Chapter 11
Replacement
Analysis
Principles of Engineering Economic Analysis, 5th edition
In comparing various investment
alternatives in Chapters 5 thru 10, we
considered a single alternative (where
the decision is between investing and
not investing) and

INEG 2413
THIRD PRACTICE TEST 3
F11JAW
1.
True or False: The after-tax present worth for a capital investment decreases as the
interest rate on borrowed capital increases.
2.
True or False: The after-tax present worth increases as the percent of capital t

INEG 2413
First Practice Test 4
F11JAW
1. True or False: of the 4 payment methods discussed in class, Method 1 should be used when the
lenders interest rate is 12%, the borrowers real required return on investment is 6%, the
borrowers income tax rate is 4

INEG 2413
Second Practice Test 4
F11JAW
1. True or False: in a capital budgeting problem of the type considered in class, if the
prospective investments are divisible and no mutually exclusive or contingency constraints
apply, then the optimum investment

INEG 2413
Third Practice Test 4
F11JAW
1. True or False: in a capital budgeting problem of the type considered in class, if the prospective
investments are divisible, then the objective is to maximize the internal rate of return for the
investment portfol

NAME _
INEG 2413
Test 1
F/11/JAW
Closed book, open notes, calculator allowed; any electronic device including Excel software is not
allowed. No text messaging during the test. Record your answers on the answer sheet and return it and
your work for grading

NAME _
INEG 2413
Test 2
F11JAW
Open book, open notes, calculator allowed; any electronic device including Excel software is not allowed. No
text messaging during the test. Record your answers on the answer sheet and return it and your work for
grading. Do

NAME _
INEG 2413
Test 3
F11JAW
Open book, open notes, calculator allowed; any electronic device including Excel software is not allowed. No
text messaging during the test. Record your answers on the answer sheet and return it and your work for
grading. Do

NAME _
INEG 2413
Test 4
F11JAW
Open book. Open notes. Record your answers on the answer sheet; return it and your work for
grading. Correct answer without correct work = 0 pts. Each question counts the same, 5 points. Note:
110 points are possible; hence,

INEG 2413
SECOND PRACTICE TEST 3
F11JAW
1.
True or False: among the depreciation methods discussed in class, sum-of-years-digits
yields the greatest depreciation charge during the first year if the salvage value is zero.
2.
True or False: the after-tax pr

INEG 2413
First Practice Test 3
F11JAW
1.
True or False: given the four loan payment methods discussed in class, when $500,000 is
borrowed at an interest rate of 12%, if your ATMARR is 10%, your income tax rate is 40%, and
only Methods 2 and 3 are availab

Chapter 15
Capital Budgeting
Principles of Engineering Economic Analysis, 5th edition
The Classical Capital
Budgeting Problem
Independent and
Indivisible Investments
Principles of Engineering Economic Analysis, 5th edition
Systematic Economic Analysis Tec

NAME _
INEG 2413
Comprehensive Make-Up Test
F11JAW
Open book, open notes. Record your answers on the answer sheet; return it and your work for grading.
Correct answer without correct work = 0 pts. Each question counts the same, 5 points. Note: 115 points

INEG 2413
First Practice Test 1
Open book, open notes. Do your own work. Return your work and answers for grading.
F11JAW
1. True or False: If you can borrow money at an annual compound interest rate of 6% and you can
earn 8% on your own investments, you

NAME _
INEG 2413
Second Practice Test 1
F11JAW
Open book, open notes, calculator allowed; any electronic device including Excel software is not
allowed. Record your answers on the answer sheet and return it and your work for grading.
1. (a) _ (4 pts)
17.

INEG 2413
Third Practice Test 1
F11JAW
1. True or False: if money is worth 9% compounded annually to you, then you would prefer to
receive $10,000 today than to receive 11 annual payments, with the first payment being $1,000
and each subsequent payment be

INEG 2413
First Practice Test 2
F11JAW
1. True or False: If PW(A) < PW(B) and IRR(A) < ERR(B), then ERR(A) < ERR(B). (5 pts)
2. True or False: If before-tax WACC = 7.5% and the income tax rate is 40%, then the after-tax WACC
= 4.5%. (5 pts)
3. True of Fal

INEG 2413
Second Practice Test 2
F11JAW
1. True of False: If the Eastman Chemical Company hurdle rate calculator yields a hurdle rate of 10.5% and
a change is made in the location of the investment from Hungary to Spain, then the hurdle rate required
will

INEG 2413
THIRD PRACTICE TEST 2
F11/JAW
1. True or False: If PBP(A) > DPBP(B), then DPBP(A) > PBP(B). (5 pts)
2. True or False: If $0 < PW(A) < PW(B), and PBP(A) > DPBP(B), then PBP(B) < DPBP(A). (5 pts.)
3. True or False: If PW(A) > PW(B) and DPBP(A) exi

INEG 2413
First Practice Test 3
1
TRUE M1 >M3> M2 when lender's interest rate < ATMARR/(1 - itr). Since 12% < 10%/0.60, M3 is preferred to M2
2
FALSE M4 is not attractive for some interest rates less than ATMARR/(1 - itr) = 0.09/0.60 = 15%
3
FALSE SYD yie

INEG 2413
1
2
3
4
5
6
FIRST PRACTICE TEST 1
F11JAW
True. The question can be re-worded as follows: if you can borrow money at an annual compound rate of 6% and can
earn 8% on your investment, you should prefer to repay a loan with Method 3 instead of Meth

INEG 2413
FIRST PRACTICE TEST 2
FALSE We do not know if PW(B) > $0, so do not know if IRR > MARR; also rank order of PW
1
F11JAW
does not assure rank order of ERR
2
3
4
5
6
TRUE WACCAT = WACCBT(1 - itr)
TRUE EMN hurdle rate calculator adds 2% to MARR if a

INEG 2413
1 .
10.
11.
12.
0%. Wed. my
W l W \t
W gig/Q] 00/ um
True or False: If mone has a time value of ° compounded annually, receiving $26,000 five years
from today has a greater value than receiving $7,500 one year from now, $6,000 two years

INEG 2413
10.
11.
12.
13.
14.
15.
HS-4 (Rev #2) S13JAW
True or False: If PW < 0 and IRR = 10%, then MARR > 10%. (5 pts) use a a g» amp QM {1% a
Wm
True orFalse: If PW < 0 and MARR = 10%, then ERR < IRR. (5 pts)
True or False: If PW(A) > PW(B) >