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REFERENCES
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Dunn, E., and M. 01ton, Happy Money: The Science of Happier Spending. Simon an d Schuste1~ 2013.
Elizandro, D.. W., and J. 0. Matson . ''Takfog a Moment to Teach Engineering Economy," The Engineering Economist. Vol 52, No. 2,
2007, pp. 97-116.
The Engineering Economist. A quarterly joumal of the Enginee1ing Economy Divisions of ASEE and HE.
Eschenbach, T. G. "MuJtiple Roots and the Subscription/Membersh ip Problem," The Engineering Economist. Vol 29, o. 3, Spring
1984, pp. 216-223.
Eschenbach, T. Engineering Economy: Applying Theory to Practice, 3rd. Oxford Unive.rsity Press, 2011.
Eschenbach, T. G., E. R. Baker, and J. D. Whittaker. "Characterizing the Rea] Roots for P A, and F with Applications to Environmental
Remediation a11d Home Buying Problems," The Engineering Econom ist. Volume 52, No. 1, 2007, pp. 41-65.
Eschenbach, T. G., and J. P. Lavelle. "Technical Note: MACRS Depredation w:ith a Spreadsheet Function: A Teaching and Practice
ote," The Engineering Economist. Vol 46, o. 2, 2001, pp. 153-161.
Eschenbach T. G., and J. P. Lavelle. "How Risk and nceJtain ty Are/Could/Should Be Presented in Engineerin g Economy,"
Proceedings of the 11 th Industrial Engineering Research Conference. HE, Orlando, May 2002, CD.
Eschenbach, T. G., . A. Lewis, J.C. Hartman, a11d L. E. Bussey (with chapter author H. L. achtmann). The Economic Analysis of
Industrial Projects 3rd, Oxford University Press, 2015.
Eschenbach T. G., . A. Lewis, and J. C. Hartman. "Technical Note: Waiting Cost Models for Real Optio ns." The Engineering
Economist, Vol. 54, o. 1, 2009, pp. 1-21.
Fish, J.C. L. Engineering Economics. McGraw-Hill, 1915.
Lavelle, J. P., H. R. Liggett, and H. R. Parsaei, editors. Economic Evaluation of Advanced Technologies: Techniques and Case Studies.
Taylor & Francis,. 2002.
Lewis, N. A., T. G. E!>ehenbach, and J. C. Hartman, "Can We Capture the Value of Option Volatility?" The Engineedng Economist, Vol
53, No . 3, July- Sep tember 2008, pp. 230~258, winner of Grant Award for best article in volume 53.
Liggett, H. R., .L Trevino, and J . P: Lav,elle. "Activity-Based Cost anagement Systems in an Advanced Manufacturing Environment,"
Econom.ic and Financial Justification of Advanced Manufacturing Technologies . H. R. Parsaei,. W. G. Sullivan, and T. R. Hanley,
ed itors, Elsevier Science, 1992.
Lorie, J. H., and L. J. Savage. "Three Problems in Rationing Capital," The Journal of Business. Vol 28, o. 4, 1955, pp. 229-239.
ational Council of Examiners for Engineering and Sarveying (NCEES), FE Reference Handbook, chem ical engineering section.
ewnan, D. G. "Detennin ing Rate of Retum by Means of Payback Pe1iod and Useful Life," Tile Engineering Economist. Vol. 15, No.
1, 1969, pp. 29-39.
Sunda.ram, M., editor. Engineering Economy Exam File. Oxford University Press, 2014.
Tippet, D. D., and P. Hoekstra. "Activity-Based Costing: A Manufacturing Management Decision-Making Aid," Engineering
Management Journal. Vol. 5, o. 2, June 1993, Ame1ican Society for Engineering anagernent, pp. 37-42.
Ulrich, Gael 0., and PaUigarnai T. Vas udevan, "Capital Costs Quickly CaJcul.ated," Chemical Eng.ineering, Vol. 116, o. 4, 2009, pp.
46-52.
WeJlington, A. M. Tile Economic Theory of Rai lway Location. JohnWiley & Sons, 1887.
1 of 61 1/25/2020, 11:40 AM
25% Compound Interest Factors 25%

Si ngle Payment Uniform Payment Series Aritil!i metic Grad ie;nt
Compou nd Pre.sent Sin king Capita! Compound Pre.se nt Gradient Gradient
Amount Worth Fund Recovery Amount Worth Uniform Pre.5ent
Factor Factor factor Factor factor Factor ~ ries Worth
Find F Find P Find A Find A Find f Find P Find A Find P
Give n P Given F Given F Give.n P Given A G·iven A Given G Give n G
n FIP PIF AJF A/fl FIA PIA AIG PIG II
1 1.250 .8000 l.0000 1.2500 1.000 0.800 0 0 1

2 1.563 .6400 .4444 .6944 L50 1.440 0.444 0.640 2
3 1.953 .5120 .2623 .- 123 3.8 13 1_9 -2 0.852 1.664 3
4 .44 1 .4096 .1734 .4234 5.766 _.362 1.225 -.893 4
5 3:052 .3277 .1218 .3718 8.207 2.689 l.563 4.204 5
6 3.815 .2621 .0888 .3388 11.259 2.95 1 l.868 5.514 6
7 4.768 .2097 .0663 .3163 15.073 3..161 2.142 6.773 7
8 5.960 . 1678 .0504 .30M 19.&42 3.329 2.387 7.947 8
9- 7.4-1 .1342 .0388 .2888 25.802 3.463 1.605 9 ..021 9
10 9.313 . 1074 .030! .2801 33.253 3.571 2_7c;7 9.987 ]0
n 11.642 .0859 .0235 .2735 42 .566 3.656 2.966 10.846 11
12 14 ..552 .0687 .0184 .2684 54.-08 3.725 3.115 11 .602 12
13 18 .1 90 .0550 .0145 .2645 68 .760 3.780 3.244 1-.262 13
]4 22.737 .0440 .0115 .2t>l5 86.949 3.824 3.356 12.833 ]4
15 28.422 .0352 .00912 .2591 109.687 3.859 3.453 13.326 ]5
16 35.527 .0281 .00724 .2572 1.38.109 3.887 3.537 13.748 16
17 44.409 .0225 .00576 .2558 173.636 3.9 10 3.608 14.108 17
18 55 .5 11. .0180 .110459 .2546 21 . 045 3.928 3.670 14.4 15 18
19- 69.389 .01 44 .00366 .2537 273.556 3.942 3.722 14.674 19
w 86.736 :0115 .00292 .2529 342 ..945 3.954 3.767 14.893 20
21 108.420 .00922 .00?.33 .2523 429.681 3.963 3.805 15.078 21
22 135 .525 .00738 .00186 .2519 538. JO J 3.970 3.836 15.233 22
23 169.407 .00590 .001 48 .25 15 673.626 3.976 3.863 15.362 23
24 211.758 .00472 .00119 .2512 843.033 3.981 3.&86 15.47 1 24
25 264.698 .00378 .00095 .2509 I 054.8 3.985 3.905 15 .562 25
26 330.872 .-()0302 .00076 .2508 l 319.5 3.988 . .921 15.637 26
27 413.590 .00242 .0006 1 .2506 I 650.4 3.990 3.935 15.700 27
28 5 16.988 .00193 .00048 . 505 2064.D 3.992 3.946 15.752 28
29- 646.235 :001 55 .00039 .2504 2 580.9 3.994 3.955 15.796 29
30 807.n4 .00124 .0003 1 .2503 3227.2 3.995 3.963 15.832 30
31 1000 .7 .00099 .000?....5 .2502 4 035.0 3.996 3.969 15.861 31
32 l 262.2 :00079 .00020 ..2502 50¢4.7 3.997 3.975 15.886 32
33 1577..7 .00063 .00016 .2502 6306.9 3.997 3.979 15.906 33
34 1972.2 :00051 .00013 .2501 7884.6 3.998 3.983 15.923 34
35 2465 .2 .00041 .00010 .250! 9856 ..8 3.998 3.986 15.937 35
0 7 523 .2 .00013 .00003 .2500 30088 .7 3.999 3.995 15.977 40
45 22958 ..9 .OOOM .00001 .2500 91 831.5 4:000 3.998 15.991 45
5() 70064.9 .00001 .2500 280255.7 4:000 3.999 15.997 50
55 2 l3 821.2 .2500 855280.7 4.000 4.000 15.999 55
2 of 61 1/25/2020, 11:40 AM

Single Paymeint Unifo ,m Payment Series Arithmetic Gradient
Compound Present Sinking Capital Compound Present Gradient Gradient
Amount Worth IFu nd Recovery Amount Worth Un iform Pre5ent
Factor Factor Factor Factor Factor Factor Series Worth
Find f Find P Find A Find A Fiind F Find P Find A Find P
Given P Given F Given F Given P Given A Given A Given G Given G
n FIP PIF AJF AIP FIA PIA AIG PIG ,,
l I.JOO .7692 l .0000 1.300) 1.000 0.769 0 0 1
2 1.690 .5917 .4348 .7348 2300 1.361 0.43S 0.592 2
3 2. l97 .4552 .2506 .5506 3.990 1.816 0.827 1.502 3
4 __856 .3501 .1616 .4616 6. 187 __166 1.178 2.552 4
5 3 ..713 .2693 .1106 .4106 9:043 __436 1.490 3.630 5
6 4.827 .2072 .07&4 .3784 12.756 2.643 1.765 4.666 6
7 6.275 .1594 .0S69 .3569 17.583 __802 2.006 S.622 7
8 8. 157 .1226 .04 l9 .3419 23.858 __925 2--16 6.480 8
!) 10.604 .0943 .03 12 .3312 32 ..015 3.019 2.396 7.234 9
10 13.786 .072.5 .0235 .323S 4-.619 3.092 2.SS 1 7.887 ]0
u 17.922 .0558 .0177 .3177 S6.4□- 3. 147 2.6&3 8.445 n
]2 23 .298 .0429 .0135 .3135 74.327 3.190 2.79S 8.917 12
13 30.287 .0330 .0!02 .3I02 97.625 3.223 2.889 9.314 l3
]4 39.374 .0254 .00782 .3078 127.912 3.249 2.%9 9.644 ]4
]5 51.1 86 .Ol9S .00598 .300:l 167.286 3.268 3.034 9.917 ]5
]6 66542 .0150 .00458 .3046 218.472 3.283 3.089 10.143 ]6
17 86504 .0116 .0035 1 .303S 2SS.014 3.295 3.13S l0.328 ]7
]8 112.455 Jl0889 .00269 .3027 37L5 18 3.304 3.172 I 0.479 ]8
]!) 146.192 .00684 .00207 .3021 483.973 3.311 3.202 10.602 ]9
3 ___ 8
21> 190.049 .00S2.6 .00 159 .3016 630. 165 3.316 10.702 2D
21 247:064 .0040S .00122 .3012 820.2 14 3.320 3.248 10.783 2]
22 32Ll84 .00311 .00094 .3009 I 067.3 3.323 3.265 10.848 22
23 417.539 .00239 .00072 .3007 1388.5 3.325 3.278 10.901 23
24 54 __800 .00184 .0005 - .3006 1806.0 3.327 L89 10.943 24
25 70S.640 .00142 .00043 .3004 2348.8 3.329 3.298 10.977 25
26 917.332 .00109 .00033 .3003 3054.4 3.330 3.305 11.005 26
27 I 192.5 .00084 .00025 .3003 3 971.8 3.331 3.311 11.02.6 27
28 15S0.3 .00065 .000 19 .3002 5164.3 3.331 3.315 11.044 28
w 2015.4 .00050 .00015 .3001 6714.6 3.332. 3.319 I 1.058 29
30 2620.0 .00038 .000 11 .3001 8730.0 3.332 3.322 11.069 30
31 3 406.0 .00029 .00009 .3001 11350.0 3.332 3.324 11.078 31
32 4427.8 .00023 .00007 .3001 14756.0 3.333 3.326 11 .085 32
33 5 756.1 .00017 .00005 .3001 19183 .7 3.333 3.328 11.090 33
34 7483.0 .00013 .00004 .3000 24939 ..9 3.333 3.329 11.094 34
35 9727.8 .00010 .00003 .3000 32422 ..8 3.333 3.330 I 1.098 35
40 36118.8 .00003 .0000 1 .300:J [2039 .6 3.333 3_33 _ 11.107 40
45 134106.5 .00001 .3000 447 018.3 3.333 3.333 11.110 45
3 of 61 1/25/2020, 11:40 AM
35% Compound Int erest Factors 35%

