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Q1 In a modified B/C ratio:

a. Disbenefits and M&O costs are subtracted from benefits in the numerator

b. Disbenefits are subtracted from benefits, and M&O are added to cost in the denominator

c. Disbenefits are added to costs, and M&O costs are subtracted from benefits

d.M&O receives the same treatment as the salvage value

Q2. To convert constant-value dollars into inflated dollars, it is necessary to take CV dollars and:

a. Divide by (1 + if) n

b. Divide by (1 + f ) n

c. Divide by (1 + i) n

d. Multiply by (1 + f )n

please explain me why you chose the answer.

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019

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Related questions

Q1. The following are examples of benefits except:

a. Additional revenue to local motels because of extended national park road.

b. School overcrowding because of a military base expansion.

c. Less tire wear because of a military base expansion.

d. $400,000 annual income to local businesses because tourism created by new national park.

Q2. To convert inflated dollars into constant-value dollars, it is necessary to take inflated

dollars and:

a. Divide by (1 + if)n

b.Divide by (1 + f )n

c. Divide by (1 + i)n

d. Multiply by (1 + f)n

Please explain me why you chose the answer.

  1. 1. What is the capitalized value of an infinite series of $1,000 biennial (every two years) payments? MARR = 10%

    $4,950

    $4,025
    .

    $4,350


    $4,762

    1. 2. Frank West Enterpises would like to choose one of the following plans for expansion. Using present worth analysis, find the best alternative among the three alternatives and the Do-Nothing.

      Alt. A

      Alt. B

      Alt. C

      Initial Cost

      $10,000

      $21,000

      $8,000

      EUAB

      $6,000

      $7,000

      $4,000

      EUAC

      $1,500

      $1,000

      $2,000

      Salvage Value

      $2,000

      $8,000

      $3,000

      Life

      2 Years

      3 Years

      2 Years

      Use a MARR of 10%.

      .

      Do-Nothing
      .

      Alt. C
      .

      Alt. B
      .

      Alt. A

      3.

      1. U. S. Engineering is investigating the possibility of acquiring new automated packaging equipment at a cost of $12,000. It is expected that the equipment will have a salvage value of $1,000 at the end of its useful life of 10 years. It is determined by the plant engineering department at the company that the operation and maintenance cost will be $500 in the first year and will gradually increase every year starting year 2 at the rate of $50 until the equipment is retired. Determine the equivalent uniform annual cost (EUAC) if MARR for the company is 10%.

        $2,575.95


        $2,150.50
        .

        $2,176.60
        .

        $2,184.40

        4.

        1. The cash flows given in table below are for two different alternatives. MARR =10%

          Data

          C

          D

          Initial Cost

          $20,000

          $80,000

          Uniform Annual Benefits

          $6,000

          $10,000

          Salvage Value

          $5,000

          $20,000

          Useful Life in years

          5

          infinity

          The equivalent uniform annual worth (EUAW) of alternative N is ______________.

          Hint: Assume the Salvage Value is never realized since N is infinite.

          $2,000

          $1,920

          $1,762


          $2,476

          5.

          1. Compare the following plans using a MARR of 6%.

            Data

            Plan X

            Plan Y

            Equipment First Cost

            $50,000

            $75,000

            Annual Operation & Maintenance Cost

            $3,000

            $2,500

            Salvage Value

            $10,000

            $0

            Service Life, Years)

            25

            50


            $6,728; $7,255


            $7,255; $9,000
            .

            $6,728; $7,728
            .

            $6,728; $8,200

            6.

            1. LAEP, Inc. wants to evaluate two methods of shipping their products. The following cash flows are associated with each alternative:

              Data

              Method

              A

              B

              Life (Years)

              10

              10

              First Cost

              $700,000

              $1,512,000

              M&O Cost

              $18,000

              $9,000

              M&O Cost Gradient

              $900

              $775

              Annual Benefit

              $154,000

              $303,000

              Salvage Value

              $142,000

              $210,000

              Annual profits are based on amount of products which can ordinarily be shipped each year as a function of the amount of vehicles or service purchased with the first cost and the M&O costs.

              Using a MARR of 15%, calculate the equivalent uniform annual cash flow (EUAB - EUAC) for each alternative.

              Determine the most desirable alternative based on the results.

              $389.57, $445.90; Method A


              $445.90, $389.57; Method A
              .

              $445.90, $389.57; Method B
              .

              $389.57, $445.90; Method B
            7.

            1. For the cash flow diagram shown, which of the following equations properly calculates the uniform equivalent (A)?

              n

              0

              3

              6

              9

              12

              15

              Dollars

              $100

              $100

              $100

              $100

              $100

              $100


              A=100(A/P,i,15)+ 100(A/F,i,3)


              A=100(A/P,i,15)


              A=100(A/F,i,3) + 100(A/F,i,15)


              A=100(A/P,i,3) + 100(A/F,i,3)
              8.

              1. Three different alternatives shown in table below are being considered by U. S. Engineering systems.

                Assume that alternatives X and Z are replaced at the end of their lives.

                Data

                Alternative X

                Alternative Y

                Alternative Z

                Initial Cost

                $6,000

                $1,000

                $1,500

                Uniform Annual Benefits

                $810

                $125

                $ 230

                Useful Life in Years

                20

                infinite

                10

                MARR

                12%

                The NPW for alternative

1. The Sit N Sip Tearoom has an outdoor deck where customers can sit outside on nice days and sip their tea. Next door to the tearoom is the Flowerchild Nursery, which grows flowers for sale to florists. Using the ideas of social and private benefits, which company seems more likely to provide positive externalities for the other? Briefly explain.

2. The Gizmo Company is looking at plans for developing many new household gadgets. The table below shows the company's demand for financial capital for research and development of these gadgets, based on its expected rates of return from selling them. However, say that every investment would have an additional 5% social return: that is, an investment that pays at least a 6% return to the Gizmo Company will pay at least an 11% return for society as a whole, an investment that pays at least 7% for the Gizmo Company will pay at least 12% for society as a whole, and so on.

Value of R&D Projects That Provide at Least This High a Private Rate of Return

Estimated Rate to the Gizmo Company of Return (measured in millions of dollars)
10 100
9 102
8 108
7 118
6 133
5 153
4 183
3 223

a. If the opportunity cost of financial capital for the Gizmo Company is 9%, how much will it invest in R&D if it receives only the private benefits of this investment?

b. In the table, the numbers in the second column are rising as the numbers in the first column are falling. What's the economic reasoning behind this pattern?

c. How much will the firm invest if it also receives the social benefits of its investment?

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