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Sample FE Exam Problems Solutions 11. What To Do: Find The Capitalized Cost of Infinite Cash Flow Sequence

The document provides 14 sample problems and solutions for calculating the capitalized cost of infinite cash flow sequences using present worth factors. Each problem presents a cash flow scenario and calculates the present worth, capitalized cost, or annual worth. The solutions show the step-by-step work and identify the correct answer choice for each problem.

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Surya Ch Venkata
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100 views3 pages

Sample FE Exam Problems Solutions 11. What To Do: Find The Capitalized Cost of Infinite Cash Flow Sequence

The document provides 14 sample problems and solutions for calculating the capitalized cost of infinite cash flow sequences using present worth factors. Each problem presents a cash flow scenario and calculates the present worth, capitalized cost, or annual worth. The solutions show the step-by-step work and identify the correct answer choice for each problem.

Uploaded by

Surya Ch Venkata
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Sample FE Exam Problems

Solutions
11. What to do: Find the Capitalized Cost of Infinite Cash Flow Sequence
1.

P = 600,000 + 120,000/0.10
= $1,800,000
Answer is (d)

2.

P = 1000/0.10
= $10,000
Answer is (c)

3.

For capitalized cost,


P in year 5 = 50,000/0.10 = 500,000
P in year 0 = 500,000 (P/F, 10%, 5)
= 500,000 (0.6209)
= $310,450
Answer is (c)

4.

P = 60,000 + 25,000(P/F, 8%, 1) + 10,000/0.08(P/F, 8%, 1)


= 60,000 + 25,000(0.9259) + 125,000(0.9259)
= $198,885
Answer is (a)

5.

Annual worth of 100,000 every 5 years = 100,000(A/F, 10%, 5)


= 100,000 (0.1638)
= $16,380
P = 100,000 + 16,380/0.10
= $263,800
Answer is (c)

6.

Find A over one life cycle and divide by i.


A = 15,000(A/P, 10%, 3) + 8,000 5,000(A/F, 10%, 3)
= 15,000(0.40211) + 8,000 5,000(0.30211)
= $12,521
Pcap = 12,521/0.10
= $125,211
Answer is (c)

7.

For year 10 on the annual cost is $12,000.Find its capitalized cost P/I in year 10
and use the P/F factor for its present worth.
Pcap = 40,000 + 3,000(P/A, 10%, 10) +1000(P/G, 10%, 10)
+(12,000/0.10)(P/F, 10%, 10)
= 40,000 + 3,000(6.1446) +1000(22.8913) +(12,000/0.10)(0.3855)
= $127,585
Answer is (b)

8.

A = 30,000,000(0.10) + 200,000
= $3,200,00
Answer is (c)

9.

A = 20,000(0.10) + 2000(A/F, 10%, 3)


= 2,000 + 2000 (0.30211)
= $2,604.22
Answer is (a)

10.

A = 10,000(0.06) + 10,000 (A/F, 6%, 5)


= 600 + 10,000(0.1774)
= $2,374
Answer is (c)

11.

P19 = 10,000/0.08
= $125,000
P0 = 125,000(P/F, 8%, 19)
= 125,000(0.2317)
= $28,962.50
Answer is (c)

12.

F9 = 3,000,000(F/P, 10%, 9)
= 3,000,000(2.3579)
= $7,073,700
A = 7,073,700(0.10)
= $707,370
Answer is (b)

13.

Find Pcap and then multiply by i:


Pcap = 100,000 + 30,000(P/A, 10%, 10) + (5000/0.10)(P/F, 10%, 10)
= 100,000 + 30,000 (6.1446) + 50,000 (0.3855)
= $303,613
A = Pcap(i)
= 303,613 (0.10)
= $30,361
Answer is (a)

14.

P = 500,000 + 100,000(P/A, 10%, 10) + 50,000(P/G, 10%, 10)


= 500,000 + 100,000(6.1446) + 50,000(22.8913)
= $2,259,025
F10 = P(F/P, 10%, 10)
= 2,259,025(2.5937)
= $5,859,233
A = 5,859,233(0.10)
= $585,923
Answer is (c)

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