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University of Nevada Las Vegas
EGG 307: ENGINEERING ECONOMICS
PRACTICE
EXAM
Second Midterm Exam (Closed Book/Notes)
Duration: 75 minutes
Name:
Instructions
: Please attempt all four questions using both sides of the exam paper provided. Read the
questions carefully and show your work clearly
. Full credit to any part of a question will be given only if
all the necessary steps are clearly shown and the answer is correct. Unless stated otherwise, all periodic
cash flows occur at endofperiod.
Use of
cash flow diagrams
will significantly help you in interpretation
and understanding of the questions
.
GOOD LUCK !!
Qu. 1 (25 points)
A venture capitalist is considering two mutually exclusive investments. The first one requires
investing $50,000 now in a fund that will pay $2,000
quarterly
for five years. At the end of five years
there will be additional lump sum revenue of $100,000.
The second option requires an initial invest of
$110,000 now and will pay
annual
revenues of $40,000 for five years.
(a)
If the investor’s nominal
annual
MARR is 12%
compounded quarterly
, which investment is more
economical? Clearly state the method of evaluation used.
(b)
Compute the present worth of the first alternative assuming compounding is done
continuously
.
Qu. 2 (25 points)
A newspaper publishing company is considering to acquire a new printing machine with an initial
cost of $180,000 and annual operation and maintenance costs of $60,000. It has a salvage value of
$50,000 at the end of its 4 year service life. The company’s MARR is 10%
(a) Compute the equivalent uniform annual cost of the machine.
(b) Another alternative machine being considered has a higher initial cost of $360,000, lower annual
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This note was uploaded on 07/13/2009 for the course EGG a taught by Professor Dr.kaseko during the Spring '09 term at University of Nevada, Las Vegas.
 Spring '09
 Dr.Kaseko

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