Single Payment ll 111 ifoim Payment S,eries Aritlh metic Grad ieillt
Compound Present Sinking Capita! Compound Present Gradient Gradient
Amount Worth Fund Recovery Amount Worth Unifomi Present
Factor Factor Factor Factor factor Factor Series Worth
Give n P Given F Given F Given P Given A Given A Given G Given G
n FIP PIF AIF .AJP FIA PIA AIG PIG n
1 1.350 .7400 1.0000 1.3500 1.000 0.741 0 0 J
2 1..822 .5487 .4255 .7755 2.350 1.289 0.426 0.549 2
3 2.460 .4064 .2397 .5897 4.173 1.696 0.803 1.362 3
4 3322 .3011 . 1508 .5008 6.633 1.997 1.1 34 2.265 4
5 4.484 .2230 .1005 .4505 9.954 2.220 1.422 3.1 57 5
6 6.0 -3 .1 652 .1)693 .4 193 14.438 __385 1.670 3.983 6
7 8.172 .1224 .0488 .3988 20.492 2.50 1.881 4.717 7
8 11,032 .0906 .0349 .3849 28 .664 __598 2.060 5.352 8
9 14.894 .0671 .025._ .3752 39 ..696 __665 2.209 5.889 I)
10 20.107 .0497 .0183 .3683 54.590 __715 2.334 6.336 ]0
n 27.144 .0368 .0134 .3634 74.697 __r2 2.436 6.705 11
12 36.644 .0273 .00982 .3598 l0 l.84 J 2.779 2.520 7.005 12
13 49.470 .0202 .00722 .3572 138.48- 2.799 2.589 7.247 13
14 66.784 :0150 .00532 .3553 I 7 ..954 2.814 2.644 7.442 ]4
15 90. 158 :01 11 .00393 .3539 254.739 2.825 2.689 7.597 15
16 121 .714 .00822 .00290 .3529 344.897 __834 2.76 7.72 1 16
17 164.314 .00609 .0021 4 .3521 466.61.1 2.840 2.753 7.818 17
18 221.824 .00451 .001 58 .3516 630.925 __844 2.776 7.895 ]8
19 299.462 .00334 .00117 .35L 852 .748 __848 2.793 7.955 ]I)
20 404.274 .00247 .00087 .3509 11 52.2 2.850 2.808 8.002 20
21 545 .769 .00 183 .00064 .3506 1556.5 2.852 2.8 19 8.038 21
22 736.789 :00136 .00048 .3505 2102.3 __853 2.827 8. 067 22
23 994.665 .OOIO I .00035 .3504 2 839:0 2.8-4 2.834 8.089 23
24 1342.8 .-00004 .00026 .3503 3 833.7 __855 2.839 8.1 06 24
25 1812 ..8 .00055 .000 19 .3502 5 176.5 __856 2.843 8.119 25
2~ 2 447 .2 .00041 .00014 .3501 6989.3 __8-6 2.847 8.1 30 26
27 3303 .8 .00000 .00011 .3501 9 436.5 2.856 2.849 8.137 27
28 4 460. 1 :00022 .00008 .3501 12740.3 2.857 2.851 8.143 28
29 6021.l .00017 .00006 .350! 17200.4 2.857 2.852 8.148 21)
30 8 128.5 .00012 .00004 .3500 23 221.6 2.857 2.853 8.1 52 30
31 JO 973.5 .00009 .00003 .3500 31350.1 __857 2.854 8.154 31
32 14 814..3 .00007 .00002 .3500 42323.7 __3-7 2.855 8.1 57 32
33 l9 999 .3 .00005 .00002 .3500 -7 137. 9 2.857 2.855 8.1 58 33
34 26999:0 .00004 .0000 1 .3500 77 137 .2 __3-7 2.856 8.159 34
35 36 448.7 .00003 .0000 1 .3500 104 136.3 2.857 2.856 8..1 60 35
4 of 61 1/25/2020, 11:40 AM

Single Paymeint Unifo ,m Payme1:1t Se:ries Arithmetic Gradient
Compound Present Sin king Capiuil Compound Present Gradient Giradient
Amou nt Worth IFund Recovery Amount Worth Un iform Present
Find F Find P Find A Find A Find F Find P Find A Find P
n fl P Pl f Alf Alf' FIA PIA AIG PIG n
1 1.400 .71 43 l.0000 1.4000 1.000 0.714 0 0 1
2 1..960 .5I02 .4167 .8 167 2.400 1.224 0.417 0.5IO 2
3 2.744 .3644 .2294 .6294 4.360 1.589 0.78.0 1.239 3
4 3.842 .2603 .1408 .5408 7 ..!04 1.84.9 1.092 2.020 4
5 5.378 .1859 .09 14 .4914 10.946 2.035 1.358 2.764 5
6 7.530 .132S .0613 .4613 16.324 __168 l .581 3.428 6
7 10.541 .0949 .0419 .44 19 23.853 __263 1.766 3.997 7
8 14.758 .0678 .029 1 .4291 34.395 __331 1.919 4.471 8
9' 20.661 .0484 .0203 .4203 49. 153 __379 2.042 4.858 !)
10 ~8.925 .0346 .01 43 .4 143 69.8 14 2..414 2. 142 5.1 70 ]0
11 40.496 .0247 .OIO I .4 IOI 98.739 __438 2.221 5.4 17 ]l
12 56.694 .0176 .007 18 .4072 139.235 2..456 2.285 5.611 12
13 79.371 .012.6 .005 l0 .4051 195.929 __469 2.334 5.762 ]3
14 111. l20 .00900 .00363 .4036 275.300 _.478 2.373 5.879 ]4
15 155.568 .00643 .00259 .4026 386.420 484 2.403 5.969 15
16 217..795 .00459 .00185 .4018 54 1.98 2.489 2.426 6.038 6
17 304 ..913 .003 ~8 .00 132 .4013 759.783 _.492 2.444 6.090 ]7
18 426.879 .00234 .00094 .4009 I 064.7 2.494 2.458 6.130 ]8
19' 597.630 .00167 .00067 .4007 1419.6 2.496 2.468 6.160 ]9
20 836.682 .00120 .00048 .4005 2089.2 2.497 2.476 6.183 2D
21 I 171.4 .00085 .00034 .4003 2925.9 2.498 2.482 6.200 21
22 1639.9 .00061 .00024 .4002 4097.2 __498 2.487 6.213 22
23 2295.9 .00044 .000 17 .4002 5737. 1 _.499 2.490 6.222 23
24 3 14.2 .00031 .00012 .400 1 8033.0 2.499 2.493 6.229 24
25 4499 ..9 .00022 .00009 .4001 11247.2 _.499 2.494 6.235 25
26 6 299.8 .00016 .00006 .4001 15 747.1 __500 2.496 6.239 26
27 8819.8 .00011 .00005 .4000 22M-6.9 2.500 2.497 6.242 27
28 12347.7 .00008 .OOCHJ3 .4000 30866.7 2.500 2.498 6.244 28
29' 17 ~86 ..7 .00006 .00002 .4000 43214.3 __500 2.498 6.245 2!l
30 24 201.4 .00004 .00002 .4000 60501.0 2.500 2.499 6.247 30
31 33882.0 .00003 .0000 1 .4000 84 702 ..:'i __500 2.499 6.248 31
32 47 434.8 .00002 .0000 1 .4000 J 18584.4 2.500 2.499 6.24.S 32
33 66 408.7 .00002 .0000 1 .4000 166019.2 __500 2.500 6.249 33
34 92972.l .00001 .4000 232427.9 2.500 2.500 6.249 34
35 130161 :0 .00001 .4000 325400.0 2.500 2.500 6.249 35
5 of 61 1/25/2020, 11:40 AM

Single Payment Uniform Payment Series Aritil!i metic Grad ie;nt
Compound Pre.sent Sin ki ng Capita! Compound Pre.sent Gradient Gradient
Amount Worth Fund Recove ry Amount Worth Uniform Pre.5ent
Factor Factor factor Factor fa ctor Factor ~ ries Worth
Find F Find P Find A Find A Find f Find P Find A Fin d P
Given P Given F Given F Give.nP Given A G·iven A Given G Given G
n FIP PIF AJF A/fl FIA PIA AIG PIG II
1 1.450 .6897 l.0000 1.4500 1.000 0.690 0 0 1

2 2.103 .4756 .4082 .8582 2.450 1. 165 Q.408 0.476 2
3 3:049 .3280 .2197 .6697 4.553 1.493 0.758 1.132 3
4 4.42 1 .2262 .1316 .5816 7.601 1.720 1.053 l.8IO 4
5 6.4 !0 . 1560 .0832 .5332 12.022 1.876 l.298 2.434 5
6 9.294 . 1076 .0543 .5043 18.43 1 1.983 1.499 2.972 6
7 13.476 .0742 .0361 .4861 27.725 2:051 1.661 3.4 18 7
8 19.54] .0512 .0243 .4743 41.202 __109 1.791 3 ..776 8
9- 28.334 .0353 .0165 .4665 60 ..743 . 144 l.893 4 . 058 9
10 41.085 .0243 .0112 .4612 89.077 - . 168 1.973 4.277 ]0
n 59573 .0 168 .00768 .4577 130.162 __[ 85 2.034 4.445 11
12 86.381 .0 116 .005 1 .4553 189.735 2. 196 2.082 4572 12
13 125 .252 .00798 .00362 .4536 276.11 - 2.204 2.118 4.668 13
]4 181.6 15 .00551 .00249 .4525 40L367 __210 2.145 4.740 ]4
15 2.63.342 .00380 .00172 .4517 582.982 -.214 2.165 4.793 ]5
16 381.846 .{)()2.62 .00118 .4512 846.3r 2.2 l6 2.180 4.832 16
17 553.677 .00181 J)008 1 ..4508 l 22ll.2 2.2 18 2.191 4.861 l7
18 802 ..83 1 :00125 .00056 .4506 1781. 2.2 19 2.200 4.882 ]8
19- 1164.1 .00086 .00039 .4504 2584.7 2.220 2.206 4.898 19
20 1688.0 .00059 .00027 .4503 3 748.8 2.221 2.2IO 4.909 20
21 2447.5 .00041 .0001 8 .4502 5436.7 __22 1 2.214 4.9 17 21
22 3548.9 .0002S .00013 .450! 7884.3 __222 2.216 4.923 22
23 5145 .9 .00019 .00009 .4501 l 1 433.2 __222 2.218 4.927 23
24 7 461.6 .00013 .00006 .4501 16579. 1 __222 2.219 4.930 24
25 !0819.3 .00009 .00004 .4500 24040 ..7 2.222 2.220 4.933 25
26 15688.0 .·00006 .00003 .4500 34860.1 2.222 2.221 4.934 26
27 22747.7 .00004 .00002 .4500 -o 548.1 __ 222 2.2 - 1 4.935 27
28 32984.J .00003 .0000 1 .4500 73 295.8 __ 222 2.221 4.936 28
29- 47 82.6.9 .00002 .0000 1 .4500 !06 279.9 _.2_2 2.22- 4.937 29
30 69349. 1 .00001 .0000 1 .4500 154106.8 __222 2.__2 4.937 30
31 lOO 556..1 .00001 .4500 223 455.9 __222 2.222 4.938 31
32 145806.4 .00001 .4500 324 012.0 2.222 2.222 4.938 32
33 2 11419.3 .4500 469818.5 2.222 2.222 4.938 33
34 306558.0 .4500 68 1237 ..8 2.222. 2.22.2 4.938 34
35 444509.2 .4500 987 795.9 2.222 2.222 4.938 35
6 of 61 1/25/2020, 11:40 AM

