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PracticeFinal

# PracticeFinal - Practice Final Exam IE 1040 Spring...

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Practice Final Exam IE 1040 Spring, 2008 (2084) Practice techniques 1.) Find the PW, AW, and FW of the following investment (Before Tax): Initial investment = -\$100,000 Annual savings = \$35,000 Life = 5 years Salvage value = \$20,000 Before-Tax MARR = 15% Answer: PW = \$27,271 AW = \$8,136 FW = \$54,844 Chapter 6 (Comparing Alternatives) 2.) Two alternative boilers are being considered for a particular plant. The following costs are relevant: Boiler A Boiler B Initial Cost \$50,000 \$120,000 Useful Life 20 years 40 years Salvage Value \$10,000 \$20,000 (at the end of Useful Life) \$9,000 \$6,000 a.) If the plant’s MARR is 10%, and the repeatability assumption is valid, which boiler would you recommend? Answer: AW A = -\$14,700; AW B = -\$18,320; Select Boiler A to minimize costs. b.) If the repeatability assumption were not valid, what would be another way to compare these two alternatives (calculations are not necessary)? Answer: If you use the coterminated assumption and a 20-year life, find the imputed market value of Boiler B at the end of the 20 years and compare the PWs based on 20 years. You could also determine the costs of a second Boiler A for years 21 to 40 and compare on a 40-year life. Chapter 11 (B/C Ratios)

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PracticeFinal - Practice Final Exam IE 1040 Spring...

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