2nd_exam_CB2_key

# 2nd_exam_CB2_key - Student Name & UTEID ME353 Engineering...

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Student Name & UTEID ME353 Engineering Finance key Second Midterm Exam Closed Book 1. (12 Points) In each case, write the formula that makes the cash flow on the left equivalent to the cash flow on the right Use as few time-value-of-money factors as possible. a. 0 12345 678 900 700 500 300 Formula for P (that is, equivalent value at time 0). Formula: A = 300 + 200(A/G, i , 4): P = A(P/A, i , 8) b. 0 6789 10 200 200 200 200 200 -300 -100 -100 -100 -100 200 Formula for A (uniform equivalent) 0 A A A A A A A A A A Formula: A = ( ± 300 ± 100(P/A, i , 4))(A/P, i , 10) + 200(F/A,i,6)(A/F, i , 10) (Note: one point penalty for each factor used more than 4.)

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2 2. (12 Points) A company must acquire a material handling system to move products around the plant. Should it choose the automated or manual? Show all relevant quantities. A. An automated guided vehicle system requires an initial investment of \$1,000,000. Operating costs are \$50,000 per year. Every two years the system must be redesigned and rerouted at a cost of \$200,000. At the end of its 10-year life, the system must be removed at a cost of \$100,000. B. A primarily manual system using forklift carts. This system will last 5 years. The initial set of carts requires an investment of \$100,000. The operating cost of this system is \$200,000 in the first year, and it will rise by \$100,000 in each of the succeeding years (i.e. the costs in the five years are 200000, 300000, 400000, etc.) The salvage value of the system after 5 years is \$100,000. The salvage value is revenue.
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## This note was uploaded on 05/13/2010 for the course ME 01953 taught by Professor Bard during the Spring '10 term at University of Texas.

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2nd_exam_CB2_key - Student Name & UTEID ME353 Engineering...

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