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fundamentals engineering economics
Fundamentals Of Engineering Economic Analysis 2nd Edition White, John A., Grasman, Kellie S., Case, Kenneth E., LaScola Needy, Kim, Pratt, David B. - Solutions
Video Solution The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an Enterprise Resource Planning(ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and
06.01-PR047 DelRay Foods must purchase a new gumdrop machine. Two machines are available. Machine 7745 has a first cost of $10,000, an estimated life of 10 years, a salvage value of $1,000, and annual operating costs estimated at $0.01 per 1,000 gumdrops. Machine A37Y has a first cost of$8,000, a
06.01-PR046 Five investment alternatives form the mutually exclusive,collectively exhaustive set under consideration. The cash flow profiles for the five projects are given in the table below.a. Specify the incremental cash flow profile that must be analyzed to determine the value in the
Three alternatives are being considered by the management of Brawn Engineering to satisfy an OSHA requirement for safety gates in the machine shop. Each of the gates will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage
06.01-PR044 A firm is faced with four investment proposals, A, B, C, and D,having the cash flow profiles shown below. Proposals A and C are mutually exclusive, and Proposal D is contingent on Proposal B being chosen.Currently, $750,000 is available for investment and the firm has stipulated a MARR
06.01-PR043 Arnold Engineering has available two mutually exclusive investment proposals, A and B. Their net cash flows are as shown in the table over a 10-year planning horizon. MARR is 12%.Determine which alternative the decision maker should select using an internal rate of return approach. EOY
06.01-PR042 On-Site Testing Service has received four investment proposals for consideration. Two of the proposals, X1 and X2, are mutually exclusive.The other two proposals, Y1 and Y2, are also mutually exclusive. Proposal Y1 is contingent on X1 and Y2 is contingent on X2. Other than these
Yani has $12,000 for investment purposes. His bank has offered the following three choices.1. A special savings certificate that will pay $100 each month for 5 years and a lump sum payment at the end of 5 years of $13,000;2. Buy a share of a racehorse for $12,000 that will be worth $20,000 in 5
06.01-PR040 Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios. Each enhancement will increase revenues by attracting directors who prefer this lighting style. The cash flow details, in thousands of dollars,
Dark Skies Observatory is considering several options to purchase a new deep space telescope. Revenue would be generated from the telescope by selling “time and use” slots to various researchers around the world. Four possible telescopes have been identified in addition to the possibility of
06.01-PR038 A large company has the opportunity to select one of seven projects: A, B, C, D, E, F, G, or the null (Do Nothing) alternative. Each project requires a single initial investment as shown in the table below. Information on each alternative was fed into a computer program that calculated
06.01-PR037 ZeeZee’s Construction Company has the opportunity to select one of four projects (A, B, C, or D) or the null (Do Nothing) alternative. Each project requires a single initial investment and has an internal rate of return as shown in the first table below. The second table shows the
06.01-PR036 Chingos and Daughters Construction is considering three investment proposals: A, B, and C. Proposals A and B are mutually exclusive, and Proposal C is contingent on proposal B. The cash flow data for the investments over a 10-year planning horizon are given below. The company has a
06.01-PR035 Two mutually exclusive proposals, each with a life of 5 years,are under consideration. MARR is 12%. Each proposal has the following cash flow profile:Determine which (if either) alternative the decision maker should select using the internal rate of return method. EOY NCF(A) NCF(B)
06.01-PR034 Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama–Georgia border. There are three cities being considered. After site visits and a budget analysis, the expected income and
06.01-PR033 Quilts R Us (QRU) is considering an investment in a new patterning attachment with the cash flow profile shown in the table below.QRU’s MARR is 13.5%/yr.a. What is the internal rate of return of this investment?b. What is the decision rule for judging the attractiveness of investments
06.01-PR032 Consider the following cash flow profile and assume MARR is 10%/yr.a. Determine the IRR(s) for this project.b. Is this project economically attractive? EOY NCF EOY NCF 0-$101 4 $2 1 $411 5 $8 2-$558 6 -$14 3 $253
06.01-PR031 Consider the following cash flow profile and assume MARR is 10%/yr.a. What does Descartes’ rule of signs tell us about the IRR(s) of this project?b. What does Norstrom’s criterion tell us about the IRR(s) of this project?c. Determine the IRR(s) for this project.d. Is this project
06.01-PR030 Consider the following cash flow profile and assume MARR is 10%/yr.a. What does Descartes’ rule of signs tell us about the IRR(s) of this project?b. What does Norstrom’s criterion tell us about the IRR(s) of this project?c. Determine the IRR(s) for this project.d. Is this project
Consider the following cash flow profile and assume MARR is 10%/yr.a. What does Descartes’ rule of signs tell us about the IRR(s) of this project?b. What does Norstrom’s criterion tell us about the IRR(s) of this project?c. Determine the IRR(s) for this project.d. Is this project economically
