590-2008spring-t1 - Name: _ _ _ E-mail: _ (last name...

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Unformatted text preview: Name: _ _ _ E-mail: _ (last name first) IE 590 - Mfg. Economics Spring 2008 Test No. 1 Closed book, closed notes 5 questions; 10 points each; maximum score of 50 points 75 minutes; approximately 15 minutes per question Be brief; use illustrations if possible DO NOT WRITE on the back of the test sheets Q1. Using the concept of “return on unrecovered capital investment”; provide an explanation of the (a) payback period, and (b) internal rate of return. Use illustrations. IE 590 - Mfg. Economics Name: _ _ _ Spring 2008 (last name first) IE 590 — Mfg. Economics Spring 2008 Name: _ (last name first) Q2. Provide an explanation of why it’s necessary to use the incremental rate of return method in making an economic comparison of two projects (excluding the Do Nothing case). Use illustrations. '4) IE 590 — Mfg. Economics Name: __ _ _ _ _ Spring 2008 (last name first) IE 590 — Mfg. Economics Name: Spring 2008 Q3. (last name first) ‘JI A firm is faced with four project competing for the funds available for capital investments. Project A is a coil steel cut-to-length production line. This line will feed steel from a coil, straighten, shear and stack it. Project B is an electric furnace for the foundry. Project C is a gas furnace for the foundry. Project D consists of an electric trolley car to be used to load coil steel onto the proposed cut-to—length production line, rather than using the existing crane. The capital investment $5 is limit to $850,000 in the current year, and $750,000 the following year. The minimum attractive rate of return for all projects under consideration is 0%. The expected cash flow (x103 dollars) are as follows: End-of—Year Project A, XA Project B, XB Project C__, XC _ _ Project D, XD j 0 __ —500_‘ —250 —400 ____ _ _ 400] 1 -600 —100 _ 50 _ —40 2 200 150 j— 200 -20 _ 3 _ 500 350 200 160 4 h 700 550 100 160 5 _ .1 _ 300 750. _ 100 160 Formulate the above problem as a capital allocation model. Assume that unused funds can be carried over to the next period. IE 590 — Mfg. Economics Spring 2008 Name: (last name first) (1 IE 590 — Mfg. Economics Name: Spring 2008 (last name first) Q4. Draw a chart illustrating the source and uses of cash flows for the purpose of funding future projects taking the firm’s viewpoint. IE 590 — Mfg. Economics Name: Spring 2008 (last name first) Name : IE 590 - Mfg. Economics _ _ (last name first) Spring 2008 Q5. Compute the following: a. F/P, P/F, F/A, P/A, A/F, and A/P with i=12%, and n=24. b. The monthly payment for a car loan of $10,000 which is payable over a period of 48 months. The loan rate is 1/2% per month. Show all calculations. 0 IE 590 - Mfg. Economics Spring 2008 Name: (lat name first) 10 ...
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590-2008spring-t1 - Name: _ _ _ E-mail: _ (last name...

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