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business
economics 14th global

Questions and Answers of Economics 14th Global

True or False: The cost of foregoing an opportunity to earn interest, or a return, on investment funds is referred to as a sunk cost.
True or False: Prime cost is the sum of direct material cost and direct labor cost.
True or False: If the cost function for producing \(x\) units is \(\operatorname{TC}(x)=700+0.6 x\) and the revenue function is \(\operatorname{TR}(x)=2.0 x\); then the breakeven value is 500 units.
True or False: The average cost function for Question 4 is given by \(\mathrm{AC}(x)=500+1.4 x\)
True or False: The tradeoff being considered when determining the level of detail of an estimate is the cost of making the estimate versus the cost of errors resulting from an inaccurate estimate.
True or False: An income statement shows the assets, liabilities, and net worth of a firm at a point in time.
True or False: The fundamental equation of accounting states that assets \(=\) liabilities + net worth
True or False: EBIT can also be referred to as operating earnings.
True or False: In cost accounting, the acronym ABC refers to a Pareto analysis of costs where \(\mathrm{A}\) items are most important, \(\mathrm{C}\) items are least important, and \(\mathrm{B}\)
True or False: EVA is a management tool that focuses manager's attention on adding value for the shareholders.
Consider the following cash flow profile and assume MARR is 10 percent/year.a. Determine the ERR for this project.b. Is this project economically attractive? EOY 0 2 3 4 5 6 NCF -$100 $15 $15 $15 $15
Quilts R Us (QRU) is considering investing in a new patterning attachment with the cash flow profile shown in the table below. QRU's MARR is 13.5 percent/year.a. What is this investment's external
Consider two alternatives, each of which will accomplish the same EPA-mandated pollution control. Using an incremental IRR analysis, determine the preferred alternative assuming MARR is 20
The production department of Zunni's Manufacturing is considering two numerically controlled drill presses; one must be selected. Comparison data is shown in the table below. MARR is 10 percent/year.
What do you know about the mathematical value of the annual worth of a project under each of the following conditions?a. The present worth of the project is greater than 0 .b. The present worth of
Reconsider Parts (a) through (f) of Problem 2. For each "true" statement, develop a mathematical proof based on the time value of money factor equations from Table 2.6 in Chapter 2.Data from problem
Determine whether each of the following is true or false. In each case, assume \(P\) is located at \(t=0\) and \(F\) is located at \(t=n\), and the \(A\) s are spread uniformly over the planning
A project has been selected for implementation. The net cash flow (NCF) profile associated with the project is shown below. MARR is 10 percent/year.a. What is the annual worth of this investment?b.
Reconsider the data from Problem 4. Management has expressed some concern over the life of the project and the impact of possible early termination. As a result, you have developed additional data
The cash flows associated with a project are shown below. The interest rate varies from year to year as shown.Determine an equivalent uniform annual series of cash flows. EOY Cash Flow Interest
Alternatives 1, 2, and 3 have lives of 3, 4, and 6 years, respectively. Their net cash flow (NCF) and salvage value (SV) profiles are as follows:Additional explanation is necessary: The NCF profile
Consider the net cash flows and salvage values shown below. Assume the alternatives can be indefinitely renewed with the same cash flows and salvage values. Using a MARR of 8%, specify the planning
A university pumps its water from wells located on campus. The falling water table has caused pumping costs to increase, the quantity of water available to decrease, and the quality of water to
Reconsider Problem 56. Determine which oven should be purchased based on an incremental annual worth analysis.Data from problem 56Octavia Bakery is planning to purchase one of two ovens. The expected
Using only the factor formulas given in Table 2.6, derive Equation 7.5 starting with Equation 7.3. TABLE 2.6 Summary of Discrete Compounding Interest Factors. To Find Given Factor Symbol Name P F
An asset has the estimated salvage values for various lives, shown in the table below. For each possible life from 1 to 6 by 1, determine the capital recovery cost for MARR of 8 percent/year. EOY NCF
Using only the factor formulas given in Table 2.6, derive Equation 7.6 starting with Equation 7.3. TABLE 2.6 Summary of Discrete Compounding Interest Factors. To Find Given Factor Symbol Name P F
Reconsider the data from Problem 56. What is the capital recovery cost of Model 127B?Data from problem 56Octavia Bakery is planning to purchase one of two ovens. The expected cash flows for each oven
Reconsider the data from Problem 56. What is the capital recovery cost of Model 334A?Data from problem 56Octavia Bakery is planning to purchase one of two ovens. The expected cash flows for each oven
Reconsider the data from Problem 51. What is the capital recovery cost of Alternative 3 for a 6-year life?Data from problem 51Alternatives 1, 2, and 3 have lives of 3, 4, and 6 years, respectively.