Video Solution Consider the following cash flow profile and assume MARR is 10%/yr.a. What does Descartes’ rule of signs tell us about the IRR(s) of this project?b. What does Norstrom’s criterion tell us about the IRR(s) of this project?c. Determine the IRR(s) for this project.d. Is this project
Consider the following cash flow profile and assume MARR is 10%/yr.a. What does Descartes’ rule of signs tell us about the IRR(s) of this project?b. What does Norstrom’s criterion tell us about the IRR(s) of this project?c. Determine the IRR(s) for this project.d. Is this project economically
Delta Dawn’s Bakery is considering purchasing a new van to deliver bread. The van will cost $18,000. Two-thirds ($12,000) of this cost will be borrowed. The loan is to be repaid with 4 equal annual payments (first payment at t = 1) based on an interest rate of 4%/yr. It is anticipated that the
Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The system costs$40,000. It has an expected life of 7 years at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year.
Galvanized Products is considering the purchase of a new computer system for its enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 15% compounded annually. The loan is to
Video Solution RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments atan interest rate of12%/yr. It is anticipated that the sprinkler system would be used for 9
Baon Chemicals Unlimited purchases a computer-controlled filter for $100,000. Half of the purchase price is borrowed from a bank at 15%compounded annually. The loan is to be paid back with equal annual payments over a 5-year period. The filter is expected to last 10 years, at which time it will
Value Lodges is the owner of an economy motel chain.Value Lodges is considering building a new 200-unit motel. The cost to build the motel is estimated at $8,000,000; Value Lodges estimates furnishings for the motel will cost an additional $700,000 and will require replacement every 5 years. Annual
Video Solution What do you know about the mathematical value of the internal rate of return of a project under each of the following conditions?a. The present worth of the project is greater than zero.b. The present worth of the project is equal to zero.c. The present worth of the project is less
Smith Investors places $50,000 in an investment fund. One year after making the investment, Smith receives $7,500 and continues to receive$7,500 annually until 10 such amounts are received. Smith receives nothing further until 15 years after the initial investment, at which time $50,000 is
An investment of $20,000 for a new condenser is being considered. Estimated salvage value of the condenser is $5,000 at the end of an estimated life of 6 years. Annual income each year for the 6 years is$8,500. Annual operating expenses are $2,300. Assume money is worth 15%compounded annually.
Shrewd Endeavors, Inc., invested $70,000 in a business venture with the following cash flow results:MARR is 10%. Determine the internal rate of return and whether or not this is a desirable venture. EOY CF EOY CF 0-$70,000 11 10,000 1 20,000 12 9,000 2 19,000 13 8,000 3 18,000 14 7,000 4 17,000 15
Brock Associates invested $80,000 in a business venture with the following results:MARR is 12%. Determine the internal rate of return and whether or not this is a desirable venture. EOY CF EOY CF 0-$80,000 5 $28,000 1 10,000 6 22,000 23 2 16,000 7 16,000 3 22,000 8 10,000 4 28,000
Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Shipping costs are $30,000 per year. Nancy can buy a used truck for $10,000 that will be adequate for the next 3 years.Operating and maintenance costs are estimated to be $25,000 per year. At the end of 3 years,
Eddie’s Precision Machine Shop is insured for $700,000. The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage value can be installed for $20,000. Annual maintenance costs for the sprinkler system are $400. If the
Video Solution Bailey, Inc., is considering buying a new gang punch that would allow it to produce circuit boards more efficiently.The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Labor costs would increase$2,000
A project has been selected for implementation. The net cash flow (NCF) profile associated with the project is shown below. MARR is 10%/yr.a. What is the internal rate of return of this investment?b. What is the decision rule for judging the attractiveness of investments based on internal rate of
Home Innovation is evaluating a new product design. The estimated receipts and disbursements associated with the new product are shown below. MARR is 10%/yr.a. What is the internal rate of return of this investment?b. What is the decision rule for judging the attractiveness of investments based on
A design change being considered by Mayberry, Inc., will cost$6,000 and will result in an annual savings of $1,000 per year for the 6-year life of the project. A cost of $2,000 will be avoided at the end of the project as a result of the change. MARR is 8%/yr.a. What is the internal rate of return
DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6%/yr.a. What is the internal rate of return of this investment?b. What is the decision rule for judging the attractiveness of
Imagineering, Inc., is considering an investment in CADCAM-compatible design software with the cash flow profile shown in the table below. Imagineering’s MARR is 18%/yr.EOY Cash Flow (M$) 0 −$12 1 −$1 2 $5 3 $2 4 $5 5 $5 6 $2 7 $5a. What is the internal rate of return of this investment?b.