Single Paymeint Uniform Paymeililt Series Arithmetic Gradient
Compound Present Sinking Capital Compound Present Gradien t Gradient
Amou nt Worth fond Recovery Amount Worth Un iform !Pre.s.ent
Find F Find P Find A Find A Fiind F Find P Find A Find P
n FIP PIF AIF AIP FIA PIA AIG PIG n
1 1500 .6667 l.0000 1.5000 1..000 0.667 0 0 l
2 2.250 .4444 .4000 .9000 2_500 I.Ill 0.400 0.444 2
3 3.375 .2963 __ IQ5 .7 I05 4.750 1.407 0.737 1.037 3
4 5:063 .1975 .I 31 .6231 S..1 25 1.605 1.015 1..630 4
5 7_594 .1317 .0758 .575S 13. ]88 1.737 1.2.42 2.156 5
6
7
11.391
17:086
.0878
.0585
.04-S I
.031 1
.5481
.5311
20.78 ]
32.172
1..824
1.883
1.423
1.565
2.595
2.947 .,6
8 25.629 .0390 .0203 .5203 49.258 1.922 1.675 3.220 8
I) 38.443 .02.60 .0134 .5 134 74.887 1.948 1.760 3.428 9
10 57.665 .0173 .00882 .50S8 113.330 1.965 1.8'24 3.584 10
11 &6.498 .0116 .0058- .505S 170.99 - 1.\177 l. 871 3.699 11
12 L9.746 .0077 1 .00388 .5039 257.493 1.985 1.907 3.784 l2
13 194.620 .00514 .00258 .5026 387.2 9 1.990 1.933 3.846 ]3
14 _91.929 .00343 .00172 .5017 581 .859 1.993 1.952 3.890 ]4
15 437.894 .00228 .00 114 .5011 873.788 1.995 1.966 3.922 15
16 656.81 4 .00152 .00076 .500S 1311.7 1.997 1.976 3.945 16
17 985.261 .OOIOI .0005 1 .5005 1968_5 1.998 1.983 3.961 ]7
18 1477.9 .00068 .00034 .5003 2953 . 1.999 l.9S8 3.973 18
11) 2 _16.8 .00045 .00023 .5002 4431.7 1.999 1.99 1 3.981 19
2.0 3325.3 .00030 .000 15 .5002 6648_5 1.999 1.994 3.987 2D
2l 49S7.9 .00020 .000 10 .5001 9 973.8 _:000 1.996 3.991 2l
22 7 481.8 .00013 .00007 .5001 14 961..7
__ooo 1.997 3.994 22
23 11222.7 .00009 .00004 .5000 22 443..5 2.000 1.998. 3.996 23
24 16 834.l .00006 .00003 .5000 33666.2 2.000 1.999 3.997 24
25 25251.2 .00004 .00002 .5000 50500.3 2.000 1.999 3.998 25
26 37876.8 .00003 .0000 1 .5000 75751_5 __ ooo l.999 3.999 26
__(JOO
27 5681 5.l .00002 .0000 1 .5000 11 3 62S.3 2 .000 3.999 27
__(JOO
28 85222.7 .00001 .0000 1 .5000 170 443.4 2.000 3.999 28
21) 127 834.0 .00001 .5000 255666. l
__ooo 2.000 4.000 29
36 191751.1 .00001 .5000 383 500.l __ooo 2.000 4 .000 30
31 287 626.6 .5000 575 251.2 2.000 2.00J 4.000 31
32 431 439.9 .500J 862877..8 2.000 2.00J 4.000 32
7 of 61 1/25/2020, 11:40 AM
60%, Compound Interest Factors ·6 0%

Single Payment tlnifoim Payment Series Aritlh metic Giad ieillt
Compound Present Sinki ng Capita! Compound Present Gradient Gradient
Amount Worth Fund Recovery Amount Worth Uniform Present
Factor Facto:r factor Facto:r factor Factor Series Wor~h
Given P Given F Given F Goven P Given A Given A Given G Given G
n f /P Plf Alf AJP FIA PIA AIG PIG II
l 1.600 .6250 1.0000 1.6000 1.000 o.6r 0 0 1

2 2.560 .3906 .3846 .9846 2.600 1:0 16 0.385 0.391 2
3 4.096 .2441 .1938 .7938 5.160 1.260 0.698 0.879 3
4 6.554 . 1526 .IOSO .7080 9T6 1.412 0.946 1.337 4
5 I0.486 .0954 .0633 .6633 15.810 1.508 1.140 1.718 5
6 16.777 .0 -96 .03SO .6380 26. - 95 1.-67 l.2S6 - .0 16 6
7 26.844 .0373 .0232 .6232 43.073 1.605 1.396 __24 0 7
8 42_9 -o :0233 .0143 .61 43 69 .916 1.628 1.476 2.403 !I
9' 68.71 9 .01 46 .00886 .6089 112.866 1.642 1.534 -.519 9
10 109..951 :00909 .0055 1 .6055 181.585 1..652 1.575 2.601 10
n 175.922 .00568 .00343 .6034 291.536 1.6-7 1.604 .658 11
12 281.475 .00355 .0021 4 .6021 467.458 1.661 1.624 2.697 12
1-3 450.360 .00222 .00134 .6013 748.93 1.663 1.638 __724 13
14 720.576 .00139 .00083 .6008 1 199.3 1.664 1.647 .742 14
15 1152.9 .00087 .00052 .6005 1919.9 1.665 1.654 2.754 15
16 1844.7 .00054 .00033 .6003 3072.8 1.666 1.658 - .762 16
17 2951.5 :00034 .00020 .6002 4 917.5 1.666 1.661 2..767 17
18 4722.4 .00021 .00013 .6001 7868 . 9 1.666 1.663 2.771 1!1
19' 7 555.8 .00013 .00008 .6011 12 591. 1.666 1.664 __773 19
20 12089.3 .00008 .00005 .6000 20 147 ..1 1.667 l.665 2.775 20
21 J9 342.8 .00005 .00003 .6000 32 236.3 1.667 1.666 .776 21
22 30948.5 :00003 .00002 .6000 51579.- 1.667 1.666 .777 22
23 49 517 ..6 :00002 .0000 J .6000 82 527.6 1.667 1.666 2.777 23
24 79228. l .00001 .0000 1 .6000 132045.2 1.667 1.666 2.777 24
25 126 765.0 .00001 .6000 211 273 .4 1.667 1.666 2.777 25
26 202824:0 .6000 338038.4 1.667 1.667 - .778 26
27 324 518 .4 .6000 540862.4 1.667 1.667 2.778 27
28 519 229.5 .6000 865380.9 1.667 1.667 2.778 2!1
8 of 61 1/25/2020, 11:40 AM
APPENDIXD
FUNDAMENTAL1S OF ENGINEERING
(FE) EXAM PRAC 1TICE PRQ,B LEMS
From the NCEES website (ncees.org)
The National Council of Examiners for Engineering and Surveying (NCEES) is a national nonprofit organization
dedicated to advancing professional licensure for enginee,·s and surveyors. It develops, administers, and scores the
examinations used for engineering and surveying licensure in the United Stares.
The Fundamentals of Engineering (FE) exam is the first step toward professional licensure. Effective Januaiy 2014, the
exam transitioned to a computer-based testing (CBT) platfonn, administered in testing centers during four time pe1iods
each year. For more details on the exam, study mater1als, and examination content areas, please reference the CEES
website.
The set of homework problems in this Appendix has been developed in the multiple-choice style of the FE exam. With
the new exam format, Engineer·ing Economy and Engineering Ethics topics are found in all FE exams, although the
number of questions and extent of coverage vary from discipline to discipline. Following are sections from the NCEES
Exam Specifications for each disdpline-highlighting the sections and number of questions on engineedng economy and
engineering ethics.
Chemical Engineering Exam
13. P rocess Design and Economics (8-12 questions)
A. Process flow diagrams and piping and instmmentation diagrams
H. Equipment selection (e.g., sizing and scale-up)
C. Cost estimation
D. Comparison of economic alternatives (e.g., net present value, discounted cash flow, rate of return, expected value
and risk)
E. Process design and optimization (e.g., sustainability, efficiency, green engineering, inherently safer design,
evaluation of specifications)
16. Ethics and Professional Practice (2- 3 questions)
A. Codes of ethics (professional and technical societies)
B. Agreements and contracts
C. Ethical and legal considerations
D. Professional liability
E. Public protection issues (e.g., licensing boards)
Civil Engjneering
4 . Ethics and Professional Practice (4-6 questions)
B. Professional liability
C. Licensure
D. Sustainability and sustainable design
E. Professional skills (e.g., public policy, management, and business)
R Contracts and contract law
5. Engineering Economics (4-6 questions)
A. Discounted cash flow (e.g., equivalence, PW, equivalent annual worth, FW, rate of return)
B. Cost (e.g., incremental, average, sunk. estimating)
9 of 61 1/25/2020, 11:40 AM
C. Analyses (e.g., breakeven, benefit-cost, life cycle)

D. Uncertainty (e.g., expected value and risk)
Electtical and Computer Engineering
3. Ethics and Professional Practice (3-5 questions)
B. NCEES odel Law and Mode] Rules
C. Intellectual property (e.g., copyright, trade secrets, patents)
A. Time value of money (e.g., present value, future value, annuities)
B. Cost estimation
C. Risk identification
D. Analysis (e.g., cost-benefit, trade-off, breakeven)
Environmental Engjneering
E. Public protection issues (e.g., licensing boards)
F. Regulations (e.g., water, wastewater, air, solid/hazardous waste, groundwater/soils)
4. Engineering Economics (4,--6 questions)
A. Discounted cash flow (e.g., life cycle, equivalence, PW, equivalent annual worth, FW, rate of return)
B. Cost (e.g., incrementa[, average, sunk, estimating)
C. Analyses (e.g., breakeven, benefit-cost)
D. Uncertainty ( expected value and risk)
Industrial and Systems Enginee1ing
A. Codes of ethics and licensure
C. Professional, ethical, and legal responsibility
D. Public protection and regulatory issues
A. Discounted cash flows (PW, EAC, FW, IRR, amortization)
B. Types and breakdown of costs ( e.g., fixed, variable, direct and indirect labor)
C. Cost analyses ( e.g., benefit-rnst, breakeven, minimum cost, overhead)
D. Accounting (financial statements and overhead cost allocation)
E. Cost estimation
F. Depreciation and taxes
G. Capital budgeting
Mechanical Engineering
A. Codes of ethics
E. Public health, safety, and welfare
10 of 61 1/25/2020, 11:40 AM