Crush Autosmashers can purchase a new electromagnet for moving cars at a cost of \($20,000.\) At the end of its useful life, the electromagnet will be worth \($1,000.\) If Crush’s MARR is 12
Reconsider Problem 65. Plot a graph of capital recovery cost versus useful life for lives 1 to 25 by 1.Data from problem 65 Crush Autosmashers can purchase a new electromagnet for moving cars at a
True or False: For personal investment decision making, rates of return are used more frequently than present worth.
Using an incremental internal rate of return (IRR) analysis, the decision to replace the "current best" by the "challenger"' is based on what decision rule?a. The internal rate of return of the
The four alternatives described below are being evaluated:The Incremental IRRs are:a. If the alternatives are independent, which one(s) should be selected if \(M A R R=15.5\) percent/year?b. If the
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
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 (b) External Rate of Return
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 (b) External Rate of Return (c) Future Worth (d)
True or False: If \(E R R>M A R R\), then \(I R R>E R R>M A R R\).
Five projects form the mutually exclusive, collectively exhaustive set under consideration. The cash flow profiles for the five projects are given in the table below.Information on each project was
If a well-behaved investment alternative's internal rate of return (IRR) is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true? 1.
True or False: If \(P W>0\), then \(I R R>M A R R\).
Consider the following cash flow profile, and assume MARR is 10 percent/year.a. What does Descartes' rule of signs tell us about the IRR(s) of this project?b. What does Norstrom's criterion tell us
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 \((F \mid P i, n-t)\)
Consider the following cash flow profile and assume MARR is 10 percent/year.a. What does Descartes' rule of signs tell us about the IRR(s) of this project?b. What does Norstrom's criterion tell us
True or False: If \(E R R>M A R R\), then MIRR \(>\) MARR.
ZeeZee's Construction Company has the opportunity to select one of four projects (A, B, C, or D) or choose the null (do-nothing) alternative. Each project requires a single initial investment and has
A snow-cone machine at an icecream 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
A project has been selected for implementation. The net cash flow (NCF) profile associated with the project is shown below. MARR is 10 percent/year.a. What is the internal rate of return of this
Consider the following cash flow diagram. What is the value of \(X\) if the internal rate of return is 15 percent?a. \(\$ 246\)b. \(\$ 255\)c. \(\$ 281\)d. \(\$ 290\) 0 $400 X X 1 2
What do you know about the mathematical value of a project's internal rate of return under each of the following conditions?a. The present worth of the project is greater than 0 .b. The present worth
If the IRR of Alternative \(A\) is 18 percent, the IRR of Alternative B is 16 percent, and MARR is 12 percent, which of the following is correct?a. Alternative B is preferred over Alternative A.b.
True or False: The following annual cash flows in years 1 thru 7, respectively, have a single real positive-valued root: \(-\$ 100,+\$ 15,-\$ 25,+\$ 75,-\$ 10,+\$ 50\), \(+\$ 50\).
An engineer prepares a report to evaluate a project using PW and IRR. Just before submitting the report, he spills coffee on it, making the first digit of the 2-digit IRR unreadable. The second digit
The IRR of this investment is located at which point?a. Ab. Cc. Dd. E
True or False: If MARR \(=10 \%\) and IRR \(=9 \%\), then ERR \(\$ 0\).
Consider the following cash flow profile and assume MARR is 10 percent/year.a. Determine the IRR(s) for this project.b. Is this project economically attractive? EOY 0 1 2 3 4 5 6 NCF -$101 $411 -$558
If the interest rate at B is 20 percent, then which of the following best describes the analysis of the investment?a. The IRR of the investment is less than 20 percent.b. The IRR of the investment is
True or False: Multiple roots can exist when using IRR and MIRR methods.
Consider the following cash flow profile and assume MARR is 10 percent/year.a. What does Descartes' rule of signs tell us about the IRR(s) of this project?b. What does Norstrom's criterion tell us
When conducting an incremental analysis, what step must always be taken immediately prior to beginning the pairwise comparisons?a. Order the alternatives from highest to lowest initial investmentb.
Consider the following cash flow profile and assume MARR is 10 percent/year.a. What does Descartes' rule of signs tell us about the IRR(s) of this project?b. What does Norstrom's criterion tell us
Consider the IRR and ERR measures of worth. If we define a root to mean a value for the measure that results in \(\mathrm{PW}=0\), then which of the following statements is true?a. Both IRR and ERR
True or False: If \(\operatorname{IRR}(\mathrm{A})>\operatorname{IRR}(\mathrm{B})\), then \(\operatorname{ERR}(\mathrm{A})>\operatorname{ERR}(\mathrm{B})\).
