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Engineering Economics Analysis 9th Edition Ted G. Feller - Solutions
Consider the following cash flow:Year Cash
Compute the rate of return for the following cash flow to within 1/2%.Year Cash Flow0.........................-$1001-10.......................+27
Solve the following cash flow for the rate of return to within an 112%.Year Cash
Compute the rate of return for the following cash flow.Year Cash Flow1-5.........................-$2336-10......................+1000
Compute the rate of return for the following cash flow to within 0.5%.Year Cash
Compute the rate of return for the following cash flow.Year Cash Flow0............................-$5001-3................................04...........................+4500
A woman went to the Beneficial Loan Company and borrowed $3000. She must pay $119.67 at the end of each month for the next 30 months.(a) Calculate the nominal annual interest rate she is paying to within +0.15%.(b) What effective annual interest rate is she paying?
Helen is buying a $12,375 automobile with a $3000 down payment, followed by 36 monthly payments of $325 each. The down payment is' paid immediately, and the monthly payments are due at the end of each month. What nominal annual interest rate is Helen paying? What effective interest rate?
Peter Minuet bought an island from the Manhattoes Indians in 1626 for $24 worth of glass beads and trinkets. The 1991 estimate of the value of land on this island was $12 billion. What rate of return would the Indians have received if they had retained title to the island rather than selling it for
A man buys a corporate bond from a bond brokerage house for $925. The bond has a face value of $1000 and pays 4% of its face value each year. If the bond will be paid off at the end of 10 years, what rate of return will the man receive?
A well-known industrial firm has issued $1000 bonds that carry a 4% nominal annual interest, rate paid semiannually. The bonds mature 20 years from now, at which time the industrial firm will redeem them for $1000 plus the terminal semiannual interest payment. From the financial pages of your
One aspect of obtaining a college education is the prospect of improved future earnings in comparison to non-college graduates. Sharon Shay estimates that a college education has a $28,000 equivalent cost at graduation. She believes the benefits of her education will occur throughout 40 years of
An investor purchased a one-acre lot on the outskirts of a city for $9000 cash. Each year he paid $80 of property taxes. At the end of 4 years, he sold the lot. After deducting his selling expenses, the investor received $15,000. What rate of return did he receive on his investment?
A popular reader's digest offers a lifetime subscription to the magazine for $200. Such a sub sanction may be given as a gift to an infant at birth (the parents can read it in those early years), or taken but by an individual for himself. Normally, the magazine costs $12.90 per year. Knowledgeable
On April 12, 1988, an engineer bought a $1000 bond of an American airline for $875. The bond paid 6% on its principal amount of $1000, half in each of its April 1and October 1 semiannual payments; it repaid the $1000 principal sum on October 1, 2001. What nominal rate of return did the engineer
The cash price of a machine tool is $3500. The dealer is willing to accept a $1200 down payment and 24 end-of-month monthly payments of $110 each. At what effective interest rate are these terms equivalent?
A local bank makes automobile loans. It charges 4% per year in the following manner: if$3600 is borrowed to be repaid over a 3-year period, the bank interest charge is $3600 x 0.04 x 3 years = $432. The bank deducts the $432 of interest from the $3600 loan and gives the customer $3168 in cash. The
Upon graduation, every engineer must decide whether to go on to graduate school. Estimate the costs of going full time to the university to obtain a Master of Science degree. Then estimate the resulting costs and benefits. Combine the various consequences into a cash flow table and compute the rate
A table saw costs $175 at a local store. You may either pay cash for it or pay $35 now and $12.64 a month for 12 months beginning 30 days hence. If you choose the time payment plan, what nominal annual interest rate will you be charged?
An investment of $5000 in Biotech common stock proved to be very profitable. At the end of 3 years the stock was sold for $25,000. What was the rate of return on the investment?
The Southern Guru Copper Company operates a large mine in a South American country. A National Assembly said in a speech that most of the capital for the mining operation was provided by loans from the Word Bank; in fact, Southern Guru has only $500,000 of its own money actually invested in the
An insurance company is offering to sell an annuity for $20,000 cash. In return the firm will guarantee to pay the purchaser 20 annual end-of-year payments, with the first payment amounting to $1100. Subsequent payments will increase at a uniform 10% rate each year (second payment is $1210; third
A bank proudly announces that it has changed its interest computation method to continuous compounding. Now $2000 left in the bank for 9 years will double to $4000.(a) What nominal interest rate, compounded continuously, is the bank paying?(b) What effective interest rate is it paying?