A. Time value of money
H. Cost. including incremental, average, sunk, and estimating
C. Economic analyses
D. Depreciation
Other Disciplines
A. Codes of ethics
B. NCEES odel Law
C. Public protection issues (e.g., Ucensing boards)
A. Time value of money (e.g., present worth, annual worth, future worth, rate of return)
B. Cost (e.g., incremental, average, sunk, estimating)
C. Economic analyses (e.g., breakeven, benefit-cost, optimal economic life)
D. Uncertainty ( e.g., expected value and risk)
E. Project selection (e.g., comparison of unequal life projects, lease/buy/make, depreciation, discounted cash flow)
PROBLEMS
Chapter 1
Decision Making
D-1 Engineering economic analysis provides usefuJ input in all of the following situations except which one?
(a) Determining how much we should pay fora m achine that will provide a savings.
(b) Determining the priority of investing our company's retained earnings.
(c) Illustrating the econo mic advantages o ( one alternative over other feasible choices.
(d) Convincing management that one person should be hired over another.
D-2 Engineering economic analysis can be described by the following statement:
(a) Involves a systematic analysis of reJevant costs and benefits.
(b) Involves a comparison of competing alternatives.
(c) Supports a rational economic decision-making objective.
(d) AU of the above.
D-3 To which of the following questions does an engineering economy analysis provide useful input?
(a) Has the mechanical or electJical engineer chosen the most economicaJ motor size given functional req uirements?
(b) Has the civil or mechanical engineer chosen the best thickness for insulating a building?
(c) Has the biomedical engineer d1.0s,en the best ma.terials for the company's artificial knee product?
(d) AU of the above
D-4 Vvhkh of the following job functions potentiaJJy conducts and utilizes engineering economic anaJysis in decision making?
(a) Senior technica.l design engineer.
(b) Midlevel manager of business and finance.
(c) Senior management for new product deveJopment.
D-5 Engineering economic analysis can be described by the following statement:
(a) Involves a systematic analysis of relevant costs and benefits.
(b) Involves a comparison of competing alternatives.
(c) Supports a rational economic decision-making objective.
Engineering Ethics
11 of 61 1/25/2020, 11:40 AM
D- Engineers are acting in the most ethica] way in which of these situations?
6 (a) They are making sure the company's interests are protected.
(b) They feel good about the decisions that they' ve made.
( c) They act to protect the interests of society in general.
( d) They ensure that thefr own best interest is protected.
D- To act as an ethical engineer, you shou.ld accept fees for engineering work in which situation ?
7 (a) If you need the money to keep your business open and thliving.
(b) If you are competent to rnmplete all aspects of the job.
( c) If the conn--act is a cost plus contract.
(d) If there were no other engineers who bid on the job.
D- A registered professional engineer (PE) has as a plimary obligation to protect which of the following entities?
8 ( a) The government
(b) The PE's company
(c) The PE's country
(d) The general public
D- Engineers should act in ethical ways for what reason?
9 (a) It creates a feel -good situation for them.
(b) The engineering code of conduct req uires it.
( c) They may be considered for a raise because of it.
(d) They may be violating the law if they don't.
D- A design engineer is responsible for an important subelement of a large project at a firm . The project has faJJen behind schedule,
10 and the important client 1s very angry and threatening to sue. The boss is expecting the engineer's design review to go well so that
the proj eel can be shipped by the end of the week. The engineer notices during final design review that an element of the design is
wrong and will create a major safety issue for the enti.re system. To rework that portion of the design will take several months. The
engineer should do which of the following?
(a) Sign off on the d rawings because of the threatened fawsuit and because the project is so far behin d.
(b) Do not sign off on the drawings, and let the boss know what is fo u.nd at the fi nal design review.
(c) TeH the boss that to sign off on the design now, the engineer must have an immediate raise.
(d) Sign off and keep an eye on how construction goes. Maybe the engineer can correct the safety issues before the project is fuJ]y
operational.
D- As team leader for your unit, you function as both engineer and manager. One of your roles is to approve major purchases, and you
11 have been contacted by a new supplier .in your area. The new company has invited you to expensive dinners, has 0He11ed trips to
vacati.on spots to attend "product shows," and has recently been sendi ng to your private add11ess personal items such as colJectible
art, coins, sports tickets, and golf d ub membersMps. You are unsure how to handle th.is situatio n. You should do which of the
foUowing?
(a) Accept all of the gifts because you know that everyone else is doing it and that this is yo ur chance to get a share of the action.
(b DecUne the gifts and other offers that would be considered outside the sc-ope o oroinary business or professional contact.
(c) Knowing that the gifts wm not influence your purchasing decisions, acoept the items with no gunt.
(d) Accept the gifts but make su.re that your boss and others on your team share ln the bou nty.
Cost Problems
D- A company produces several product ]jnes. One of those lines generates the foUowing annual rnst and production data:
12
Manufacturin g/Matelials costs $200,000
General/ Administrative costs 50,000
Direct-labor costs 170,000
Other overhead costs 60,000
Annual production demand 10,000 units
The company adds 40% to its production cost in selling to the retailer. The retailer in tum adds a 50% profit margin when selling to
jts customers. How much would it cost a retailer to buy 100 units of the product?
(a) $4800
12 of 61 1/25/2020, 11:40 AM
(b) $6720
(c) $7200
(d) $1008
D- An agri business is deciding what crop to plant in this area for the next growing season. The local agricuJtural extension office has
13 provided the foUowing data (in $100):
Crop Cos"'t per acre Inrnme/acre at 1'00% Yield Es1imated Yield(%)
A $30 $45 80
B 45 75 65
C 15 25 90
Us.ing a 200-acre plot as an example (subtract 10% fo r unusable areas of the field), which crop should be planted this year, and
what is the total profit?
(a) A; $108,000
(b) C; $135,.000
(c) C; $150,000
(d) B; $540,000
Use the data below for Problems D~l4 to D- 17:
A textbook publisher produces a textboo k for $50 per book and sells to the Campus Bookstore for $75 per unit. The books tore seUs
the textbook new for $100 and used for $60. It .is able to buy unUrnited amounts of used books from a secondary supplier for $50.
The bookstore buys a lol of 250 new books fro m the publisher.
D - What is the net profit (sales-cost) to the publisher for this order?
1A (a) $25
(b) (250)(75-50) = $6250
(c) $10,000
(d) $2500
D- If enrollment in the course is 150 for each of the first two semeste.rs, what are the net costs 10 students for tex~books?
15 (a) $15,000
(b) $20,400
(c) (250)(75) + (300-250)(60) = $21,750
(d) $30,000
D- If the bookstore purchases $3000 worth of used books over 3 semesters to meet class enrollment demand, what was the total
16 enrollment for this period of time?
(a) 300
(b) 150
(c) 75
(d) (3000)/(50) + 2 0 = 310
D- If enrollment in the course is 7 each semester for 4 semesters, what is the net profit (sales-costs) for the booksto re?
17 (a) (250)(100) + (300-250)(60) - (250)(75) - (300-250)(50) = $6750
(b) $22,500
(c) $11.,200
(d) $28,000
Chapter 2
Cost Concepts
D - A £inn bought a used machine 2 years ago for $1500. When new, the machine cost $8000. Today it could be sold for $500. Which
18 of the following statements is tme?
(a) The fixed cost for operating the machine can be ignored in any analysis.
(b) The $8000 purchase price is not incl uded jn the analysis.
,(r' Tho (.1 c;.nn n ::rirl 7 UO !:U'li:! !:Hlt\ i,c i n r l 11 rl.a..-l i n tho !Jon :1 lut!lC'
13 of 61 1/25/2020, 11:40 AM
(c) The $1500 paid 2 years ago is included in the analysis.
(d) The variable cost of ownership is the difference betwe,en what was paid and what the machine is now worth ($1 00-$500 =
$1000).
D- When considering two alternatives that are described only in terms of the cost of ownership, the breakeven point cannot be
19 described by which of the following statements?
( a) The difference in initial cost between the two altematives.
( b) The level of production (or activity) of each alternative under consideration 1s equivalen t.
(c) Fixed plus variable costs of each alt,ernative a11e equivalent.
(d) A rational decision maker should be indifferent between the two alternatives.
D- If J J Industries realiz,es a profit of $4.00 per uni t sold, what is the flxed-cost portion of their production costs? Their va1iable
2.fl costs are $1.50 per unit, and they se]J 1000 units per year at a p1ice of $6.00 per unit.
(a) There are no fixed costs in this type of problem.
(b) $250
(c) $500
(d) $2000
D- Consider the following production data for Altematives A and B .in a firm that uses a 10% interest ra te.
2.1
AU.A AJt. B
Annual fixed cost per unit $2 milJfon $3.5 milHon
Annual variable cost per unit 850 250
If the company is going to produece 4000 units annually, which alternative should be chosen?
(a) Neither aJtemative should be chosen because the negative ca:sh flows are greater than the positive cash flows for both
alternatives.
(b) This problem cannot be solved because there is not enough data given.
(c) Alt. A
(d) Alt. B
D- A company has annual fixed costs of $2,500 000 and va1iable costs of 0. 15 per unit produced. For the firm to break even if they
22 charge $1.85 for their product, the level of annual production is nearest to what value?
(a) 375,000 units
(b) 1,315,789 units
(c) 1,351,351 units
(d) 1,562,500 units
Estimating in Enyineering Economy

D- Whkh statement is not hue with respect to esti.mating the economic impacts of proposed engineering projects?
23 {a) Order-of-magnitude estimates are us,ed for high-level planning.
(b) Order-of-magnitude estimates are the most accurate type at about-3 to 5%.
(c) Increasing the accuracy of estimates requires added time and resources.
(d) Esti.mators tend to underestimate the magnitude of costs and to overestima~e benefits.
D- The Department of Transportation is accepting bids for materials to provide "signage and safe ty" for a new 25-mile s.ection of a 4-
24 lane hJghway. DOT estimates are:
Lane paint $500 per mile per lane

Refleaetive lane markers $6 per 25 feet
Mile markers $18 per unit
Flexible roadside delineators $32 per unit; spaced at 1000 feet

Emergency boxes $500 per unit spaced at 2.5 miles
Sign.age (various messages) $1000 per mile; based on histmical costs
14 of 61 1/25/2020, 11:40 AM
The bids that DOT receives should be in what range of costs?

(a) Less than $100,000
(b) Between $100,000 and $200,000
(c) Berween $200,000 and $250,000
(d) Greater than $250,000
D- A 250-gaUon reactor cost $780,000 when it was constmcted 20 years ago. What wouJd a 750-gaJJon model cost today if the power-
25 sizing exponent is 0.56 and the constmction cost index fo r such fadJities has increased from 141 to 556 over the last 20 years?
Choose the dos.est value.
(a) $0.37 million
(b) $1.66 miJHon
(c) $1.44 milHon
( d) $5.69 miJHon
D- A half-minion-square-foot warehouse facility is being considered by yoUT company fo r a locati.on in Kansas City, KS . You have a
2;6 bid for a simiJar type 25,000-ft 2 facility in Washington, DC, al $4,375,000. I f the warehouse construction cost index va]ue for KS
is 0.75 and for DC it is 1.34, what range shou]d the KS bid fa]] into if you assume that construction costs are linear across size?
( a) Less than $30 million
(b) Betv,een $30 mill.ion and $60 mHUon
(c) Between $60 miUion and $100 m.i.Uion
(d) Greater than $100 million
D- A company has major cUents in all 50 states . Fifteen (15) of the states have 4 dients, 10 have 3 clients, 20 have 6 clients and 5
27 have 10. The totaJ number of clients the film has is closest to what number?
(a) 23
(b) 50
(c) 250
(d) 260
Chapter 3
Simple Interest
D- Whkh of the fo llowing statements is not tiue?
2.8 (a) Simp le in terest is to be us,ed only in simple decis ion situations.
(b) Compo unded interest involves computing interest on top of interest.
(c) imple in terest is rare in practical situations of borrowing and loaning.
( d) If the interest is not stated as being simple or compounded, we assume the latter.
D- If you borrow $1000 from th,e bank at 5% simple inte11est per month due back in 2 years, what .is the size of yo ur monthly
29 payments?
(a) $25
(b) $50
(c) $500
(d) $1200
D- Your quarterly payments on a l.oan are $500 and the in terest that you are paying is l % per quarter simple interest. The size of the
30 principal that you have borrowed is closest to whkh value?
(a) $5000
(b $12,500
(c) $20,000
(d) $50,000
D- The principal that you borrowed fo r a recent purchase was $15,000. You will pay the purchase off through a simple interest loan at
31 8% per year due in 3 yea.rs. The amount that is due at the end of 3 years is closest to what va.lue?
(a) $1200
(b) $3600
(c) $16,200
(d) $18,900
15 of 61 1/25/2020, 11:40 AM
'lOJ ,: uo,~uu
D- If $10,000 is bonowed today at 5% simple interest, how much is due at the end of 10 years?
32 (a) $5000
(b) $10,000
(c) $15,0 00
(d) $16,289
·C ompound Interest, Single Cash Flows

D- A savings account's value today is $150 and it eams interest at 1 % per month. How much will be in the account one year from
33 today? Which of the following is con--ect to solve for the unknm\lll value?
(a) P = 150(1 + 0.0 1) 12
(b) 150 = F(FIP, 12%, 1)
(c) F = 150(1.12f 12
(d) F = 150(F/P 1%, 12)
D- To calculate how many years (n) an investment (P) must be kept in an account that earns interest at i%, in order to tri ple in amount,
34 which of the following e.xp1--essions should be used?
(a) n = -P + F(PIF, i%, n)
(b) n = [ log (F / P)]/[ log ( l + io/t )]
(c) n = [ ln ( - P + F)]/[ln i%]
(d) n = -F( l + i%l
D- If you invest $40,000 in a stock whose value grows at 2% per yea.r, your investment is nearest what value after 5 years?
35 (a) $40,800
(b $43,296
(c) $44, 164
(d) $64,420
D- An account pays inte1--e:st at 1.5% per month . If you deposit $5000 at the beginning of this year,. how much could you withdraw at
36 the end of next year?
(a) $5151
(b) $7148
(c) $49,249
( d) $265,545
D- A machine wiU need to be replaced 15 years from today for $10,000. How much must be deposited now into an account that eams
37 5% per year to cove r the replacement cost?
(a) $1486
(b) $4810
(c) $6139
(d) $10,000
D- You deposit $5000 into an account that will grow to $14,930 in 6 years. Your rate of return on this investment is closest to wha t
38 value?
(a) 18%
(b) 20%
(c) 22%
(d) 25%
D- An inves tment company owns land now worth $ 00,000 that is increasing in value each year. ]f the land va.l ue doubles in 7 years,
39 what is the yearly rate of return nearest to?
(a) 0.0%
(b) 2.0%
(c) 7.0%
(d) 10.5%
D- Your friend withdrew $630,315 from an account into which s.he had invested $350,000. If the account paid interest at 4% per year,
40 she kept her money in the account for how many years?
(a) 1.8 years
16 of 61 1/25/2020, 11:40 AM
.... ~-1 ... , ..... J"'""°" • ...,,
(b) 6.5 years

