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Adamson University College of Engineering Engineering Economy

SET E

Final-Quiz Name: ____________________________ Section: ____________ Student No.: _______________________ Date Submitted: ______

QUIZ #1

1. Suppose that the annual income from a rental property is expected to start at $1,300 per year and decrease at a

uniform amount of $100 each year after the first year for the 12-year expected life of the property. The

investment cost is $10,000, and is 8% per year. Find F at the end of 12 year. Assume that the investment occurs

at time zero (now) and that the annual income if first received at EOY one.

2. In a geometric sequence of annual cash flows starting at EOY zero, the value of A0 is $1,304.35 (which is a cash

flow). The value of the last term in series, A10, is $5,276.82. What is the equivalent value of A for years 1 through

10? Let i=20% per year.

3. Refer to the accompanying cash flow diagram and solve for the unknown quantity in parts (a) through (d) that

makes the equivalent value of cash outflows equal to the equivalent value of the cash inflow, F.

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a. If F=$40,000, G=$2000, and N=6, then i=?

b. If F=20,000, G=$2000, and i=5% per period, then N=?

c. If G=$1000, N=12, and i=10% per period, then F=?

d. If F=$30,000, N=12, and i=10% per period, then G=?

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Adamson University College of Engineering Engineering Economy

SET D

Final-Quiz Name: ____________________________ Section: ____________ Student No.: _______________________ Date Submitted: ______

QUIZ #2

1. You are faced with making a decision on a large capital investment proposal. The capital investment amount is

$650,000. Estimated annual revenue at the end of each year in the eight-year study period is $100,000. The

estimated annual year-end expenses are $35,000 starting in year one. These expenses begin decreasing by

$2,500 per year at EOY four and continue decreasing through EOY eight. Assuming a $20,000 market value at

EOY eight and a MARR=15% per year, what is the PW of this proposal?

2. Your uncle has almost convinced you to invest in his peach farm. It would require a $20,000 initial investment on

your part. He promises you revenue (before expenses) of $2,000 per year the first year, and increasing by $100

per year thereafter. Your share of the estimated annual expenses is $700. You are planning to invest for six

years. Your uncle has promised to buy out your share of the business at that time for $12,000. You have decided

to set a personal MARR of 12% per year. Use the FW method to determine the profit-ability of this investment

project.

3. A drugstore is looking into the possibility of installing 24/7-automated prescription refill system to increase its

projected revenues by $20,500 per year over the next five years. Annual expenses to maintain the system are

expected to be $2,500. The system will cost $50,000 and will have no market value at the end the five-year

study period. The store’s MARR is 10% per year. Use the AW method to evaluate this investment.