Fifteen families live in Willow Canyon. Although several water wells have been drilled, none has produced water. The residents take turns driving a water truck to a fire hydrant in a nearby town. They fill the truck with water and then haul it to a storage tank in Willow Canyon. Last year truck
Ian purchased 100 shares of Peach Computer stock for $18 per share, plus a $45 brokerage commission. Every 6 months she received a dividend from Peach of 50 cents per share. At the end of 2 years, just after receiving the fourth dividend, she sold the stock for $23 per share and paid a $58
An investor purchased 100 shares of Omega common stock for $9000. He held the stock for 9 years. For the first 4 years he received annual end-of-year dividends of $800. For the next 4 years he received annual dividends of $400. He received no dividend for the ninth year. At the end of the ninth
The Diagonal Stamp Company, which sells used postage stamps to collectors, advertises that its average price has increased from $1 to $5 in the last 5 years. Thus, management states, investors who had purchased stamps from. Diagonal 5 years ago would have received a 100% rate of return each
You spend $1000 and in return receive two payments of $1094.60-- one at the end of 3 years and the other at the end of 6 years. Calculate the resulting rate of return.
A mine is for sale for $240,000. It is believed the mine will produce a profit of $65,000 the first year, but the profit will decline $5000 a year after that, eventually reaching zero, whereupon the mine will be worthless. What rate of return would this $240,000 investment produce for the purchaser
Fred, our cat, just won the local feline lottery to the tune of 3000 cans of "9-Lives" cat food (assorted flavors). A local grocer offers to take the 3000 cans and in return, supply Fred with 30 cans a month for next 10 years. What rate of return, in terms of nominal annual rate, will Fred realize
An apartment building in your neighborhood is for sale for $140,000. The building has four units, which are rented at $500 per month each. The tenants have long-term leases that expire in 5 years. Maintenance other expenses for care and upkeep are $8000 annually. A new university is being built in
A new machine can be purchased today for $300,000. The annual revenue from the machine is calculated to be $67,000, and the equipment will last 10 years. Expect the maintenance and operating costs to be $3000 a year and to increase $600 per. year. The salvage value of the machine will be $20,000.
AI Larson asked a bank to lend him money on January 1, based on the following repayment plan: the first payment would be $2 on February 28, with sub-sequent monthly payments increasing by $2 a month on an arithmetic gradient. (The March 31 payment would-be $4; the April30 payment would-be $6, etc)
The following advertisement appeared in the Wall Street Journal on Thursday, February 9, 1995. ''There's nothing quite like the Seville Smart Lease. Seville SLS $0 down, $599 a monthj36 months" first month's lease payment of $599 plus $625 re-fundable security deposit and a consumer down pay tune
After 15 Years of working for one employer, you transfer to a new job. During these years your employer contributed (that is, she diverted from your salary) $1500 each year to an account for your retirement (a fringe benefit), and you contributed a matching amount each year. The whole fund was
A finance company is using the following "Money by Mail" offer. Calculate the yearly nominal IRR received by the company if a customer chooses the loan of $2000 and accepts the credit insurance (Life and Dis.)
A finance company is using the "Money by Mail" offer shown in Problem 7-43. Calculate the yearly nominal IRR received by the company if a customer chooses the $3000 loan but declines the credit insurance.
In his will, Frank's uncle has given Frank the choice between two alternatives:Alternative 1$2000 cashAlternative 2$150 cash now plus $100 per month for 20 months beginning the first day of next month(a) At what rate of return is the two alternatives equivalent?(b) If Frank thinks the rate of
The owner of a comer lot wants to find a use that will yield a desirable return on his investment. After much study and calculation, the owner decides that the two best alternatives are:If the owner wants a minimum attractive rate of return on his investment of 6%, which of the two alternatives
Two alternatives are as follows:If 5% is considered the minimum attractive rate of return, which alternative should be selected?
Consider two mutually exclusive alternatives:If the minimum attractive rate of return is 10%, which alternative should be selected?
Consider these two 7-49 mutually exclusive alternatives:At a MARR of 10%, which alternative should be selected?
Two mutually exclusive alternatives are being considered. Both have a 10-year useful life. If the MARR is 8%, which alternative is preferred?
Consider two mutually exclusive alternatives:If the MARR is 8%, which alternative should be selected?
