CE 167 Midterm #1
Fall 2003
Prof. C.W. Ibbs
Directions
:
•
Put your name on your bluebook.
•
This exam is to be completed in a bluebook – answers not recorded
in a bluebook will not be graded.
•
Place the exam on the inside of you bluebook when finished.
•
Read the question thoroughly before answering.
Point totals for
each question are listed.
•
Write legibly
and express yourself logically and explicitly.
Write
short, concise answers.
•
If you have a question regarding any portion of this exam, approach
the proctor privately.
Question #1
[10 points]
You have the opportunity to invest $10,000 now.
Find the IRR if you receive
$1,200 per year at the beginning of the year for 10 years.
IRR = i @ NPV = 0
NPV = 0 = -$10,000 + $1,200 + $1,200(P/A, i, 9)
NPV = -$8,800 + $1,200(P/A, i, 9)
(P/A, i, 9) = 7.333 -> i
≈
4.5%
Question #2
[25 points total]
You are considering buying a bulldozer for $100,000.
You expect this investment
to provide a yearly benefit of $21,300 for five years, and can be sold at the end of
the fifth year for $10,000.
The current interest rate for construction equipment is
5%.
$10,000
$1,200
1
2
3
4
5
6
7
8
9
10
Equivalent to (A, i, n = 9)