EGG 307 Sample Exam 2 Solutions

EGG 307 Sample Exam 2 Solutions - University of Nevada Las...

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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 end-of-period. 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.

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EGG 307 Sample Exam 2 Solutions - University of Nevada Las...

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