Exam1_2005

Exam1_2005 - Exam 1 IE 226 J. Hartman Spring 2005 Name_...

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Exam 1 Name___________________ IE 226 J. Hartman March 1, 2005 Spring 2005 INSTRUCTIONS: Answer all of the following questions on the following six pages. If you need additional paper to work on, come to me and I will provide you with blank paper. Show all of your work (unless you do not want credit). Point values are adjacent to the problem number. [2] 1. What is the difference between a project’s present worth and profit. [2] 2. Why was the ERR developed? [2] 3. In what ways does a loan affect after-tax cash flows? Be specific about the principal borrowed, principal payments and interest payments. [2] 4. Give one reason to AND one reason not to use double-declining balance when depreciating an asset. [2] 5. Give one reason to AND one reason not to generate ideas with a group of people.
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Boeing recently announced that Ryanair Holdings of Ireland agreed to buy 70 jets (737- 800s). These airplanes carry a list price of $57 million each. The planes are to be delivered between 2008 and 2012. 1 Assume five planes are delivered at the end of 2008 and Boeing increases the delivery amount by 5 planes each year until reaching 20 in 2011. The final 20 planes are delivered at the end of 2012. What is the present worth (end of 2004) of revenues if list prices are paid at the time of delivery and the nominal interest rate is 11.495% compounded quarterly? 1
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Exam1_2005 - Exam 1 IE 226 J. Hartman Spring 2005 Name_...

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