Fabco, Inc., is considering the purchase of flow valves that will reduce annual operating costs by $10,000 per year for the next 12 years.Fabco’s MARR is 7%/yr. Using an internal rate of return approach, determine the maximum amount Fabco should be willing to pay for the valves.
Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year. An emission reduction filter will cost $75,000 and have an expected life of 5 years.Carlisle’s MARR is 10%/yr.a. What is the internal rate of return of this investment?b.
Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results:Assume MARR is 20% per year. Based on an internal rate of return analysis(1) determine the investment’s worth; (2) state whether or not your results indicate the investment should
An investment has the following cash flow profile. For each value of MARR below, what is the minimum value of X such that the investment is attractive based on an internal rate of return measure of merit?End of Year Cash Flow 0 −$30,000 1 $6,000 2 $13,500 3 $X 4 $13,500a. MARR is 12%/yr.b. MARR
06.01-PR003 Draw a cash flow diagram of any investment that has both of the following properties:1. The investment has a 4-year life.2. The investment has a 10%/yr internal rate of return
06.01-PR002 Match the measures of worth in the first column with the appropriate unit of measure that results from the analysis. Measure of Worth (a) Annual worth Resulting Units of Measure (1) Dollars (b) External rate of return (2) Percentage (c) Future worth (d) Internal rate of return (e)
06.01-PR001 Match the measures of worth in the first column with one (or more) of the analysis approaches that is (are) appropriate for that measure. Measure of Worth (a) Annual worth Analysis Approach (1) Ranking approach (b) External rate of return (2) Incremental approach (c) Future worth (d)
Consider the calculation of an external rate of return (ERR).The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors?a. 0b. The unknown value of ERR (i′)c. MARRd. IRR
Consider the IRR and ERR measures of worth. If we define a“root” to mean a value for the measure that results in PW = 0, then which of the following statements is true?a. IRR can have multiple roots and ERR can have multiple rootsb. IRR has only a single root but ERR can have multiple rootsc.
If the IRR of Alternative A is 18%, the IRR of Alternative B is 16%, and MARR is 12%, which of the following is correct?a. Alternative B is preferred over alternative Ab. Alternative A is preferred over alternative Bc. Not enough information is given to determine which alternative is preferredd.
