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CIII-Engineering Economic Analysis-Exam-VIII (1)

# CIII-Engineering Economic Analysis-Exam-VIII (1) -...

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Engineering Economic Analysis Final Exam – 2001 Sample Test – Dr. Kahraman Name: Read the following instructions carefully Fill in your name on this exam sheet. Fill in your name, exam version number and the course number on your general purpose Scan Sheet. Use the scan sheet to answer all the questions. You must return both the exam sheet and the scan sheet at the end of this examination. This is the only check we have that you attended the examination. In recognition of the Student Honor Code, you should neither give nor receive aid on this examination. Note that your answers may differ slightly from the choices listed due to rounding errors. Select the closest answer from the listed choices. Problem 1 Consider the four mutually exclusive projects given below. Project Investment at year 0 IRR A \$2,000 45% B \$2,500 40% C \$3,000 35% D \$3,500 30% The service life for all the four projects is the same and investment is required only in year 0. Also, IRR(B-A) = 17%, IRR(A-D) = 15%, IRR(D-C) = 10%, IRR(B-C) = 20% Which project would you prefer based on the rate of return criterion at a MARR of 13%? A. A B. B C. C D. D E. Information insufficient to decide Problem 2 The following two cash flow transactions are equivalent at an interest rate of 9%. Find X A. X < \$90 B. \$90 <= X < \$94 C. \$94 <= X < \$98 D. \$98 <= X < \$102

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E. None of the above Problem 3 Farmer's National Bank gave you a loan of \$30,000, to buy a car, at an interest rate of 12% compounded monthly. The agreement was to pay off the entire amount in 48 equal monthly installments (each payment occurs at the end of each month). After making the first 30 payments on time you missed the payments due at the end of the 31 st and the 32 nd months. Now at the end of the 33 rd month you want to pay off the remaining amount of the loan in full. Assuming no penalty of charges for the missing payments, how much should you pay? A. between \$0 and \$12,500 B. between \$12,501 and \$13,000 C. between \$13,001 and \$13,500 D. between \$13,501 and \$14,000 E. greater than \$14,001 Problem 4 Five years ago you purchased 100 shares of Gillette stock at \$30 per share. Now the current stock price is \$85 per share. Assuming that the price of the stock is expected to continue an increasing trend in the future, which of the following statements is incorrect ? A. If you sell the stock right now, your annual rate of return on your Gillette investment will be less than 25%. B. In order to realize a 25% annual rate of return, the current stock price should be about \$92. C.
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CIII-Engineering Economic Analysis-Exam-VIII (1) -...

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