(c) 12.5 years
(d) 15 years
D- Annual revenues in our com pany are $1.5 mi.Ilion this year. If they are expected to grow at a compounded rate of 20% per year,
41 what wiJl they be 10 years fro m now?
(a) $3.89 miJHon
(b $9.29 mUHon
(c) $10.9 miJHon
(d) $57.51 million
D- A student inhe.rits $50,000 and invests .it in government bonds that will average 3% annual interest. What is the value of the
42 investment after 50 years?
(a) $67, 195
(b) $219,195
(c) $355,33
(d) $5,869,545
D- A zero-coupon bond has a face (par) value of $10,000. T he bond js sold at a discount for $5500 and held for 3 yea.rs, at which time
43 it is sold. If an annual rate of 10% is ,earned over that 3-year period, how much was the bond sold fo r?
(a) $8652
(b) $13,310
(c) $15,859
(d) $25,937
Nominal and Effective Interes:t Rates

D- A rate of 2% per quarter compounded quarterly is dosest to what annual compounded interest rate?
44 (a) 2.00%
(b) 8.00%
(c) 8.24%
(d) 24.00%
D- A nominal jnterest rate of "12% per year compounded yearly" is closest to:
45 (a) 1% per month effective rate
(b) 3% per quarter effective rate
( c) 6% per 6 months effective rate
(d) 12% per year effective rate
D- An interest rate expressed as "1.5% per month" is exactly the same as:
46 (a) 4.5% per quarter effective interest
(b) 18% effective interest per year
(c) 18% per year compounded month]y
(d) None of the above
D- A deposit of $50,000 is made into an acco unt that pays 10% compounded sem iannually. How much would be in the account after
47 10 years?
(a) $81,445
(b) $129,685
(c) $132,66
(d) $336,375
D- A mining firm must deposit funds in a "redamation" account each quarter. The account must have $25 million on deposit when a
48 project reaches its horizon in 10 years. The account pays interes t at a rate of 2% per q ua1ier. How much is the quarterly depos it?
(a) $41,500
(b) $172,575
(C) $228,325
(d) $414,000
D- A deposit of $1000 compounds to $2500 in 5 years. The interest on this account compo unds quaiterly. What is the dosest nominal
49 annual rate of return?
17 of 61 1/25/2020, 11:40 AM
(a) 2.50%
(b) 4.70%
(c) 18.75%
(d) 20.11%
D- If your local bank indicates that it pays interest on passboo k savin gs accounts at a rate of 2.25%, the nominal and effective interes t
50 rates are nearest which the fo1Jow1ng?
(a) 2.25%, 2.25%
(b) 2.25%, 2.28%
(c) 2.25%, 27%
(d) 27%, 2.25%
Continuous Compounding Interest Rate

D- How long will it. take money to triple in an account if it pays interest expressed as 8% nominal annual compounded continuously?
51 (a) 13.73 years
(b) 14.27 years
(c) Your money will never triple.
( d) None of the above
D- A deposit of $500 per year (beginning of year) is m ade for a period of 2 years in an acco unt that earns 6% nominal interest
52 compo unded continuously. How m uch is in the accou nt after 2 years?
(a) $917
(b) $1062
(c) $1092
(d) $1095
D- A firm offers to sen a zero-rnupon bond (no semi-ammaJ payments) to you today. When it matures in 5 years you will receive the
53 par value of $10,000. lf the fJnn pays interest at 15% compounded continuously on the bond how much would you pay for it
tod ay?
(a) $4724
(b) $4972
(c) $10,000
(d) $21, 170
D- If $1000 is invested annually at 6% continuous compounding for each o f 10 years, how much is in the account after the last
54 deposit?
(a) $1822
(b) $10,000
(c) $13, 181
(d) $13,295
Chapter4
Uniform Cash Flow Series
D- You piace $100 per m onth into an account that earns 1% per month. Which o f the followi ng expressions can be used to cakuiate
55 the account's value after 3 years?
(a) P = lOO(P/A, 1%, 3)
(b) F = lOO(P/A, 1%, 36)(F/P, 1%, 36)
(c) F = 100[ 1 + 0.01)'1 - l ]/0.01
(d) F = lOO(F/A, 12.68%, 3)
D- A machine must be replaced in 7 years at a cost of $7500. How much must be deposited at the end o f each year into an acc-o unt
56 that earns 5% in order to have ac-cumu.lated enough to pay for the replacement?
(a) $471
(b) $596
(c) $791
(d) $921
18 of 61 1/25/2020, 11:40 AM
'l llJ <l>,CIL.L
D- Winners of the PowerS tate Lottery ca11 take $30 mjJUon now or payments of $2.5 million per year for the, next 15 years. These are
57 equivalent at what annual interest rate? The answer is closest to what value?
(a) 1%
(b) 2%
(c) 3%
(d) 5%
D- You deposit $1000 in a retirement in vestment account today that earns 1% per month. In adctition, you deposit $50 at the end of
58 eve1y month sta1ting this month and continue to do so for 30 years. TI1e amount th.at has accumulated in this account at the end of
30 years is nearest to
(a) $35,949
(b) $42,02.7
(c) $174,748
(d) $210,698
D- Suppose $10,000 is deposited into an account that earns 10% per year for 5 yea.rs. At that point in time, uniform end-of-year
59 withdrawals are made such that the account is emptied after the 15th withdrawal. The size of these annua.1 withdrawals is closest to
what value?
(a) $2118
(b) $2621
(c) $3410
(d) $16,105
D- A manufacturer bonuws $85,000 for machinery. The loan is fo r 10 years at 12% per year. What is the annual payment on the
60 machinery?
(a) $4843
(b) $8500
(c) $13,834
(d) $15,045
D- How many years would you have to put $100 per year into an account that earns 15% annually to accumulate $6508?
61 (a) 17 years
(b) 21 years
(c) 30 years
(d) 65 years
D- A $10,000 face value municipal bond pays $1000 interest at the end of every yea.r. If there a.re 12 more years of payments, at what
62 price today would the bond yield 18% over the next 12 years?
(a $1372
(b) $4793
(c) $6165
(d) $10,000
Gradient Cash Flows

D- Today $5000 is deposited in an account that earns 2.5% per quarter. Additional. deposits are made at the end of every quarter fo r
G3 the next 20 years . The deposits start at $100 and increase by $50 each year thereafter. The amount that has accumulated in this
account at the end of 20 years ca11 he expressed as follows.
(a) = OOO(P/F, 2.5%, 20) + lOO(F/A, 2.5%, 20%) + 50 (PIG, 2.5%, 20 - 1)
(b) = 000(FIP, 10%, 80) 150(P/G, 10%, 80) (F IP= 10%, 80)
(c) = 5000(P /F, 10.38%, 20) lO0(P IA, 10.38%, 20) + 50(P/G, 10.38%, 20)(P/F , 10.38%, 1)
(d) = 5000(F/P, 10.38%, 80) lO0(FIA, 2.5%, 80) + 50(P/G, 2.5 %, 80)(F /P, 2.5%, 80)
D- An investment returns the following end-of-year cash flows: Year 1, $0; Year 2, $1500; Year 3, $3000; Year 4, $4500· and Year 5,
64 $6000. Given a 10% interest ra.be, what is the present worth?
(a) $5970
(b) $6597
(c) $9357
(d) $10,293
19 of 61 1/25/2020, 11:40 AM
D- A project's annual revenues wiU be $50,000 the first year and will decrease by $1500 per year over its 20-year life. If the firm' s
G5 interest rate is 12%, what is the project's present worth?
(a) $305,998
(b) $373,450
(c) $384,654
(d) $440,902
D- A cash flow series is descri bed by the following: $10,000 + $250(t), where tis the number of compo unding periods. The present
6G worth of this series at the end of five periods,. where interest is 2% pert, is nearest what value?
(a) $11,250
(b) $50,620
(c) $56,432
(d) $60,620
D- Revenue from sales of a trainin g video for the firs t year are estimated to be $350,000. In addition, revenue is expected to decrease
67 by $25,000 per year over the life of the video (which is 10 years). If interest is 10%, the present worth of the revenue over the life
of the video is nearest what value?
(a) $100,000
(b $125,000
(c) $1,578,475
(d) $2,723,025
Chapter 5
Present Worth Analysis
D- A project is being considered that has a first cost of 12,500, creates $5000 in annual mst savings, requires $3000 in annuaJ
68 operating costs, and has a saJvage va1ue of $2000 after a project life of 3 years. If interest is 10% per yea.r, which formula
cakulates the project' s present worth?
(a) PW= 12,500(P/F, 10%, 1) + (- 5000 + 3000) (PIA, 10%, 3) - 2000(F/P, 10%, 3)
(b) PW= -12,500 + (5000 - 3000) (PIA, 10%, 3) - 2000(P/F, 10%, 3)
(c) PW= 12,500(F/P, 10%, 3) + (5000 - 3000) (FIA, 10%, 3) + 2000
(d) PW= - 12, 500 5000(P/A, 10%, 3) - 3000 (PIA, 10%, 3) + 2000(P/F, 10%, 3)
D- A new packing machine will cost $57,000. The existing machine can be sold for $5000 now and the new machine for $7500 after
69 its 10-year useful life. If the new machine reduces annual expenses by $5000, what is the present worth at 25% of this investment?
(a) - $18,388
(b) - $33,340
(c) - $34,145
( d) - $38,340
D- A vendor is offering an extended repak contract on a madl.ine. The firm's experience is that this wiU cover repair costs over the
70 next 4 years of $200, $200, $400, and $500. At 6%, what is the extended repair conUact worth now?
(a) $1040
(b) $1089
(c) $1099
(d) $1300
D- Annual disbursements fo r maintenance of critical heavily used equipment wiU be $25,000 fo r the next 10 years, and then $35,000
71 into infinity. vVhat is the present worth of the maintenance cost cash flow stream if interest is 15%?
(a) $166,667
(b) $183,147
(c) $192,367
(d) $233,334
D- anufacturing costs from a. scrapped poor-quality product are $6000 per year. An investment in an empfoyee u.iining program can
72 reduce this cost. Program A reduces the cost by 75% and requires an investment of $12,000. Program B reduces the cost by 95%
and wi.LI cost $20,000. Based on ]ow turnover at the plant either program should be effective for the next 5 years. If interest is
20%, the present worth of the two programs is nearest what values? (Consider cost red uction a positive cash flow.)
(a) A: - $25,460; B: - $37,049
20 of 61 1/25/2020, 11:40 AM
(b) A: $1460; B: - 2951
(c) A: $5060; B: $1609
(d) A: $13,460; B: $17,049
Chapter 6
Annual Worth Analysis
D- ew product tracking equip ment costs $120,000 and will have a $10,000 sa.lvage va.lue when disposed of in 10 years. Annual
73 rep air costs begin at $5000 in the fifth year and increase by 500 per year thereafter until disposed of. If in terest is 10%, what is the
dosest equivalent annual cost of ownership?
(a) $21,505
(b) $21,766
(c) $21,844
(d) $23,109
D- Your company is considering tv.•o alternatives:
74
Alt I Alt. II
First cos t $42,500 $70,000
Annual maintenance 6,000 4,000
Annual savings if implemented 18,500 20,000
Salvage value 12,000 25,000
Useful life of alternative 3 years 6 years
What is the annual d ollar advantage of A.It. II over Alt. I at an intef\est rate of 15%?
(a) Alt. II has no annual advantage over AJt I.
(b) $3020
(c) $3500
(d) $7436
D- Specialized bits (costing $50,000) used in the mining industry have a usefuJ life of 5000 hours of operation and can be traded in
75 when a new bit is purchased for 10% of first co.st. The drilling machine that uses the bit is used 1000 hours per year. What is the
equivalent uniform annuaJ cost o f these bits at 2.5%?
(a) $8559
(b) $9510
(c) $9828
(d) $10,920
D- A new chernicaJ remediation tank is needed. Current technology tanks, wh ich cost $150,000, must be drained and treated every 2
76 years at a cost of $30,000; the tanks wiU last 10 years, and each wiU have a salvage value of 5% of first cost. A tank wi th new
technology ha:s j ust come on the m arket. There are no periodk maintenance costs, and a tank wm last 20 years. If the new tanks
cost $325,000, wha t m inimum salvage value, as a pementage of first cost, wou ld be required for this technology to be a better
option? Use a. 12% interest rate.
(a) 10%
(b) 36%
(c) 57%
(d) 72%
D- A beautiful bridge is being bum over the river that runs through a major city in your state. The cost of the bridge is estima~ed at
77 $600 million. Annual costs of the bridge will be $200,000, and the bridge is estimated to last a very long time. H accountants in
city haJJ use 3% as the intef\est rate fo r analysis, what is the an nual.ized rnst of the bridge project?
(a) $18 m illion
(b) $18.2 miJHon
(c) $20,000 million
(d) $219,500 million
21 of 61 1/25/2020, 11:40 AM
Chapter 7
Rate of Return Analysis