Consider the following cash flow profile and assume MARR is 10 percent/year.a. What does Descartes' rule of signs tell us about the IRR(s) of this project?b. What does Norstrom's criterion tell us
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
Draw a cash flow diagram of any investment that exhibits both of the following properties: 1. The investment has a 4-year life. 2. The investment has a 10 percent/year internal rate of return.
What is the internal rate of return of the following cash flow diagram?a. 20 percentb. 18.2 percentc. 17.5 percentd. 15 percent $30 $31 0 1 2 3 $30 $15
Quilts R Us (QRU) is considering investing in a new patterning attachment with the cash flow profile shown in the table below. QRU's MARR is 13.5 percent/year.a. What is the internal rate of return
Jupiter's is considering an investment in 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
A large company has the opportunity to select one of seven projects-A, B, C, D, E, F, G-or choose the null (donothing) alternative. Each project requires a single initial investment as shown in the
Management is considering three alternatives to satisfy an urgent need. Each of the alternatives will completely satisfy the need, so no combinations have to be considered. The first costs, operating
Consider the following cash flow profile and assume MARR is 10 percent/year and the finance rate is 4 percent/year.a. Determine the MIRR for this project.b. Is this project economically attractive?
Consider the following cash flow profile and assume MARR is 10 percent/year and the finance rate is 4 percent/ year.a. Determine the MIRR for this project.b. Is this project economically attractive?
Consider the following cash flow profile, and assume MARR is 10 percent/year and the finance rate is 4 percent/year.a. Determine the MIRR for this project.b. Is this project economically attractive?
Consider the following cash flow profile and assume MARR is 10 percent/year and the finance rate is 4 percent/year.a. Determine the MIRR for this project.b. Is this project economically attractive?
A university pumps its water from wells located on campus. The falling water table has caused pumping costs to increase, the quantity of water available to decrease, and the quality of water to
True or False: Annual worth analysis is the most popular DCF measure of economic worth.
Consider a palletizer at a bottling plant that has a first cost of \($150,000,\) operating and maintenance costs of \($17,500\) per year, and an estimated net salvage value of \($25,000\) at the end
True or False: Unless non-monetary considerations dictate otherwise, choose the mutually exclusive investment alternative that has the greatest annual worth over the planning horizon.
When using annual worth to evaluate the attractiveness of a single alternative, what value is the calculated AW compared to?a. PWb. FWc. 0.0d. MARR
True or False: The capital recovery cost is the uniform annual cost of the investment less the uniform annual worth of the salvage value.
The annual worth of an alternative is 0 . Which of the following is (are) also true?(1) \(\mathrm{PW}=0\)(2) \(\mathrm{FW}=0\)a. (1) onlyb. (2) onlyc. Both (1) and (2)d. Neither (1) nor (2)
True or False: If AW > 0, then PW > 0, and FW > 0.
The overhead costs in a highly automated factory are expected to increase at an annual compound rate of 10 percent for the next 7 years. The overhead cost at the end of the first year is \(\$
True or False: If AW(A) > AW(B), then PW(A) > PW(B).
The operating and maintenance expenses for a mining machine are expected to be \(\$ 11,000\) in the first year and increase by \(\$ 800\) per year during the 15 year life of the machine. What uniform
True or False: If AW(A) < AW(B), then AW(B-A) > 0.
A successful alumnus gives a state university \(\$ 2\) million to establish an endowed scholarship fund. If the university can invest at 5 percent/ year and gives \(\$ 100,000\) in scholarships each
Consider cash flows given below. With \(\mathrm{i}=8 \%\), what is the annual worth of these costs?a. \(\$ 418\)b. \(\$ 436\)c. \(\$ 502\)d. \(\$ 536\) End of Year Cost 0 $1,000 1 $100 2 $200 3 $300
True or False: IfAW(A)>AW(B), thenCW(A)>CW(B) and DPBP(A)
True or False: AW can be applied as either a ranking method or as an incremental method.
A grinding machine has a first cost of \(\$ 24,000\) with an expected useful life of 13 years. Salvage value at the end of its useful life is estimated to be \(\$ 8,000\). Annual maintenance expenses
True or False: To compute capital recovery cost using Excel, enter = PMT(i%,n,-P,F) in any cell in a spreadsheet.
Reconsider the grinding machine from the previous question. What is the capital recovery cost of the grinding machine?a. \(\$ 2,020\)b. \(\$ 2,665\)c. \(\$ 2,980\)d. \(\$ 3,010\)
True or False: When using annual worth analysis with mutually exclusive alternatives having unequal lives, always use a planning horizon equal to the least common multiple of lives.
What is the equivalent uniform annual cost of the following cash flow profile? Assume an interest rate of 15 percent.a. \(\$ 45,130\)b. \(\$ 53,125\)c. \(\$ 62,100\)d. \(\$ 79,050\) End of Year Cost
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,
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
On your child’s first 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

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