A company is considering two alternatives, one of which must be implemented. Of the two projects, A has the higher maintenance cost, but B has the higher investment cost. The appropriate (and properly calculated)incremental IRR is 17.6%. Which alternative is preferred if the Minimum Attractive Rate
The IRR of this investment is located at which point?a. Ab. Cc. Dd. E
If the interest rate at B is 20%, then which of the following best describes the analysis of the investment?a. The IRR of the investment is less than 20%b. The IRR of the investment is equal to 20%c. The IRR of the investment is greater than 20%d. None of the above are true
A snow cone machine at an ice cream shop costs $15,000. The machine is expected to generate profits of $2,500 each year of its 10-year useful life. At the end of the 10 years the machine will have a salvage value of zero. Within what interest rate range does the IRR fall?a. Less than 10%b. 10% to
What is the internal rate of return of the following cash flow diagram?a. 20.0%b. 18.2%c. 17.5%d. 15.0% $30 $15 $30 $31 2 3
An investment is guaranteed to have a unique value of IRR if which of the following is true?a. Alternating positive and negative cash flowsb. An initial negative cash flow followed by all positive cash flows and the sum of the positive cash flows is greater than the magnitude of the negative cash
If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true?i. PW = 0 ii. AW = 0a. I onlyb. II onlyc. Neither I nor IId. Both I and II
Consider the following cash flow diagram. What is the value ofX if the internal rate of return is 15%?a. $246b. $255c. $281d. $290 $400 X 1 2
A portfolio analysisa. Looks at the value of an entire portfolio of investments, not including the money in the investment poolb. Looks at the value of an entire portfolio of investments, including the money in the investment poolc. Is useful when considering multiple investmentsd. b and c
When comparing multiple mutually exclusive alternatives, select the alternative that __________ the future worth.a. maximizesb. minimizes
The FW analysis:a. Is appropriate when one plans to achieve a particular financial goal at some point in the futureb. Sometimes results in the same decision as PW and AWc. Does not utilize the concept of time value of moneyd. All of the above
When comparing multiple mutually exclusive alternatives, select the alternative that __________ the annual worth.a. minimizesb. maximizes
Identify the one true statement about the annualized worth.a. The AW is the value of all cash flows converted to an equivalent uniform annual series of cash flows over a 5-year periodb. The AW may provide a different decision than when present worth or future worth is calculatedc. The AW will
Reconsider data from Problem 53 (Orpheum Productions lighting enhancement). Assume that any money not invested in the lighting enhancements will be placed in an interest-bearing account earning MARR and will be used for future studio modernization projects.a. Use the total portfolio approach to
An investor has $100,000 to invest in a business venture, or she can earn 10%/year with a $100,000 certificate of deposit for 4 years. Three possible business ventures have been identified. Any money not invested in the business venture can be put into a bank account that earns 7%/year. Based on a
Deep Seas Submarine must implement a new engine in its submarines to meet the needs of clients who desire quieter operation. Two designs, both technologically feasible, have been created, and Deep Seas wishes to know which one to pursue. Design 1 would require an up-front manufacturing cost of
Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios. Each enhancement will increase revenues by attracting directors who prefer this lighting style. The cash flow details, in thousands of dollars, for these
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then
The management of Brawn Engineering is considering three alternatives to satisfy an OSHA requirement for safety gates in the machine shop. Each gate will completely satisfy the requirement, so no combinations need to be considered. The first costs, operating costs, and salvage values over a 5-year
Video Solution Alpha Electronics can purchase a needed service for $90 per unit. The same service can be provided by equipment that costs $100,000 and that will have a salvage value of $0 at the end of 10 years. Annual operating costs for the equipment will be $7,000 per year plus $25 per unit
Two numerically controlled drill presses are being considered by the production department of Zunni’s Manufacturing; one must be selected. Comparison data is shown in the table below. MARR is 10%/year.a. What is the future worth of each drill press?b. Which drill press should be recommended?