D- Whkh of the fo llowing equations can be used to find the internal rate of return (i) for a project that has initial. investment of P, net
78 annual cash flows of A, and salvage vaJue of S after n yea.rs?
(a) 0 = -P + A(PIA, i%, n) + S(PIA, i%, n)
(b) (P -A)(PIA, i%, n) = S(PIF, i%, n)
(c) -A = -P(AIP, j%, 11) - S(AIF, i%, 11 - 1)
(d) 0 = -P(FIP , i%, n) A{F/A, i%, n) + S
D- The rate o f return 0 11 an investment of $1500 that doubl,es irr val ue over a 4-year per-iod, arrd produces a .$300 annual cash flow, is
79 nearest to which value?
(a) 15%
(b) 20%
(c) 25%
(d) 30%
D- The interest rate that makes Alternatives A and B equiva.lent is in what range?
80
Year Alt.A Att.B
0 -$1000 -$3000
1 100 500
2 100 550
3 100 600
4 200 650
5 200 700
(a) Less than 2%

(b) Between 2 and 5%
(c) Greater than 5%
( d) There is 110 interest rate that equates these two cash flow series.
D- A corporate bond with a face (par) value of $10,000 wiU mature 7 years from today (it was issued 3 years ago). The bond just after
81 the 6 th interest payment is being sold for $6950. The borrd' s interest rate is 4% nomirral annual, payable semiannua.lJy. The yield of
the bond if held to maturity is in what range?
(a) Less th.an 4%
(b) Between 4 and 6%
( c) Betv,reen 6 and 10%
(d) Greater than 10%
D- A firm bon llwed $50,000 fm m a mortgage ban k. The terms of the loan specify q uarterly payments for a 10-year period . If
32 payments to the bank are $3750 per quarter, wha t effective ammaJ interest rate is the film paying?
( a) Less th.an 1%
(b 7%
(c) 28%
(d) 31%
Chapter 8
Incremental Cash Flows and Analysis
D- You are given the cash flow series for two projects, Alt . A and Alt. B.
33
Year Cl 1 2 3 4 5 6
Alt. A($) - Il X X X X X X+S1
Alt. B ($) - 12 y y y y y X+S2
22 of 61 1/25/2020, 11:40 AM
11ut. ts (:l,J 1-u I YI YI YI YIY 1x+::,L I
Assume 12 > 11 and X, Y, S1, and S2 are positive; the incremental rate of return (i) 011 the additional investment in Alt. B can be
ca.lculated with the following expression.
(a) 0 = -]2 Y(P/A, i%, 6) + S2(PIF, i%, 6)
(b) 0 = -(12 -11) + (Y -X)(P/A, i%, 5) + (S2 -S l )(P/F, i%, 6)
(c) 0 = -(12 -Il)(F/P i%, 6) + (Y -X)(F/A, i%, 6) (S2 -S1)
(d) 0 = -(12 -Il) + (Y -X) + [{Y + S2) - (X + S1)]
D- A firm is co11sidering two mutually exclusive alternatives (i = 8%):
84
Alt. AJpba Alt. Omega
First cost $10,000 $30,000
Annual maintenance 2,800 2,000
Annual savings if implemented 5,500 6, 00
Salvage value 2,000 5,000
Useful life of alternative 4 years 8 years
If Alt. Alpha will be repl.ac,ed with a "like alternative , at the end of 4 years, what is the present worth of the incrementa1 cash flows
associated with going from an investment in Alpha to an investment in Omega?
(a) - $6201
(b) -$5942
(c) -$5028
(d) $852
D- Project 1 requires an initial investment on $50,000 and has an interna1 rate of return (IRR) of 18%. A mutually exclusive
85 alternative, Project 2, requires a11 investment of $70,000 and has an IRR of 23%. Which of the fo llowing statements is true
concerning the rate of return on the incremental $20,000 investment?
(a) It is less than 18%.
(b) It is between 18 and 23%.
( c) It is greater than 23%.
(d) It cannot be determined from the data given.
D- Alternative no has a first cost of $10,000 and annual e.xpens,es of $3000, whereas Alternative Dos has a first cost of $35,000,
BG annual expenses of $2000, and a recurring cost of $5000 every 10 years . If b oth al ternatives have an in finite Me, which of the
foUowing eq uations can be used to solve for the rate oheturn 0 11 the incremental investment?
(a O= -$25, 000 + $1000/i - $SOOO(A/F, .i, 10)
(b) 0= -$25, 000 + $1000/i + $5000(A/P, i, 10)/i
(c) 0= -$25, 000 + $1000/i - $SOOO(A/F, i, 10)/i
(d) 0= +$25, 000 - $1000/i + $5000(A/F, i, 10)
D- Compare two competing, mutua1Jy exclusive new machines tha t have only cost data given and tel.I which of the following
87 statements is true regarding the present worth of the incremental. investment at yo ur investment interest rate.
(a) Ifit is greater than zero, we chose the a.l temative with the largest initial investment expense.
(b) The internal rale of return will always be equal to the investment rate of return.
(c) Neither machine js chosen if there is onJy cost data and the present worth is less than zero.
(d) If it is less then zero, we chose. the alternative with the smalJest injtial investment expense.
Chapter 9
Future Worth Analysis
D- The future worlh of a project with initiaJ c-ost P, positive annual cash flows of A, salvage val ue S, and ime11est rate of i over a life of
88 n years can be calculated using whkh statement?
(a) FW = -P(FIP, i%, n) + A(FIA, i%, n) + S(F/P, i%, n)
(b1 FW = P(F/P . .i%. n) + A(F/A i%. n1 + S
23 of 61 1/25/2020, 11:40 AM
(DJ l'W = f-'tFW, 1%, n) + A lf<IA, 1%, nJ +:::,
(c) FW = -P(PIF i%, n} + A(FIA, i% n) - A[(PIA, j%, n) S
(d) FW = -P(FIP, i%, n} + A(FIA, i%, n) + S
D- A firm has been investing retained earnings to estabUsh a bui.lding fund. T he film has retained $l.2 mill.ion, $1.0 million, and
89 $950,000, respectively, 3, 2, and 1 year ago. Th.is year the flrm has 1.8 million to invest. If the firm earns 18% on invested funds,
what is the value of the project that can be undertaken using the funds as a 25% down payment?
( a) $6.28 mjlUon
(b) $7.42 miJHon
(c) $25. 1 million
(d) $29.7 millio11
D- A £inn is considering the purchase of a software analysis package that costs $450,000. AnnuaJ licensing ees are $25,000 (payable
90 at the beginning of each year, starting in Year 1). The fi1m is bidding on a farge 4-year government project where th e new software
will be used. If the film uses an interest rate of 20%, what value for software costs should be pu t in the bid?
(a) $514,72
(b) $527,650
(c) $1,067,540
(d) $1,094,346
D- Whkh of the following is a true statement regarding the futu~e worth of a single investment aJtemative?
91 (a) It will be equal to both the present worth and the annual worth if the same discounting interest rate is used.
(b) Choose to invest if the calculated amount is less than zero at the investment rate of return.
(c) It will yield a recommen dation consistent with the present wortil and annual worth methods if the sa.me discounting interest
rate is used.
(d) It cannot be used to evaluate single investment altematives.
D- Using the data for Uno and Dos fro.m Problem 86, where the IJves of both aJtematives is 10 years, give the future worth on the
9.2 incremental investment if the interest rate used is 10%.
(a) - $20, 000
(b) - $20, 783
(c) - $43, 910
(d) - $53, 910
Benefit-Cost Ratio Analysis

D- The annual benefits associated with consnuction of an outer belt highway are estimated at $10.5 miJUon by a local pfanning
~ commission. The initial construction costs will be $400 mimon, and the project's useful life is 50 y,ears. Annual maintenance costs
are $500,000 with periodic relmHding costs of $10 miJlion every 10 years. If interest is 2%, the benefit-cost ratio is dosest to what
value?
(a) 0.25
(b) 0.75
(c) 1. 11
(d) 1.35
D- A city needs a new pedestrian bridge over a local. stream . The city uses an interest rate of 5%, and the project life is 30 years. The
94 foUowing data {in miJHons of dollars) summarizes the bids that were 11eceived.
BidA BidB
Construction mate1ia]s costs $4.20 $6.20
Construction labor costs 0.60 0.70
Construction overhead costs 0.35 0.03
Initial ad minjstrati ve and legal costs 0.60 0.01
Annual operating costs 0.05 0.075
Annual revenue fro m operation Unknown 0.40
Other annual benefits to the city 0.22 0.25
What would the annuaJ revenue of Bid A have to be for the two projects to be eq uivaJent? Choose the closest vaJue.
ta, n rn
24 of 61 1/25/2020, 11:40 AM
(a 0.10
(b) 0.20
(c) 0.30
(d) 0.40
D- When using the benefit-cost method of analyzing a project, which of the following is a true sta ~ement?
95 (a It will always produce a recommendation consistent with the si mple payback period method.
(b) It will always produce•a recommendatio n consistent with present worth, future worth, and annual worth methods.
(c) It can be used only to evafaate projects from the public sector (such as bridges and roadways).
( d) None of the above.
D- Project A has a flrs t cost of $950,000 and will produce a $50,000 net annual benefit over its 50~yea.r life. Project B costs
96 $1,250,000 and produces an $85,000 net annual benefit. lf interest is 3% per yea1~ the benefit-cost ratios of Projects A a.nd B are
nearest what values?
(a) 0.52, 0.67
(b) 0.74 0.57
(c) 1.35, 1.75
(d) 2.63, 3.40
D- Using the data for Projects A and B in Problem 96, the benefit-cos t ratio on the incf\emental investment is nearest what value?
97 (a) 0.17
(b) 0.33
(c) 3.00
(d) 5.83
Sensitivity and Breakeven Analysis

