ECON Practice Final Exam - The Payback Method compares...

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Dr. Paul E. Robinson 10 th ed. Newnan 1 The Payback Method compares alternative projects on the basis of which project makes the least overall profit over the entire lifetimes of the projects…………………………. .…. .{ NO } Payback is based on which project pays back the initial cost ( investment ) first. No calculations using interest are used. Pg 294 in Newnan 10 th ed.
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Dr. Paul E. Robinson 10 th ed. Newnan 2 Using Present Worth is a good way in which to determine project acceptability………………{ YES } “Present Worth analysis is suitable for almost any economic analysis problem” Pg. 171 Summary to Chapter 5
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Dr. Paul E. Robinson 10 th ed. Newnan 3 The MARR is the interest rate used by a company at which it can earn money for the least risk………………{ YES } Chapter 15 discusses MARR in detail Pg. 484 in 10 th ed. Newnan
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Dr. Paul E. Robinson 10 th ed. Newnan 4 If the Equivalent Uniform Annual Worth for the Knurly Bytes Project is <0, should management at FIFO Inc. accept the project for making Knurly Bytes?. .............................................. { NO } If EUAW is less than zero, the project does not make a profit. Pg. 190 in Newnan 10 th ed.
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Dr. Paul E. Robinson 10 th ed. Newnan 5 Project #1 covers 5 years and Project #2 is for 7 years. Can they be compared?. ......................... { YES } Convert both to EUAB and EUAC. Then the difference in years has no effect on the comparison. Pg. 419 in Ch 14 in Newnan 10 th ed.
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Dr. Paul E. Robinson 10 th ed. Newnan 6 Is the Book Value ( BV ) for an asset equal to the cost of the asset minus the summation of the depreciation for that asset? …………………….{ YES } Pg. 358 in Ch 11 in Newnan 10 th ed.
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Dr. Paul E. Robinson 10 th ed. Newnan 7 Does the SOYD equation for the Sum-Of- Year’s-Digits Method use “t” as an actual part of the equation to find the SOYD Number? ……………….……………. . { NO } SOYD = ( N ) ( N+1 ) / 2 There is no “t” in the SOYD Number equation. Pg. 362 in Ch. 11 in Newnan 10 th ed.
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Dr. Paul E. Robinson 10 th ed. Newnan 8 Can you switch from Declining Balance to Straight Line Method within a property’s depreciation time period if the salvage value has not yet been reached?. ............................ { YES } “ …the other modification would switch from declining balance depreciation to straight line – this ensures taking enough depreciation.” Pg. 364 in Ch 11 in Newnan 10 th ed.
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Dr. Paul E. Robinson
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This note was uploaded on 09/11/2011 for the course ECON 201 - ECON 201 - taught by Professor Charlesc.chiemeke during the Spring '09 term at American University of Kuwait.

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ECON Practice Final Exam - The Payback Method compares...

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