Two mutually exclusive alternatives are being considered.If the minimum attractive rate of return is 8%, which alternative should be selected? Solve the problem by(a) Present worth analysis "(b) Annual cash flow analysis(c) Rate of return analysis
A contractor is considering whether to purchase or lease a new machine for his layout site work. Purchasing a new machine will cost $12,000 with a salvage value of $1200 at the end of the machine's useful life of 8 years. On the other hand, leasing requires an annual lease payment of $3000.
Two hazardous environment facilities are being evaluated, with the projected life of each facility being 10 years. The cash flows are as follows:The company uses a MARR of 15%. Using rate of return analysis, which alternative should be selected?
Two alternatives are being considered:If the minimum attractive rate of return is 7%, which alternative should be selected?
Jean has decided it is time to purchase a new battery for her car. Her choices are:Jean believes the batteries can be expected to last only for the guarantee period. She does not want to invest extra money in a battery unless she can expect a 50% rate of return. If she plans to keep her present car
Two alternatives are being considered:Base your computations on a MARR of 7% and an 8-year analysis period. If identical replacement is assumed, which alternative should be selected?
Two investment opportunities are as follows:At the end of 10 years, Alt. B is not replaced. 'Thus, the comparison is 15 years of A versus 10 years of B. If the MARR is 10%, which alternative should be selected?
Find the rate of return for the following cash flow:Year Cash Flow0....................-$15,0001.......................10,0002........................-8,0003.......................11,0004.......................13,000
A group of businessmen formed a partnership to buy and race an Indianapolis-type racing car. They agreed to pay an individual $50,000 for the car and associated equipment. The payment was to be in a lump sum at the end of the year. In what must have been "beginner's luck," the group won a major
A student organization, at the beginning of the fall quarter, purchased and operated a soft-drink vending machine as a means of helping finance its activities. The vending machine cost $75 and was installed at a gasoline station near the university. The student organization pays $75 every 3 months
Given the following cash flow, determine the rate of return on the project.Year Cash
Given the following cash flow, determine the rate of return on the investment.Year Cash Flow0..............................-$5001.................................2002................................-5003...............................1200
Given the following cash flow, determine the rate of return on the investment.Year Cash
Compute the rate of return on the investment characterized by the following cash flow.Year Cash
Compute the rate of return on the investment characterized by the following cash flow.Year Cash
A firm invested $15,000in a project that appeared to have excellent potential unfortunately, a lengthy labor dispute in Year3 resulted in costs that exceeded benefits by $8000. The cash flow for the project is as follows:Year Cash
The following cash flow has no positive interstate. The project, which had a projected life of 5 years, was terminated early.Year Cash
For the following cash flow, compute the rate of return.Year Cash
Given the following cash flow:Year Cash
Consider the 7A-13 following cash flow.Year Cash Flow0.........................-$1001............................2402...........................-143If the minimum attractive rate of return is 12%, should the project be undertaken?
Refer to the strip-mining project in Example 5-10. Compute the rate of return for the project.
Consider the following cash flow.Year Cash Flow0...........................-$5001..............................8002..............................1703.............................-550Compute the rate of return on the investment.
Determine the rate of return on the investment for the following cash flow.Year Cash Flow0...........................-$1001............................+3602.............................-4283..............................168
Compute the rate of return on the investment on the following cash flow.Year Cash
Determine the rate of return on the investment on the following cash flow.Year Cash Flow0..............................-$35701-3............................+10004................................-31705-8............................+1500
Bill purchased a vacation lot he saw advertised on television for an $800 down and monthly payments of $55. When he visited the lot he had purchased, he found it was not something he wanted to own. After 40 months he was finally able to sell the lot. The new purchaser assumed the balance of the
Compute the rate of return on an investment having the following cash flow.Year Cash Flow0................................-$8500.................................+6002-9.............................+20010.............................-1800
Assume that the following cash flows are associated with a project.Year Cash
Compute the rate of return for the following cash flow.Year Cash
Following are the annual cost data for a tomato press.Year Cash
A project has been in operation for 5 years, yielding the following annual cash flows:Year Cash
Consider the following situation.Year Cash Flow0................................-$2001.................................+4002..................................-100What is the rate of return?