D- BVM manufactured and sold 25,000 sma11 statues this past year. At that volume, the firm wa.s exactly in a brea.keven situation in
98 terms of profitability. BVM's unit costs are expected to increase by 30% next year. What additional infonnation is needed to
dete1mjne how much the production volume/sales would have to increase next year to just break even in te.rms of profitability?
(a) Costs per unit
(b) Sales p1ice per unit and costs per unit
(c) Total fixed costs, sa.les price per unit, and costs per unit
(d) No data is needed, the volume inc11ease is 25,000 + 25, 000(0.30) = 32, 500 units.
D- Process A has fixed cost s of $10,000 and unit costs of $4.50 each, and Process B has fixed costs of $25,000 and unit costs of
99 $1.50 each. At what I,evel of annual production wouJd the two processes have the same cost?
(a) 50 units
(b) 500 units
(c) 5000 units
(d) 50,000 units
D- A seasonal bus tour firm has 5 buses with a capacity of 60 people each. Each customer pays $25 for a one-day tour. Recoros show
100 $360,000 in fixed costs per season, incremental costs of $5 per customer, and an average da1Jy occupancy of 80%. T he number of
days of operation necessary each season to break even is closest to which value?
(a) 50 days
(b) 75 days
(c) 100 days
(d) 120 days
D- Alternative I has a first cost of $50,000, wi11 produce an $18,000 net a1muaJ benefit over its 10-year life and be salvaged fo r
101 $5,000. Alternative II costs $150,000 and has a. salvage vaJue of $50,000 after its lO~year useful me. lf interest .is 15%, what is
the minimum amount of annual. benefit that Altema.tive II must produce to make it the preferred choi.ce?
(a) Tbjs value can not be determined from the data given.
(b) $23,500
(c) $31,450
(d) $35,708
D- Use the table to detenn.ine which project is best if it is known for sure that annual sales wiJJ be 7 million. AU values are in
102 millions (PW and Sales) of do]]ers.
25 of 61 1/25/2020, 11:40 AM
.Estimated PW ,($M)
Ann. Sa]es. Proj.1 Proj. 2 Proj. 3
$0 -75 -10 0
SM 125 15 150
lOM 325 40 300
(a) Project 1
(b) Project 2
(c) Project 3
(d) None, since Projects land 2 have negative vaJues.
Chapter 10
Uncertainty and Probability
D- An interest rate of 15% is used to eval uate a new system that has a first cost of $212,400, annual opera ting and maintenance costs
103 of $41,200, annual savings of $94,600, a li fe of 6 years, and a salvage value of $32,500. After in itial evaluation, the firm receives
word from the vendor that the first cost is 5% higher than originalJy quoted. The percentage en u r in the system's present worth
frnm thjs is closest to what value?
(a) 5%
(b) 15%
(c) 100%
(d) 300%
D- A ma chine has a first cos t of $10,000 and annual costs of $3500. There is no salvage val ue, and interest is 10%. If the project's
104 useful ]ife is descri bed by the followin g data, what is the annual worth of costs?
Useful Life (years)

4 5 6 7
Prob. of Ufe (%) 5 22 41 32
(a) $3500
(b) $5127
(c) $5554
(d) $5796
D- Three estim ators have estimated a project with a 10-year life.
105
Estimate 1 Estimate 2 Estimate 3
First cost $10,000 $17,500 $15,000
Net annual cash flows 7,500 8,000 6,000
Salvage value 3,500 0 10,000
Use an interest rate of 20% to determine the project's expected present worth. The value is dosest to whkh of the following?
(a) $16,066
(b) $16,612
(c) $31,660
(d) $31,607
D- The fi rst cost (FC), JHe (n), and annual benefits (A) for a prospective proj,ect are uncertain. Optimistic (OP), most likely (ML),
106 and pessi mistic (P ) esti.mates are given. If tlte interest rate is 25%, what is the present worth difference between a total worst-
---- ___ _ __ R _ _ _ .. _ ---"--1 L - - • - - - - ______ ._ ....
26 of 61 1/25/2020, 11:40 AM
case scenario and a total best-case scenario?
Estimate
Parameter Pessimistic Most Likely Optimistic
Fkst cost $150,000 $100,000 $80,000
Annual cash Hows 25,000 45,000 50,000
Project life, in years 5 7 10
(a) $15.8
(b) $42.2
(c) $181.3
(d) $282.5
D- Whkh of the following statements, related to the use of decision tree analyses to model a problem and recommend a solution, is
107 not u-ue?
(a) In modeling the decision, the sequence Hows from left to 1ight, with later outcomes and decisions shown to the right of
earlier decision and outcomes.
(b) Brandies at a decision pofot are ' pruned off" if they maxjmize the benefit to th,e decision maker relative to other choices.
(c) In analyzing the best path, sequence Hows from right to left as inferior branches a.re pruned at decis.ion points.
(d) Expected value at outcome points is calculated by multiplying the effect of each branch by the probability of that branch
event.
Chapter 11
Depredation of Capital Assets
D- The cmTect percentage to use to caJculate the depreciation aUowance for a MACRS 3-year property for Year 2 is whkh of the
108 foJJowing?
(a) 14.4%
(b) 32.0%
(c) 33.3%
(d) 44.5%
D- With reference to the straight-line depreciation method, which statement is faJse?
109 (a) An equal amount of depredation is allocated in each year.
(b) The book value of the asset decrements by a fixed amount each year.
(c) The depredation life (n) is set based on the MACRS property classes.
(d) The asset is depreciated down to a book value equa.l to the salvage vaJue.
D- A 7-year MACRS property has a cost basis fo r depreciation of $50,000. The estimated salvage {market) value is $10,000 after its
110 10-year useful life. The depredation charge for the 4th year and book value of the asset after the 4 th year of depreciation are
closest to what values?
(a) $5760; $44,240
(b) $6245; $12,496
(c) $6245; $15,620
(d) $624 ; $43,7 5
D- A $100,000 asset has a $20,000 salvage val ue after its 10-year useful Life. The depreciation al.lowance using straight-line
111 depreciation is closest to what value?
(a) $2000
(b) $8000
(c) $10,000
(d) $12,000
D- The book va.lue of an asset that is listed as a 10-year MACRS property is $49,500 after the firs t year. If the asset's estimated
112 salvage (market) value is $5000 after its 15-year useful life, what was the asset's original wst basis?
27 of 61 1/25/2020, 11:40 AM
(a) $50,000
(b) $52,105
(c) $55,000
(d) $61,875
Chapter 12
Calculating Income Taxes
D- Whkh of the following is true?
113 (a) Tax rates a.re based on two flat-rate schedules, one fo r in dividuals and one for bus.inesses.
(b) When businesses subtract expenses, they always indude capital costs.
(c) For businesses, taxable income is total focome ]ess depredation and ord inary expenses.
(d) When quantifying depredation aUowance, one must always divide first cost by MACRS 3-year life.
D- If a corporation has taxable income of $60,000, wh kh of the folJowing exp~essfons is used to calculate the federal tax owed?
114 (a) Flat 15% o.f taxable income
(b) Flat 25% of taxable income
(c) $7, 500 + 25% over $50,000
(d) $13, 750 + 34% over $75,000
D- This past year CLL Industries had income from operations of $8.2 million and expenses of $1.8 m illion. Allowances for
115 depreciated capital expenses were $400,000. What is CLL's taxable income and federal taxes owed for operations last year?
Choose the closest values.
(a) $6.0 miUion; $1.93 mill.ion
(b) $6.0 miUion; $2.04 mdJion
(c) $6.4 miUion; $1.93 miUion
(d) $6.4 mmion; $2.04 m.iUio n
D- Annual data for a firm for this tax year are:
116
Revenues $45 million
Operating and maim ena.nce costs 7 mimo n
Labor/Sala.ry costs 15 mill.ion
Overhead and administrative c-osts 3 mj}Jion
Depreciation alJowance 8 miJHon
ext year the firm can increase revenue by 20% and costs will increase by 2%. If the depreciation allowance stays the sam e, what
will be the change in firm s after-tax net profit? Choose the dosest answer.
(a) $5.2 miJJion
(b) $5.4 minion
(c) $7.9 miUion
(d) $13.3 mUUon
D- Widget Industries erected a facility costing $1.56 miJUon on land bought for $1 rn.ill.ion. T he finn used straight-line depredation
117 over a 39~year period; it instaUed $2.5 million worth of plant and office equipment (a]] classified as MACRS 7-year property),
Gross income from the fi rst year of operations (excluding capital expenditures) was $8.2 million, and $5.8 million was spent 0 11
labor and materials. How m uch did Widget pay in fede ral income taxes fo r the first year of operation?
(a) $680,935
(b) $1,002,750
(c) $1,321,815
(d) $2,788,000
Chapter 13
Replacement Analysis
28 of 61 1/25/2020, 11:40 AM
D- Whkh of the following is a valid reason to consider replacing an existing asset?

118 (a) It has become obsolete and d oes not perform its intended function.
(b) There is a newer asset available that is technologicaUy superior.
(c) It has become very costly to keep the asset in working ordeL
D- The replacement of a typical existing asset (defender) that is beyond its minimum economic life with a new asset (challenger)
119 should be done when?
(a) It shou ld never be done because the existing asset is working.
(b) The defender's margin al cost is greater than the chall enger's equivalent ann ual cost
(c) The challengers average future cost becomes less than the existing asset.
(d) The defender's equivalent annual cost equals the challenger's equivalent annual cost.
D- A factory asset has a first cost of $100,000, annual costs of $15,000 the firs t year and increasing by 7.5% per year~ and a sa)vage
120 (market) value that deueases by 204¾:i per year over its 5-year li fe. The minimum cost economic life of the asset is what value·?
Interest is 10%.
(a) 2 years
(b) 3 years
(c) 4 years
(d) 5 years
D- The minimum cost life of a new replacement machin e is 6 years with a minimum equivalent annual cost of $6000. Given th,e
121 existin g machine's marginaJ cost data fo r the next 4 years, when should the existing machine be replaced?
Year Total Marginal Cost

1 $5400
2 5800
3 6200
4 8000
(a) After Year 1

(b) After Year 2
(c) After Year 3
(d) After 6 years
D- A material handling system was purchased 3 years ago for $120,000. Two years ago it required substan tial upgrading at a cost of
122 $15,000 . It once agajn is requiring an upgrading cost of $25,000. Alterna tely, a new system can be purchased today at a cost of
$200,000. The existing machine could be sold today for $50,000. In an economic analysis, what first cos t should be assigned to
the existing system?
(a) $50,000
(b) $65,000
(c) $75,000
(d) $80,000
Chapter 14
Inflation Effects
D- If the real growth of money interest rate for the past year has been 4% and the general inflation has been 2.5%, the combin ed
123 (market) in terest rate is dosest to what val ue?
(a) 1.5%
(b) 6.5%
(c) 6.6%
(d) 10.0%
D- To convelt actual (inflated) dollars to constant purchasing power dollars (where n = difference in time benveen today and
124 purchasing base) that occur at the same point in time, one must:
(n, Multi,n ll" h." ( P lr:l inf bHnn r,:,t o 114. n,
29 of 61 1/25/2020, 11:40 AM
(a) Multiply by (P/F, inflation rate%, n).
(b) Multiply by (FIP, inflation rate%, n).
(c) MuJtip]y by (P/F, combined rate%, n).
(d) Divide by (PIF, real in terest rate%, n).
D- The cost of a material. was $2.00 per ounce 5 years ago. If prices have increased (inflated) at an average rate of 4% per year, what
125 is the cost per ounc,e now?
(a) $2.04
(b) $2.08
(c) $2.43
(d) $8.00
D- A deposit of $1000 is made into an account that promises a m inimum of 2% per year increase in purc hasing power. If genera.I
126 price inflation is 3, 1, and 5%, respectively, over the next 3 years, the m inimum value that will be in the account at Year 3 is
dosest to what amount?
(a) $1061
(b) $1092
(c) $1157
(d) $1177
D- The cost of materials was $1000 per lot when the cost index is 145. Today the cost index is 2Hl. What is the cost per lot?
127 (a) $690
(b) $1000
(c) $1448
(d) Cannot be determined with the data given.
Chapter 15
Capital Budgeting
D- Whkh of these statements can be said of projects considered to be mutual.ly exdusive?
128 (a) The projects are equivalent or mutual in te1ms of their cash flows.
(b) Neither alternative should be chosen.
(c) A U projects can be chosen as Jong as they meet minimum economic criterion .
(d) The selection of one in the set eliminates selection of others in that same set.
Use the following data for Problems 129-131 A £inn has identified fo ur projects fo r possible funding in the next budget
cycle.
Project First Cost (SM), PW($M)

A 12 22 5
B 18 250
C 24 320
D 30 400
D- The projects are independent. What is the total number of possible investment strategies (com binations) that the firm can use?
129 (a) 4
(b) 6
(c) 10
(d) 15
D- If the projects have the following contingencies, what is the total number of possible investment strategies (combinations) that the
130 firm can use? Project A can be invested in only by itself; Project D is chosen on]y if Project B is chosen.
(a) 0
(b) 2
(c) 4
(d) 6
D- If the oroiects are indeoendent. and the oroiect bud!let fraoital limit) is $32 mimon. what investment combin ation maximizes
30 of 61 1/25/2020, 11:40 AM
u- It tne projects are moepemlent, arnl me proJect ouoget (capital llm!I) 1s :))SL muuon, what mvestment com:om anon max1mtzes
131 PW?
(a) A and C
(b) D alone
(c) Invest in all projects to maximize PW.

