CHAPTER 1 PROBLEMS
1-1
Think back to your first hour after awakening this morning. List 15 decision-making
opportunities that existed during that hour. After you have done that, mark the decision-making
opportunities that you actually recognized this morn
CHAPTER 2 - PROBLEMS
2-1
Bob Johnson decided to buy a new house. After looking at some new housing
developments, he decided that a custom-built home was preferable. He hired an architect to
prepare the drawings. In due time, the architect completed the dr
CHAPTER 3 - PROBLEMS
3-1
In your own words explain the time value of money. From your own life (either now or in
a situation that might occur in the future), provide an example in which the time value of money
would be important.
Solution:
Time value of m
Chapter13(1)
ReplacementAnalysis
Learning Objectives
Replacement situations
Opportunity cost
Minimum cost life - Economic Service Life
(ESL)
NO TAX CONSIDERATIONS
2
The Replacement Problem
Obsolescence
Depletion
Technology of an asset is surpassed by newe
Chapter16
EconomicAnalysisinthe
PublicSector
1
Learning Objectives
Decision Making in the Public Sector
Comparing Private and Public Investments (Financing, duration, and
politics of investments)
Framework of Benefit- Cost Analysis
The Point of View used
Chapter13(2)
ESLWhentoreplaceanAsset
Learning Objectives
AC and MC
The process of replacing a Defender with a
Challenger
Repeatability assumption
NO TAX CONSIDERATIONS
2
Replacement Terminology
Defender: an old
machine
Challenger: a new
machine
In replace
TOPIC22Chapter4
EquivalenceforRepeated
CashFlows
Learning Objectives
Uniform compound series
Arithmetic gradients (Topic 2-3)
Geometric gradients (No)
Continuous compounding with uniform
series (No)
Spreadsheet functions (No)
Annuity
Annuity: a series of
Topic4Chapter14
InflationandPriceChange
Learning Objectives
What is inflation?
How do we measure inflation?
How do we incorporate the effect of inflation in
equivalence calculations?
Inflation effect on purchasing power
Real and actual dollars
Constant an
Chapter3
InterestandEquivalence
NominalandEffective
InterestRates
Learning Objectives
Nominal and effective interest rates
Continuously compounded interest (NO)
Nominal and Effective Interest
Rates
Notation:
r = Nominal interest rate per year
without cons
Newnan
Example 13-1
A piece of machinery costs $7500 and has no salvage value after it is installed. The manufacturers
warranty will pay the first years maintenance and repair costs. In the second year, maintenance costs will
be $900, and this item will i
Newnan 13-4
ESL of D year 1 EUAC 13,250 < EUAC of C at its ESL15,426
Keep for year 1. What about year 2?
Year 2 MC of D 14,600 < EUAC of C at its ESL15,426
Keep for year 2. What about year 3?
Year 3 MC of D 15,950 > EUAC of C at its ESL15,426
Do not keep