EE366 - HW 10 (5th Edition): Park 12.27 (a & b), 14.2 (b, c, d), 14.8, 14.11, 14.15,
16.12, Decision Problem
14.2:
a) Original cost = $15,000 and Market value = $6000
Sunk cost = $15k 6k = $9000
From an accounting point of view, the value of the machine n
Decision Tree Question:
0.05
First
30
30
30
0.2
Second
20
New Product
0
20
4.25
20
0.5
Late
10
10
10
0.25
Fail
-25
-25
2
-25
0.3
5.7
High
12
Cost Reduction
0
12
5.7
12
0.7
Low
3
3
3
Do Nothing
5
5
5
With perfect information:
Develop the New product if you
HW 9 (5th Edition):
Decision problem: A firm is considering four mutually exclusive investment alternatives
designated A1, A2 and A3. The firm has identified four scenarios that describe the
possible State of Nature this investment will encounter (S1 to S
HW 8 (5th Edition): 11.6, 11.8, 11.10, 11.15, 11.19a, ST11.3 (wo R&D), CPI Question
CPI Question: The Consumer Price Index (CPI) was 164.3 in January 1999. It had
risen to 185.2 in January of 2004.
a) What was the average annual inflation rate over that 5
HW 4 EE366 McCann
Park 5th Edition
5.5: a) A: 4x$800=$3200 and 5x$800=$4000; therefore payback is 5years or 4.375 years
B: 3 years profit = $5000 and that equals the investment Payback is 3 years.
C: 3 years profit = $6000 and 4 years profit = $10,000. Pa
HW 3 EE366 McCann
Park 5th Edition
Problem 1: The interest for one month is $40 so the monthly interest rate is 40/200 = 20%. The
nominal annual interest rate is 12 x 20% = 240%. The effective annual interest rate is [(1.2)^12]1 = 791.6%
Problem 2: First
HW 2 EE366 McCann
Park, 5th Edition
3.5: $18k is a future worth at the end of year 5. You are setting the future worth of P equal to
$18k, or equivalently, finding the present worth of the $18k.
$18,000 = P (1.05)5 P = $18,000/1.2763 = $14,103; or
P = $18
HW 1 EE366 McCann
2.2: (a) Working capital requirement is the change in working capital.
Change in WC = Change in current assets Change in current liabilities
WC = + ($100k - $20k) ($30k - $40k) = $90k
The amount of money needed to operate the business in
EE366 - HW 10: Park 12.24 (a & b), 14.1, 14.6, 14.9, 14.13, 16.10, Decision Problem
14.1:
a) Original cost = $15,000 and Market value = $6000
Sunk cost = $15k 6k = $9000
From an accounting point of view, the value of the machine now is the NBV = $4320.
Fr
Decision Tree Question:
0.05
First
30
30
30
0.2
Second
20
New Product
0
20
4.25
20
0.5
Late
10
10
10
0.25
Fail
-25
-25
2
-25
0.3
5.7
High
12
Cost Reduction
0
12
5.7
12
0.7
Low
3
3
3
Do Nothing
5
5
5
With perfect information:
Develop the New product if you
HW 9:
Decision problem: A firm is considering four mutually exclusive investment alternatives
designated A1, A2 and A3. The firm has identified four scenarios that describe the
possible State of Nature this investment will encounter (S1 to S4). The probab
HW 8: 11.5, 11.7, 11.9, 11.13, 11.16a, ST11.2 (wo R&D), CPI Question
CPI Question: The Consumer Price Index (CPI) was 164.3 in January 1999. It had
risen to 185.2 in January of 2004.
a) What was the average annual inflation rate over that 5-year period?
b
HW 4 EE366 McCann
Park 4th Edition
5.3: a) A: -$2500+8($300) = -$100 Payback = never
B: 1 years = -$1000 and 2 years = +$500. Payback is 2 years or 1.67 years if fractional years
are used.
C: 2 years = -$1500 and 3 years = +$500. Payback is 3 years or 2.7
HW 3 EE366 M cCann
Park 4th Edition
Problem 1: The interest for one month is $40 so the monthly interest rate is 40/200 = 20%. The
nominal annual interest rate is 12 x 20% = 240%. The effective annual interest rate is [(1.2)^12]1 = 791.6%
Problem 2: First
HW 2 EE366 McCann
Park, 4th Edition
3.5: $12k is a future worth at the end of year 5. You are setting the future worth of P equal to
$12k, or equivalently, finding the present worth of the $12k.
$12,000 = P (1.05)5 P = $12,000/1.2763 = $9,402
3.7: Compute
HW 1
EE366
M cCann
2.2: (a) Working capital requirement is the change in working capital.
Change in WC = Change in current assets Change in current liabilities
WC = + ($100k - $20k) ($30k - $40k) = $90k
The amount of money needed to operate the business i