Econ test - 3*. 6?] _ CE 352 Name MAKmNQ L033 _ ’ / Fall...

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Unformatted text preview: 3*. 6?] _ CE 352 Name MAKmNQ L033 _ ’ / Fall 2007 Test 3 Open Book, Closed Notes Note: To receive any credit for the following questions it is necessary that you show all of'the calculations necessary to justify your answer. ——--——_______________________ 1., The CROC Co.‘ is considering a new milling machine. They have narrowed the choices down to three alternatives (in addition to the Null alternative): _ First Cost _ $75,000 Annual Benefit 28,000 Alternatives m Deluxe $125,000 $220,000 79,000 A U) Q C O - _ 8,000 ‘ 13,000 38,000 All machines have a useful life of 10 years. Use a MARR of 1.5% to determine the following: a) Using an incremental rate of return analysis, which alternative should the company choose? (15 points) b) Calculate the benefit—cost ratio for each alternative, (10 points) 0) Using incremental benefit cost ratio analysis, which alternative should the company choose? 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SC 29350 c E 15 Q r 1 51' 1 By _ Date -- V 803 - 568 -- 2100 _ \ {€803 - 568 - 2121 . _ QK'ERH‘LQoa Infriang.:-{i‘iwmiiwéjéfila.52”v -—~_=‘7;_ gm :, 50:36:11: «.0623 6? figtimum = ' _ _ "DE: [FHQDQ v§3pg§jg (23990441, uqu WC :2 v.5 Eggfi t. 4.5% <5 ii? g'zis'g " fi'gwm; j = - ' -—=---—-. n——.' '-——--—-n—. ' ' AELiéFcI-C-AN SYSTEMS COLUMBM sc NBS-5 Test 3 CE 352 Fall 2007 #2. A poor analysis technique for comparing alternatives is (circle one): (5 points) af Benefit-Cost analysis lf incremental rate of'return c. P sent worth analysis Whack period 9?None of these .3 The City of Cedar Park has decided to build a youth softball complex on land donated by one the city residents, The city engineer has collected the following estimates for the project: - Initial consuuction costs: $700,000 - Annual maintenance costs: $110,000 - Renovation costs: $00,000 after 10 years - Annual revenues from team user fees: $75,000 - Useful life: 20 years - Interest rate: 4 5%., The city expects 35,000 visitors to the complex each year. What ticket price (round up to the nearest penny) will the Parks and Recreation Department need to charge in order for the complex to break even? (30 points) ~ '1 \CKET SALE S I? 'E‘SIUOOO‘) CF12”. A $41.4,qu H A - 'TWTT‘T‘ET? ' ‘:.‘:EE_-j-:m-7"'§' t" L ‘4 ‘5 ’ 'f '. _¢ GA#HL ‘4.”"flfi‘fhlf 1' r 4— ’ r‘ r - . .. {llilil .17-, it it {ll .., m; “wa9 ‘DODCGD "Tag. ‘6 L. C I w I I' . \ iiUAm, x50 ._ "+00 OQOC A]? .Ltr5;{,;lw}cyflachorngiéP/f‘q‘gyflg fifplW|54l103 -- F‘ t e -. , l l ‘I _ ‘ O K'L'Efiltsu&_:31'?3,tu '- - - C) E34230 €954,631, q‘){_,o}gj/Ll n . "fig-goon? t KC‘3 5: “’9‘ l I / CE 352 Fall 2007 Test 3 4. Three investors bought a city lot for $1 million and built a commercial building on it for $1.5 million. Construction was completed on January 1, 2004. Annual net revenues are $800,000.. The corporate income tax rate is only 20%, because the city offered numerous tax incentives to entice the investors to build the project. The investors have an offer to sell the lot and the building for $3.5 million, to close on December 31 of this year. This is close to the value indicated in a recent appraisal. For simplicity, assume that the capital gains tax rate is 20%. 6 a) Complete the following table for this investment, in order to evaluate the offer: (20 points) I: E fixt‘hifin "Eu-ELI} Ho’s-C : E“ 6‘31l‘tsc‘1‘ :- 8 fix: ‘E OO‘CKXD ?ia(£-:33‘S 1L4? “TO. _ . LS M'fll'lin C‘R'J nu Decaf - A): (Vim on: Ule‘fi gcbfl‘u LL [c.‘C‘If g 4» arm; b) What (if any) is the depreciation recapture? (5 points) irLEOC-DICDCO I” (.QLHCHS _‘ {fix Eq‘cmqerorstf) or FEE-CIRTNN: '2 5“"““‘“ “'“‘ ‘W i; “I 7 I .w_...-._...._._w, C,A'P fl C‘: P“ r» C) im/ LAM “if: ‘2'. CD ' ’ a "b ...
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This note was uploaded on 04/18/2008 for the course ECON 352 taught by Professor Bren during the Spring '08 term at Clemson.

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Econ test - 3*. 6?] _ CE 352 Name MAKmNQ L033 _ ’ / Fall...

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