i University of Toronto
2: Faculty of Applied Science and Engineering
FINAL EXAMINATION - Fall, 2016
ECE 472E - Engineering Economic Analysis & Entrepreneurship
Exam Type: D
Calculator Type: 1
Examine
IRR Reinvestment Rate
IRR Reinvestment Rate
What interest rate for the reinvestment of cash flows
is implicitly assumed by the Internal Rate of
Return methodology?
At-1
At
Bt
Et
At-1
At
t-1
t-1
Intere
Capital Budgeting
Capital Budgeting
Assume no taxes, perfect certainty
Process of planning expenditures whose returns are
expected to extend beyond one year
Significance of capital budgeting
long-ter
Equivalence
Equivalence
Two cash-flow profiles are equivalent at some specified
interest rate, i %, if their present values are equal using that
interest rate of i.
$300
Cash Flow Profile A:
Purchase
Replacement Analysis
Replacement due to Obsolescence
frequently occurring problem
reasons for replacing existing assets
replacement due to obsolescence
replacement due to deterioration
replacement
Compensation For Lending
Time Value Of Money Operations
The value of a given sum of money depends on when the
money is received
Interest - rental amount charged for the use of money
Fn = P + In
where
Public Sector Projects
Benefit-to-Cost Comparisons
Benefit-cost analysis is often used to evaluate projects
undertaken by the government
Benefits and costs are evaluated on a monetary basis
The choice
Breakeven, Sensitivity and Risk Analysis
Investment Decisions Under Risk
Breakeven Analysis
Performed when we are completely uncertain of the
possible values a parameter can take on
This method iden
Determining After-Tax Cash Flows
Capital Budgeting - After-Tax Treatment
Taxes
Interest
Income Statement
Gross Income
After-Tax
Cash Flow
What are the effects of the benefits and costs of a project
on
Nonlinear Breakeven Analysis
Nonlinear Breakeven Analysis
Manufacturing Example
Cost and revenue functions do not generally follow
convenient linear patterns
Manufacturing Example Cost Schedule
n
FC
0
Income Tax Considerations
Faculty of Applied Science and Engineering
tax dollars are real cash flows
maximize the value of the firm on an after-tax basis
taxes and depreciation affect the magnitude an
Free Enterprise System
Free Enterprise System
Private Property
factors of production - scarce resources - owned by
individuals and private institutions
freedom to negotiate legally binding contracts
ECE 472 Tutorial Review Questions for Chapter 3
For the Chapter 3 questions, be sure to draw the cash flow diagrams to help understand the problem.
Question 1 Annuity Valuation Methods
3-16 - Consider
Introduction
Faculty of Applied Science and Engineering
Each engineering project should be evaluated along two
dimensions:
The Department of Electrical
and Computer Engineering
Does it meet the requir
ECE 472F After-Tax Project Analysis
Lecture Discussion
First Cost
Salvage Value
Planning Period
Revenue
O & M Cost
After-tax MARR
CCA Rate
Tax Rate
Capital Cost Allowance Depreciation
1,000,000
150,00
ECE 472 Tutorial Review Questions for Chapter 7
Question 1 Break-Even Analysis
A store owner is considering purchasing a Kodak photo kiosk. It can be purchased for $50 000 and is
expected to have a us
ECE 472 Tutorial Review Questions for Chapter 1
Question 1 Cash Flow Analysis
Two investment opportunities are available. Each requires a $1 000 investment. The returns are
guaranteed and are as follo
ECE 472 Tutorial Review Questions for Chapter 6
Question 1 Public Works Project B/C Ratio Analysis
6-6
Remember that the incremental approach must be used in this problem because it asks for the
B/C r
ECE 472 Tutorial Review Questions for Chapter 9
Question 1 Accounting Statements - Basic
9-1 This is an excellent warm-up accounting question before attempting Problem Set #1 and
Question 2.
Question
ECE 472 Tutorial Review Questions for Chapter 5
Question 1 Capital Cost Tax Factor
The Six Points Construction Company is a profitable construction company. It has purchased a
bulldozer for $50,000. A
ECE 472 Tutorial Review Questions for Chapter 4
Question 1 Present Value Project Analysis
4-7
Question 2 Internal Rate of Return Project Analysis
In order to improve air quality, the Ministry of the E
Hydro Utility
A small hydro utility has two hydro-electric power
plants. The fixed cost of Plant 1 is $4,000,000 per year
and at Plant 2, it is $2,500,000 per year. The variable
cost of producing elec
MACRS - Modified Accelerated Cost
Recovery System
MACRS is the U.S. equivalent of CCA
ACRS was introduced in 1982 and phased in by 1985
simplified system that permitted faster write-off of
business as
IRR vs. NPV: Mutually Exclusive Projects
B
A
IRR vs. NPV : Mutually Exclusive Projects
$200
$1 500
Which Project Is Really Better?
Look at the rate of return (IRR) on the incremental
investment
$1 30
Multiple Compounding Periods in a Year
Not all interest rates are stipulated as annual compounding
rates often rates are compounded more frequently
$1 000 Loan 8% Interest Compounded Quarterly
=> 2% p
5% University of Toronto
\ :3 Faculty of Applied Science and Engineering
FINAL EXAMINATION - Spring, 2015
ECE 472$ - Engineering Economic Analysis & Entrepreneurship
Exam Type: D
Examiner: R. Vander
5% University of Toronto
2: Faculty of Applied Science and Engineering
FINAL EXAMINATION - Spring, 2016
VE.UT EVO
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ECE 472S - Engineering Economic Analysis & Entrepreneurship
Exam Type: D
Examin
% University of Toronto
Q Faculty of Applied Science and Engineering
FINAL EXAMINATION - Spring, 2015
ECE 472S - Engineering Economic Analysis & Entrepreneurship
Exam Type: D
Examiner: R. Vander Kraat
University of Toronto
Faculty of Applied Science and Engineering
FINAL EXAMINATION - Fall, 2015
ECE 472F - Engineering Economic Analysis & Entrepreneurship
Exam Type: D
Examiner: R. Vander Kraats
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