Engineering Economy Homework

I need the questions for an Engineering Economy take home exam answered by Monday 12:00 AM (Eastern Standard Time – New York). The exam consists of multiple choice, fill in the blank, and open ended questions.  I need as much work as possible to be shown for the open ended questions.  Willing to pay $15 for mulitple choice & fill in the blank and $15 for open ended, or $30 for the whole exam. 

IENG

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40 Exam Chapters 5,6,7 12/4/2012 Name____________________________

Multiple Choice (3 points each). Choose the best answer and fill in box with letter.

1. Which of the following is the best measure of equivalence when comparing alternatives?

a. Present worth

b. Annual equivalent

c. Future worth

d. All the above lead to the same result so none is better than the others

2. Which of the following statements is true regarding the IRR?

a. it is the interest rate that causes the equivalent cash flow receipts to equal the equivalent cash flow disbursements

b. it represents the rate earned on the unrecovered balance of an investment

c. it is the solution to an nth degree polynomial

d. it is best avoided as a basis for comparison when multiple IRRs occur

e. all of the above are true

3. The difference between payback with interest and payback without interest is

a. payback without interest ignores the time value of money

b. payback with interest ignores what happens after the payback period

c. payback without interest ignores what happens after the payback period

d. both are essentially the same simplistic bases of comparison

4. Which of the following is false?

a. The MARR is the yield rate that is considered minimally acceptable

b. The Do Nothing alternative is usually not an option in cost-only projects

c. Alternatives must be compared over the same time span

d. If the PW is <0 then the IRR is >MARR

5. The “Do Nothing” alternative represents investing funds at

a. the minimally acceptable rate of return

b. the internal rate of return

c. 0% interest

d. none of the above

6. Which of the following 4-year cash flows passes the test for a single IRR?

a. –3000, 7500, -4620, 0, 0

b. 4000, -1000, 1000, 2000, 3000

c. –2000, 0, 0, 20,000, 20,000

d. –400, 100, 100, 100, 100

7. What is the IRR for the following cash flow?

Y0: -$3345 Y1: $1000 Y2: $1000 Y3: $1000 Y4: $1000

a. 7.56 %

b. 9.05%

c. 10.05%

d. 11.95%

8. A freshman buys a computer for $2000 and resells it 4 years later for $250. If the interest rate is 10%, what is his equivalent annual cost using Capital Recovery with Return?

a. $325

b. $437

c. $500

d. $577

9. You intend giving NYIT a gift so that it will earn $20,000 per year for a scholarship in your name. If the annual interest is assumed to be 8%, how big should your gift check be?

a. $250,000

b. $200,000

c. $100,000

d. undetermined from the above information

10. The current IRS approved depreciation method is known as

a. Straight Line

b. Declining Balance

c. MACRS

d. Sum of Year Digits

e. SL switching to DB

11. If the initial cost of an asset is $50,000 and the salvage value is $5,000 after 4 years, what is the annual depreciation expense using the straight line method?

a. $5,000

b. $9000

c. $10,000

d. $11,250

e. $12,500

12. For the above example, what is the depreciation expense in the third year using 200% DB method?

a. $25,000

b. $12,500

c. $7200

d. $3200

13. A piece of equipment is to be replaced after 30,000 hours of use. It has a basis of $50,000 and a salvage value of $10,000. What is its book value after 10,000 hours of operation?

a. $ 50,000

b. $ 33,333

c. $ 36,700

d. $ 10,000

14. If the federal income tax rate is 35% and the state rate is 5% (and deductible from federal taxes), the total effective tax rate is

a. 35%

b. 37.6%

c. 38.3%

d. 40%

15. Suppose for 2009, the income of your business is $110K, expenses are $65K and depreciation is $25K. If the effective tax rate is 40% then the ATCF is

a. -$8,900

b. 4,700

c. $13,200

d. $29,700

e. $37,000

16. Interest from which of the following is usually exempt from all income taxes?

a. Junk bonds

b. Municipal bonds

c. Corporate bonds

d. US Treasury bonds

Fill in (2 point each)

17. Federal tax owed on business net income of $12.5M is $________________

18. In order to be depreciated, property must have a life over one year, help produce income and _________________________________________.

19. The book value of an item of property = the adjusted cost basis minus _____________________________

True/False (2 point each)

______22. If using IRR to judge multiple projects always use an incremental analysis.

______23. Land, as a real asset, is depreciated over 39 years using SL

______25. Tax free investments usually offer a higher rate of return than taxable ones.

Problems (8 points each). Show all work for credit
.

1. A company is considering constructing a plant to manufacture a new product. Land costs $350.000, the building costs $600,000, equipment costs $250,000 and an additional $100,000 in working capital is needed. The product will have sales of $750,000 for 10 years at which time the land can be sold for $500,000, the building for $350,000 and the equipment for $50,000. The (upfront) working capital will all be recovered at the end of year 10. If annual expenses are $475,000 and the firm requires an MARR of 12% on projects of similar risk, what is its PW and should the project be implemented?

2. A bond with a face value of $15,000 pays interest of 6% per year. This bond will mature and be redeemed in 25 years. How much should someone pay for this bond today in order to receive a yield of 8% per year on the investment?

3. A firm is considering 3 mutually exclusive alternatives. The firm’s MARR is 15%

A1
A2
A3

Initial investment
$22,000 $26,200 $17,000

Salvage value 4,000
5,000
3,500

Useful life
4 years
10 years
5 years

Annual receipts
14,000 15,000 12,000

Annual costs
7,000 7,500 5,800

Which of the 3 alternatives, if any, should be adopted and why?

4. A wood products company will purchase logging equipment for a cost of $100,000 plus a trade-in for its old equipment of $10,000. The new equipment will be used 10 years and then sold with an estimated salvage value of $5000.

a. Using Straight Line method what is the annual depreciation? (2)

b. Using 150% DB what is the book value of the equipment at the end of its depreciable life? (3)

c. Using MACRS what will be the book value at the end of year 5? (3)

5. Your green energy business has been going poorly and you are thinking of selling it. One piece of equipment was purchased 3 years ago for $45,500 and at that time had an estimated useful life of 10 years and an estimated market value at end of useful life of $5000. What is the imputed market value today of the equipment if the MARR is 18% per year?

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