Yani has $12,000 for investment purposes. His bank has offered the following three choices.a. A special savings certificate that will pay $100 each month for 5 years and a lump sum payment at the end of 5 years of $13,000.b. Buy a share of a racehorse for $12,000 that will be worth $20,000 in 5
Xanadu Mining is considering three mutually exclusive alternatives. Cash flows, measured in thousands of dollars, are shown in the table below. MARR is 10%/year.a. What is the future worth of each alternative?b. Which alternative should be recommended? EOY A001 B002 C003 0-$210-$110-$160 23 1 $80
Video Solution Final Finishing is considering three mutually exclusive alternatives for a new polisher. Each alternative has an expected life of 10 years and no salvage value. Polisher 1 requires an initial investment of $20,000 and provides annual benefits of $4,465. Polisher 2 requires an initial
Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama–Georgia border. There are three cities being considered. After site visits and a budget analysis, the expected income and costs
Nadine Chelesvig has patented her invention. She is offering a potential manufacturer two contracts for the exclusive right to manufacture and market her product. Plan A calls for an immediate single lump sumpayment to her of $30,000. Plan B calls for an annual payment of $1,000 plus a royalty of
Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.50 per year per foot of pipe. A 1-inch thick
The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from
Video Solution The following three investment opportunities are available. The returns for each investment for each year vary, but the first cost of each is $20,000. Based on a future worth analysis, which investment is preferred? MARR is 9%/year. End of Year Investment 1 Investment 2 Investment 3
Jupiter is considering investing time and administrative expense on an effort that promises one large payoff in the future, followed by additional expenses over a 10-year horizon. The cash flow profile is shown in the table below. Jupiter’s MARR is 12%/year.a. What is the future worth of this
Video Solution Imagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash flow profile shown in the table below. Imagineering’s MARR is 18%/year.a. What is the future worth of this investment?b. What is the decision rule for judging the attractiveness of
05.02-PR014 Quilts R Us (QRU) is considering an investment in a new patterning attachment with the cash flow profile shown in the table below.QRU’s MARR is 13.5%/year.a. What is the future worth of this investment?b. What is the decision rule for judging the attractiveness of investments based on
05.02-PR013 Galvanized Products is considering the purchase of a new computer system for its enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 15% compounded annually. The
05.02-PR012 DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6%/year.a. What is the future worth of this investment?b. What is the decision rule for judging the attractiveness of
05.02-PR011 Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year.An emission reduction filter will cost $75,000 and have an expected life of 5 years. Carlisle’s MARR is 10%/year.a. What is the future worth of this
05.02-PR010 Video Solution Bailey, Inc., is considering buying a new gang punch that would allow it to produce circuit boards more efficiently.The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs
05.02-PR009 Video Solution Financial planners (and engineering economists) unanimously encourage people to seek out the highest rate of return possible within their personal level of risk tolerance. To illustrate this point, they frequently produce a table similar to the one below. Fill in the
05.02-PR008 Video Solution Financial planners (and engineering economists) unanimously encourage people to start early in planning for retirement. To illustrate this point, they frequently produce a table similar to the one below. Fill in the blank cells in this table assuming that your goal is to
05.02-PR007 On your child’s 1st birthday, you open an account to fund his college education. You deposit $300 to open the account. Each year, on his birthday, you make another deposit. Each subsequent deposit is 8% larger than the previous one. The account pays interest at 5%/year compounded
05.02-PR006 You decide to open an individual retirement account (IRA) at your local stockbroker that pays 10%/year for the life of the account. You deposit $2,000 today to open the account. For the next 41 years, you will deposit $2,000 per year into the account at the end of each year. There are a
05.02-PR005 You decide to open an individual retirement account (IRA)at your local bank that pays 8%/year. At the end of each of the next 40 years, you will deposit $2,000 per year into the account (40 total deposits). Three years after the last deposit, you will begin making annual withdrawals. If
05.02-PR004 You decide to set up a college fund for your 10-year-old child and plan to make annual deposits into the account each year on your child’s birthday. Because “other things” consistently use more of your money than anticipated, your deposits are actually somewhat erratic. One year
05.02-PR003 Reconsider the situation described in Problem 26. Assume that rather than annual deposits, she makes monthly deposits. The first deposit will be 1 month from today, and the last deposit will be 40 years from today.Assume that the stock market return is 10.4% per year compounded
05.02-PR002 A 22-year-old engineering graduate wants to accumulate$2,000,000 to be available when she retires 40 years from today. She investigates several investment options and decides to invest in a stock market index fund after discovering that the long-term average return for the stock market
05.02-PR001 An investment has the following cash flow profile. MARR is 12%/year. What is the minimum value of X such that the investment is attractive based on a future worth measure of merit?End of Year Cash Flow 0 −$30,000 1 $6,000 2 $13,500 3 $X 4 $13,500
LEARNING OBJECTIVE 5.2 Calculate a future worth (FW) converting all cash flows to a single sum equivalent at the end of the planning horizon for a given interest rate.
05.01-PR023 RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of12%/year. It is anticipated that the sprinkler system would be used for 9
05.01-PR022 Video Solution Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios. Each enhancement will increase revenues by attracting directors who prefer this lighting style. The following table shows the cash
05.01-PR021 Packaging equipment for Xi Cling Wrap costs $60,000 and is expected to result in end of year net savings of $23,000 per year for 3 years.The equipment will have a market value of $10,000 after 3 years. The equipment can be leased for $21,000 per year, payable at the beginning of each
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