midterm_solutionMS261_F10

midterm_solutionMS261_F10 - MSCI261 Fall 2010 Midterm...

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Unformatted text preview: MSCI261 Fall 2010 Midterm Solution Question 1 1. C 2. C 3. D 4. D Question 2 a. b. A = 10,000(A/F, 10%, 5) = 1,638 c. X = 20,000 500(P/A, 1%, 30) = 7096 d. P = [8,000 + 1,000*(A/G, 10%, 6)](P/A, 10, 6) = 44,257 Question 3 b. P = 65,000 + 5,000(P/F, 10%, 7) + 20,000(P/A, 10%, 7) 2,500 = $19,867 Question 4 a. SUMY: ROVNO: PSEL: Choose ROVNO since it has smallest payback period. b. PW(SUMY) = 1,000 + 10*50(P/A, 10%, 3) = 243.45 PW(ROVNO) = 1,200 + 10*70(P/A, 10%, 3) = 540.83 PW(PSEL) = 1,500 + 10*80(P/A, 10%, 3) = 478.52 Choose ROVNO since it has largest present worth. * Question 5 a. X = Where = = = 11.65% = 9.52% b. If x 3, do not produce since not profitable Otherwise produce Question 6 AW(normal) = 22,000(A/P, 10%, 5) + 8,000 (A/F, 10%, 5) 7,500 1,500 = 13,493 AW(high efficiency) = 30,000(A/P, 10%, 5) + 10,000(A/F, 10%, 5) 4,500 2,500 = 13, 276 Choose high efficiency since it has higher lower cost Question 7 LCM = 12 years PW(A) = [ 5,000 400(P/A, 10%, 3)][1 + (P/F, 10%, 3) + (P/F, 10%, 6) + (P/F, 10%, 9)] PW(B) = [ 4,000 300(P/A, 10%, 2)][1 + (P/F, 10%, 2) + (P/F, 10%, 4) + (P/F, 10%, 6) + (P/F, 10%, 8) + (P/F, 10%, 10)] PW(C) = [ 7,000 1,000(P/F, 10%, 2)][1 + (P/F, 10%, 4) + (P/F, 10%, 8)] Question 8 PW = 850,000 125,000(P/A, , 10) + 40,000(P/F, , 10) + [500,000 + 60,000(A/G, , 10)(P/A, , 10) =0 Compute , which is the internal rate of return of this proposed investment. Question 9 1. Eliminate D since its IRR = 11% < MARR 2. A is the current best since it has lowers first cost than other remaining proposals 3. C is the challenger since it has second lower first cost 4. > MARR, the challenge succeeds, so C becomes the current best 5. B is the challenger since it has next lowest first cost 6. < MARR, the challenge fails, so B is still the current best 7. Finished all comparison, so Proposal B is the overall best. ...
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This note was uploaded on 04/01/2012 for the course MSCI 261 taught by Professor Bonkoo during the Winter '09 term at Waterloo.

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