Final Exam.docx - Review Test Submission Final Exam Course Test Status Attempt Score Results Displayed 2019 r Cost Capital Project Analysis Final Exam

Final Exam.docx - Review Test Submission Final Exam Course...

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Review Test Submission: Final Exam Course 2019 r Cost Capital Project Analysis Test Final Exam Status Completed Attempt Score 30 out of 100 points Results Displayed All Answers, Submitted Answers, Correct Answers, Feedback, Incorrectly Answered Questions Question 1 0 out of 10 points Machine A which is a basic model costs $25,000 and lasts 5 years. At the end of the 5 years it has a salvage value of $1,500 and its market value at the end of 3 years is $7,000. An enhanced model, Machine B sells for $36,000 and has a life of 8 years with a salvage value of $8,500. The benefit that these two machines are anticipated to provide is $9,500 per year, indefinitely. Looking at an 8-year window with a rate of 12% APR compounded yearly, what is the difference between the net present worth of Machine B over Machine A? (Hint: the second copy of Machine A can be sold at the end of the 8th year for the price that it will command after a 3-year life.) Selected Answer: $4,291 Answers: $11,565 $8,428 $4,291 $2,940 Respo nse Feedba ck: Answer is D. $2,940. Machine A (Basic Model) Machine B (Improved Model) Years Initial cost Salvage Benefit Cash flow Initial cost Salvage Benefit Cash flow 0 ($25,000) ($25,000) ($36,000) ($36,000) 1 $9,500 $9,500 $9,500 $9,500 2 $9,500 $9,500 $9,500 $9,500 3 $9,500 $9,500 $9,500 $9,500 4 $9,500 $9,500 $9,500 $9,500 5 ($25,000) $1,500 $9,500 ($14,000) $9,500 $9,500 6 $9,500 $9,500 $9,500 $9,500 7 $9,500 $9,500 $9,500 $9,500 8 $7,000 $9,500 $16,500 $8,500 $9,500 $18,000Difference Rate 12%NPW $11,685 NPW $14,626 Question 2 0 out of 10 points
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For two mutually exclusive machines, which machine will you select if the MARR is 10% based on the concept of IRR or B/C ratio? Machine A: Cash flows for Years 0 to 6: (-$2000), $500, $500, (-$1000), (-$1000), $3500 and $4000. Machine B: Cash flows for Years 0 to 6: (-$3000), $0, $1000, (-$500), $1800, (- $3500) and $9000. Selected Answer: Both need to be rejected. Answers: Machine A Machine B Both need to be rejected.
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  • Spring '14
  • MerwanB.Mehta

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