Assignment 3
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School
Concordia University *
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Course
301
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
Pages
6
Uploaded by PrivateGuanacoMaster669
How much would the owner of a building be justified in paying for a sprinkler system that will save $ 750 a year in insurance premiums if the system has to be replaced every 20 years and has a salvage value equal to 10 % of its initial costs? Assume money is worth 6%.
1.
5105
a.
7995
b.
5082
c.
8879
d.
How much must be deposited in an account to have annual withdrawals of $ 4207 forever? Interest is compounded quarterly and the interest rate is 9% for the first 11 years and 13 % thereafter.
2.
The answer is close to
10452
a.
39798
b.
30724
c.
9046
d.
The General Hospital is evaluating new office equipment offered by four companies. In each case the interest rate is 20% and the useful life of the equipment is 5 years. Use a Net Present Worth analysis to determine from which company you should purchase the equipment. 3.
Buy the equipment from
Company 1
a.
Company 2
b.
Company 4
c.
Company 3
d.
Assignment 3
July 27, 2023
12:32 PM
ENGR 301 Page 1
The General Hospital is evaluating new office equipment offered by three companies. Interest rate is 5%.
4.
Use an annual cash flow analysis to determine from which company you should purchase the equipment.
Company 1
a.
Don't select any company
b.
Company 2
c.
Company 3
d.
If the analysis rate is 11%, compute the value of X that makes the two alternatives equally desirable.
5.
The answer is close to
8
a.
5
b.
12
c.
11
d.
ENGR 301 Page 2
The General Hospital is evaluating new office equipment offered by four companies. The useful life of the equipment is 5 years.
6.
The internal rate of return for Company A is close to (%)
55
a.
20
b.
30
c.
40
d.
The General Hospital is evaluating new office equipment offered by four companies. The useful life of the equipment is 6 years.
7.
When doing an incremental analysis looking at it from an investment perspective the companies need to be ranked as follows
C 1-C 2-C 3-C 4
a.
C 3
-
C 4
-
C 2
-
C 1
b.
C 1
-
C 2
-
C 4
-
C 3
c.
C 4-C 3-C 2-C 1
d.
ENGR 301 Page 3
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The General Hospital is evaluating new office equipment offered by three companies.
8.
The incremental rate of return between Company B and Company C is close to (%)
19.0
a.
24.0
b.
9.0
c.
14.0
d.
For the following diagram, assume P= $400 and A= $1100. Compute the rate of return (%):
9.
The answer is close to
14
a.
12
b.
10
c.
16
d.
ENGR 301 Page 4
16
d.
Peter Minuit bought an island from the Manhattoes Indians in 1626 for $30 worth of beads and trinkets. The 1991 estimate of the value of the land on this island was $16billion (1 billion = 10^9). What rate of return would the Indians have received if they had retained title to the island rather than selling it for $30? 10.
The rate of return (%) is close to
5.7
a.
2.7
b.
8.7
c.
9.7
d.
Two mutually exclusive alternatives A and B are being considered:
11.
The minimum attractive rate of return is 8%. After calculation we can find that the internal rates of return: for A 1, IRRA1 = 17%, for B, IRRA2 = 14% and for A 2
–
A 1, IRRA2
–
A1 = 9.8%. Which of the following statements is correct?
Select neither A 1 nor A 2 because IRRA 1 > MARR and IRRA 2 > MARR
a.
Select A 1 because IRRA 1 > IRRA 2
b.
select A 2 because IRR 2
-
1 > MARR
c.
Select A 1 because IRRA 2
–
A 1 > MARR
d.
A machine costs $980,000 to purchase and will provide $200,000 a year in benefits. The company plans to use the machine for 13 years, and then will sell the machine for scrap, receiving $20,000. The company interest rate is 12%. Which one of the following statements is correct?
12.
Select one:
All other answers are wrong
a.
NPW = $980,000 + $200,000 (P/A,12%,13) + $20,000 (P/F,12%,13)
b.
NPW = –
$980,000 + $200,000 (P/A,12%,13) + $20,000 (P/F,12%,13)
c.
ENGR 301 Page 5
NPW = –
$980,000 + $200,000 (P/A,12%,13) + $20,000 (P/F,12%,13)
c.
NPW = $980,000 –
$200,000 (P/F, 12%,13) –
$20,000 (P/A,12%,13)
d.
NPW = –
$980,000 + $200,000 (P/A,12%,13) –
$20,000 (P/F,12%,13)
e.
A pump is needed for 10 years at a remote location. The pump can be driven by an electric motor if a power line is extended to the site. Otherwise a gasoline engine will be used. Use a present worth cash flow analysis, using the following data and a 10% interest rate, to determine how the pump should be powered. Calculate PWgas (present worth for gasoline option) and PWelectric (present worth for electric option).
13.
Which of the following statements is the best answer
Select one:
PWgas = –
$12,805; PWelectric = –
$10,685; Choose electric pump
a.
All other answers are wrong
b.
PWgas = –
$7,900; PWelectric = –
$10,685; Choose gasoline pump
c.
PWgas = –
$15,550; PWelectric = –
$17,588; Choose gasoline pump
d.
PWgas = –
$10,508; PWelectric = –
$9,685; Choose electric pump
e.
ENGR 301 Page 6
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