted Answer

A)  13.85% 
B)  12.75% 
C)  14.21% 
D)  13.11% 
A)  13.85% 
B)  12.75% 
C)  14.21% 
D)  13.11%

If Carter expects a guaranteed ROR to triple his investment in 9 years, the nominal interest rate that he got is 30%.

Determine the ROR for a project that has an initial cost of $82,000 and would provide positive cash flows of $12,000 the first year, $14,000 the second year, $16,000 the third year, $18,000 the fourth year, $20,000 the fifth year, and $15,000 the sixth year.

In a capital equipment investment project, the smallest possible rate of return is 0%.

An equipment costing $60,000 is being evaluated for a production process at Don Jones Co. The expected benefits per year is $4,500 and estimated salvage value is $20,000. Determine the rate of return the company can get in this equipment proposal. Equipment life = 20 years.

An investment of $100,000 today, will pay 10 annual payments of $15,000 each. Compute the rate of return on this investment to the second decimal place.

Tara purchases a 20-year, 5 percent savings bond with a face value of $10,000 at a premium price of $11,000. She gets the dividend paid yearly. Determine the rate of return on the bond if the bond is kept till maturity.

Pam promises to pay Sandy $4,000 in year 4 and another $6,000 in year 8 for a loan of $4,000 from Sandy today. What is the ROR that Sandy is getting? Assume interest is compounded monthly.

Determine the IRR for an equipment that costs $250,000 and would provide positive cash flows of $100,000, $90,000, $80,000, and $20,000 at the end of each year for the next four years.

MARR is minimum attractive rate of return.

Given the cash flows described in table below. Determine the ROR. Year 0 1-2 3-5 Cash flow -\ 12,300 4,000 3,000

Making Economic Decisions

Estimating Engineering Costs and Benefits

Interest and Equivalence

Equivalence for Repeated Cash Flows

Present Worth Analysis

Annual Cash Flow Analysis

Choosing the Best Alternative

Other Analysis Techniques

Uncertainty in Future Events

Depreciation

Income Taxes for Corporations

Replacement Analysis

Inflation and Price Change

Selection of a Minimum Attractive Rate of Return

Economic Analysis in the Public Sector

Accounting and Engineering Economy

Filters

Exam 7: Rate of Return Analysis

If Carter expects a guaranteed ROR to triple his investment in 9 years, the nominal interest rate that he got is 30%.

Determine the ROR for a project that has an initial cost of $82,000 and would provide positive cash flows of $12,000 the first year, $14,000 the second year, $16,000 the third year, $18,000 the fourth year, $20,000 the fifth year, and $15,000 the sixth year.

In a capital equipment investment project, the smallest possible rate of return is 0%.

An equipment costing $60,000 is being evaluated for a production process at Don Jones Co. The expected benefits per year is $4,500 and estimated salvage value is $20,000. Determine the rate of return the company can get in this equipment proposal. Equipment life = 20 years.

An investment of $100,000 today, will pay 10 annual payments of $15,000 each. Compute the rate of return on this investment to the second decimal place.

Tara purchases a 20-year, 5 percent savings bond with a face value of $10,000 at a premium price of $11,000. She gets the dividend paid yearly. Determine the rate of return on the bond if the bond is kept till maturity.

Pam promises to pay Sandy $4,000 in year 4 and another $6,000 in year 8 for a loan of $4,000 from Sandy today. What is the ROR that Sandy is getting? Assume interest is compounded monthly.

Determine the IRR for an equipment that costs $250,000 and would provide positive cash flows of $100,000, $90,000, $80,000, and $20,000 at the end of each year for the next four years.

MARR is minimum attractive rate of return.

Given the cash flows described in table below. Determine the ROR. Year 0 1-2 3-5 Cash flow -\ 12,300 4,000 3,000

Making Economic Decisions

Estimating Engineering Costs and Benefits

Interest and Equivalence

Equivalence for Repeated Cash Flows

Present Worth Analysis

Annual Cash Flow Analysis

Choosing the Best Alternative

Other Analysis Techniques

Uncertainty in Future Events

Depreciation

Income Taxes for Corporations

Replacement Analysis

Inflation and Price Change

Selection of a Minimum Attractive Rate of Return

Economic Analysis in the Public Sector

Accounting and Engineering Economy

Filters