An investor is considering two mutually exclusive projects. He can obtain a 6% before-tax rate of return on external investments, but he requires a minimum attractive rate of return of7% for these projects. Use a 10 year analysis period to compute the incremental rate of return from investing in
In January, 2003, an investor purchased a convertible debenture bond issued by the XLA Corporation. The bond cost $1000 and paid $60 per year interest in annual payments on December 31. Under the convertible feature of the bond, it could be converted into 20 shares of common stock by tendering the.
A firm is considering moving its manufacturing plant from Chicago to a new location. The industrial engineering department was asked to identify the various alternatives together with the costs to relocate the plant, and the benefits. The engineers examined six likely sites, together with the
In a particular situation, four mutually exclusive alternatives are being considered. Each of the alternatives costs $1300 and has no end-of-useful-life salvage value.If the MARR is 8%, which alternative should be selected? (Answer: Alt. C)
A more detailed examination of the situation in Problem 8-2 reveals that there are two additional mutually exclusive alternatives to be considered. Both cost more than the $1300 for the four original alternatives.IT the MARR remains at 8%, which one of the six alternatives should be selected?
The owner of a downtown parking lot has employed a civil engineering consulting firm to advise him on the economic feasibility of constructing an office building on the site. Bill Samuels, a newly hired civil engineer, has been assigned to make the analysis. He has assembled the following
An oil company plans to purchase a piece of vacan1 land on the comer of two busy streets for $70,000. On properties of this type, the company installs businesses of four different types.*Cost of improvements does not include the $70,000 cost of land.In each case, the estimated useful life of the
A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows:For each alternative, the salvage value at the end of-useful-life is zero. At the end of 10 years Alt, A could be replaced by another A with identical cost and
Given the following four mutually exclusive alternative, sand using 8% for the MARR, which alternative should be selected?
Consider the following three mutually exclusive alternatives:For what range of values of MARR is Alt, C the preferred alternative Put your answer in the following form: "Alternative C is preferred when _ % < MARR
Consider four mutually exclusive alternatives, each having an 8-year useful life:If the minimum attractive rate of return is 8%, which alternative should be selected?
Three mutually exclusive projects are being considered:When each project reaches the end of its useful life, it would be sold for its salvage value and there would be no replacement. If 8% is the desired rate of return, which project should be selected?
Consider three mutually exclusive alternatives:Which alternative should be selected?(a) If the minimum attractive rate of return equals 6%?(b) If MARR =9%?(c) If MARR = 10%?(d) If MARR = 14%?
Consider the three alternatives:Which alternative should be selected?(a) If MARR =6%?(b) If MARR =8%?(c) If MARR = 10%?
A firm is considering two alternatives:At the end of 4 years, another B may be purchased with the same cost, benefits, and so forth. If the MARR is 10%, which alternative should be selected?
Consider the following alternatives: Initial cost Uniform annual benefitsEach alternative has a l0-year useful life and no salvage value. If the MARR is 8%, which alternative should be selected?
Given the following:Over what range of values of MARR is Y the preferred alternative
Consider four mutually exclusive alternatives:The analysis period is 8 years. At the end of 2, 4, and 6 years Alt A will have an identical replacement. Alternative B will have a single identical replacement at the end of 4 years. Over what range of values of MARR is Alt. B the preferred alternative?
Consider the three alternatives:Each alternative has a l0-year useful life and no salvage value. Based on a MARR of 15%, which alternative should be selected? Where appropriate, use an external interest rate of 10% to transform a cash flow to one sign change before proceeding with rate of return
A new 10,000~square-meter warehouse next door to the Tyre Corporation is for sale for $450,000. The terms offered are $100,000 down with the balance being paid in 60 equal monthly payments based on 15% interest. It is estimated that the warehouse would have a resale value of $600,000 at the end of
Consider the following alternatives:Use present worth analysis, an 8% interest rate, and an infinite analysis period. Which alternative should be selected in each of the two following situations?1. Alternatives B and C are replaced at the end of their useful lives with identical replacements.2.
A problem often discussed in the engineering economy literature is the "oil-well pump problem"} Pump 1is a small pump; Pump 2 is a larger pump that costs more, will produce slightly more oil, and will produce it more rapidly. If the MARR is 20%, which pump should be selected? Assume that any
Three mutually exclusive alternatives are being studied. If the MARR is 12%, which alternative should be selected?
The South End bookstore has an annual profit of $170,000. The owner is considering opening a second bookstore on the north side of the campus. He can lease an existing building for 5 years with an option to continue the lease for a second 5-year period. If he opens the second bookstore, he expects
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