IE 343 Midterm 2 Spr 10 sol

# IE 343 Midterm 2 Spr 10 sol - IE 343 Spring 2010 Midterm 2...

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IE 343 Spring 2010 Name: Midterm 2 (last) (first) Section: IE 343 Midterm 2 Solution April 12 th , 2010 Closed book, closed notes. Write your name and section number in the spaces provided above. Write your name on each page as well, so that in the event the pages are separated, we can still your grade your exam. Show all of your work in the spaces provided. Interest rate tables are provided for you to use in questions that require numerical answers. For problems requiring expressions as answers, carry your solution to the point where the equation for each problem is specified. For example 2,000 (P/A, 4%, 5) + 3,500 (P/F, 4%, 5) – 4,000 Hint: Even if a problem doesn’t require you to draw a cash-flow diagram, it’s always a good idea to draw one.

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IE 343 Spring 2010 Name: Midterm 2 (last) (first) 2 1. Define the following terms and provide a short example for each of them: a. Cost Basis ( 4 points) Illustrate using the example of buying a car ANS: The initial cost of acquiring an asset (purchase price plus any sales taxes), including transportation expenses and other normal costs of making the asset serviceable for its intended use Ex. When buying a car, cost basis would be purchase price of the car including sales taxes. b. Inflation ( 4 points) ANS: Increase in the average price paid for goods and services bringing about a reduction in the purchasing power of the monetary unit Ex. Oil prices have gone up 75% in the past decade.
IE 343 Spring 2010 Name: Midterm 2 (last) (first) 3 2. Two mutually exclusive water purification systems are being considered for implementation. Data for each of these systems is given in the table below. Assume the

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## This note was uploaded on 02/07/2012 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue.

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IE 343 Midterm 2 Spr 10 sol - IE 343 Spring 2010 Midterm 2...

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