(d) A and B
D- A firm is considering the "make vs. buy" question for a subcomponent. If the part is made in-house, the production data would
132 be: firs t cost = $350, 000; annual costs for operation = $45, 000; salvage vaJue = $15, 000; project life = S years; interest = 10%;
and material cost per unit = $8.50. If annuaJ production is 10,000 units,. the maximum amount that tl1e firm should be wi.lling to
pay to an outside vendor for the subcomponent is nearest?
(a) $10 per unit
(b) $16 per unit
(c) $22 per unit
(d) $28 per unit
D- A firm is considering whether to buy specialized eq uipment that wouJd cost $200,000 and have annual costs of $15,000. After 5
133 years of operation, the equipment wo uld have no salvage value. The same equipment can be leased for $50,000 per year (an nual
costs included in the ]ease), payable at the beginnfog of each year. If the film uses an interest rate of 5% per year, the annual cos t
advantage of leasing over purchasing is nearest what value?
(a) $2494
(b) $8694
(c) $11,200
(d) $12,758
Chapter 17
Accounting
D- Whkh of the following summalizes a firm' s revenues and expenses over a month, qua.rter, or year?
134 (a) BaJance sheet
(b) Statement of assets and liabilities
(c) Income statement
D- Which of the follow:ing financiaJ ratios provides :insight in to a firm's solvency over the short term by indicating its ability to
135 cover cun"ent liabilities?
(a) Acid-test ratio
(b) Quick ratio
(c) Current ratio
(d) Net profit ratio
D- Which statement is most accurate related to an activity-based costing (ABC) system?
136 (a) ABC spreads the fir-m's :indirect costs based on volume-based activities.
(b) ABC seeks to assign costs to the activities that d rive those costs.
(c) ABC gives an inaccurate view of a fhm's costs and should never be used .
(d) ABC is caUed ABC because it is an easy method to use.
D- A firm's balance sheet has the following data:
137
Cash on hand $450,000
Ma.rket securities 25,000
Net accounts and notes receivable 125,000
Retailers inventories 560,000
Prepaid expenses 48,500
Accounts and notes payable (short tefTil) 700,000
Accumulated liabmties 120,000
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The film's cur11ent ratio and acid-test ratio are closest to what vaJues?
(Cl) 1.42; 0.73
(b) 1.42; 0. 79
(c) 1.47; 0.73

(d) 1.47; 0.79
D- A film's 1ncome statement has the following data (in $10,000):
138
Total. operating revenues $1 200
Total normperating 11evenues 500
Total operating expenses 925
Total nonoperating expenses 125
If the £inn 's incomes taxes were $60,000 what was the net profit (loss)?
(a) ALI necessary data is 1101 given, one cannot cakuJate net profit (Joss) .
(b) -$53,500
(c) $1,150,000
(d) $6,440,000
D- Annual manufacturing cost data (1000s) fo r four product hnes a.re as follows:
139
Data Line 1 Line2 Line3 Line4
Annual production 4000 3500 9800 675
Cost of direct matelials $800 $650 $1200 $2500
Cost of direct labor $3500 $3750 $600 $320
Ran k th e product lines fro m lowest to highest in terms of manufacturing mst per unit. Tota] indirect costs of $10.8 million are
all.ocated based on total di11ect cost.
(a) 1-2-3-4
(b) 3-1-2-4
(c) 3-2-1-4
(d) 3-4- 1-2
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$22 per unit

(d) 28 per unit
D-133 A firm is considering whether to buy specialized equipment that would cost $200,000 and have annual costs of
$15,000. After 5 years of operation, the equipment would have no salvage value. The same equipment can be leased for
$50,000 per year (annual costs included in the lease), payable at the beginning of each year. If the firm uses an interest
rate of 5% per year, the annual cost advantage of leasing over purchasing is nearest what value?
(a) $2494
(b) $8694
(c) $11,200
(d) $12,758
Chapter 17
Accounting
D- Whkh of the following summarizes a firm' s revenues and expenses over a month, quarter, or year?
134 (a) BaJance sheet
(b) Statement of assets an d liabilities
(c) Income statement
D- Whkh of the following financiaJ ratios provides :insight into a firm's solvency over the short term by indkating its ability to
135 cover cun1!nt Uabilities?
(a) Acid-test ratio
(b) Quick ratio
(c) Current ratio
(d) Net profit ratio
D- Whkh statement is most accurnte related to an activity-based costing (ABC) system?
136 (a) ABC spreads the firm's indirect costs bas,ed on volume-based activities.
(b) ABC seeks to assign costs to the activities that d rive those costs.
(c) ABC gives an inaccurate view of a film's costs and should never be used.
(d) ABC is caUed ABC because it is an easy method to use.
D- A firm's balance sheet has the following data:
137
Cash on hand $450,000
Market securities 25,000
Net accounts and notes receiva ble 125,000
Retailers' inventories 560,000
Prepaid expenses 48,500
Accounts and notes payable (short term) 700,000
Accumulated liabmties 120,000
The firm's current ratio and add-test ratio are closest to what values?
(a) 1.42; 0. 73
(b) 1.42; 0. 79
(c) 1.47; 0. 73
(d) 1.47;0.79
D- A film's income statement has the following data (in $10,000):
138
33 of 61 1/25/2020, 11:40 AM
Total operating revenues $1200

Total nonoperating revenues 500
Total operating expenses 925
Total normperating expenses 125
If the finn's incomes taxes were $60,000 what was the net profit (loss)?
(a) Al.I necessary data is not given, one cannot calculate net profit (Joss).
(b) -$53,500
(c) $1,150,000
(d) $6,440,000
D- Annual manufacturing cost data (1000s) for four product lines are as follows:
139
Data Line 1 Line2 Line3 Line4
Annual production 4000 3500 9800 675
Cost of direct materials $800 $650 $1200 $2500
Cost of direct labor $3500 $3750 $600 $320
Rank the product lines from lowest to highest in terms of manufactming cost per unit. Tota.I indirect costs of $10.B million are
allocated based on total direct cost.
(a) 1-2-3-4
(b) 3-1-2-4
(c) 3-2-1-4
(d) 3-4- 1-2
APPENDIXE
SELECTED ANSWERS T 0 END-OF- 1
CHAPT'E R PROBLEMS
Chapter 1
1-2 yes on a, b, e, & f
1 18 a& c ax output- input; b & d i nimize input
1-26 a) A:$725, B:$700, C :$750, D:$675/acre
b) A:$450, B:$350, C:$375, D:$475/acre
1-54 86.40 individual; $88 team
1-56 8.5 feet in length & diameter
1-58 itemiwd 8525; Std. mileage $8,175; b reakeven 16,591 miles
1-60 a) $211.81 at 60 mph; $198.00 at 70 mph
b) $177.41 at 60 mph; $174.00 at 70 mph
c) $169.27 at 60 mph; $172.50 at 70 mph
1-62 775 units/yr
1-68 a) pt= 6.2; 2 nd = 6.4; 3'11 = 5.8
34 of 61 1/25/2020, 11:40 AM
b) pt= 5.8; 2 nd = 6.6; 3iu = 7.2
Chapter 2
2-2 average $15, $14.60, $13.80, & $13.00; marginal $15, $13, $11, $11 for a/b/c/d
2-4 1 shift $472/unit; 2 shifts $465
2-6 33,333
2-8 avg./marginal a) $60.71/0, b) $53. 13/$53.13, c) $53. 13/$79.69, d) $56.69/$79.69
2-10 a) $63, b) $70, c) $35
2- 12 a) 226,316, b) $41,500 in yr 1
2- 18 A for O to 6249, B for 6249 to 11,667, C for 11,667 to 30,000
2-20 4124 units
2-34 a) $7000, b) $4000, c) stainless $1500 less
2-38 a) $126,000, b) CmTent process= $210,000/yr ew process= $84,000/yr
2-44 a) $1,280,900, b) $1,793,260
2-46 a) $130/ft2, b) L $585,000 ii. $508,950
2-48 , 1.4 mi.llion
2-50 $752
2-52 a) $11,012
2-54 $134,318
2-56 $12,811
2-58 77% rate
2-60 T 1 = 716 person hours; T 25 = 119
2-62 N = 25.12 so by 26 th unit

2-64 costs reduced by 64%
2-74 , 11.82M
Chapter 3
J-2 a) 2300
J-4 54,000
3,-6 a) 33.3 yrs, b) 23.45 yrs.
3-12 $7956
3,. 14 $2178
3,-16 $112,095
3,-18 a) $3285, c) $.5916, e) $136,363
3,- 20 a) 14.02%., c) 4.47%
3,- 22 $4909
3,- 24 a) $2900, b) $2901, c) $2900
3,- 26 12.4%
3,- 28 $13 more interest
3,- 30 17.5 years
J-32 10.063Q
3,.34 $424,925
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3,-36 ,9438
3,- 38 9.4%
3,-40 8.24%
3,-42 0.80%/month
3-44 15.0%
3-46 nominal 16.7%, eff. 17.4%
3-48 668.7%
3,-52 nominal 18%, eff. 19.72%
3-56 36,000
Chapter4
4-2 a) $99,272, b) $75,5,686
4-4 $35,460
4-6 821
4-8 , 3,436,352
4-10 29
4-12 35 months
4-14 1.995%/month
4-16 B = $634, C = $51.05, V = $228.13
4-18 $94,117
4-20 8642
4-22 a) $2050, b) $969
4-24 $14,763
4-26 $5622
4-28 $488.78
4-30 $1772
4-32 loan $171,962, house $191,069, save $23,357
4-48 10%
4-50 $792.28
4-52 a) $2790, b) $554, c) $1194
4-54 $17,788
4 56 $230,878
4r58 18 th bday $23,625; AW= $2.658
4-62 $589.50
4-64 $340
4-66 $1496.91
4-74 $452,090
4-76 a) $186,154, b) $201,405
4-78 a) $147,674, b) $166,667
4-80 is•t choice at $303,2.63; 2 nd $306,820
4-88 a) $520, b) 15%, c) 16.08%
4-90 16.67%
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4-92 a) 1.50%, pmt = $587, ia = 19.56%

4-100 payment $1281.40, last yr interest $83.83
4-102 payment 393.53, last yr interest $2.93
4-110 , 154,149
4-112 , 116,873
4-118 27,959
Chapter 5
5-2 $245,957
5-4 automate for a PW of $62,657
5-6 max. price she can afford $18,102
5-8 , 7698
5-10 $1 5,292
5-12 $2182
5-14 16.0%
5-16 $18,356
5-24 a) Buy A, PW = $7841
b) Select A, PW = $7841
5-26 $21,000 for CostA is < $21,737 for B
5-28 NPW $52,914 for B is higher
5-30 Foxhill $57,957 < Quicksilver $67,027 < Almaden $69,103
5-32 2-stage $20,098,000 < 1-stage $23,962,000
5-36 A for $1154 > B for $1420
5-38 Alternative A saves $1.84M
5-40 Four 1-yr cost $79 < PW cost $85 for one 4-yr
5-42 SuperBlower $143,243 < Sno- over $155,728
5-48 , 1,200,000
5-50 $1265.60
5-52 , 142,046
5-54 Cap. CostA $957,920 < Cap . Cost6 $1,008,830
5-58 , 6,777,957
5-60 $221,841
5,- 64 A $17,324>8 $16,569>C $15,747
5,-66 A $7.74, B $7.76, C $6.86, D $3.70, E $32.43,F $12.43~ pick E
5,-68 D >>A, B »E; NPW B $926 > C $812 > D $724
5-70 12 yrs, C $93,497 > B $55,846 >A $53,255
5- 74 Spartan $.14/$ invested
5-76 , 19,438
5-80 , 165,178
5,. 84 $ 201,234
5,- 86 $31,069
5~88 $1072
37 of 61 1/25/2020, 11:40 AM
5-90 $3602.75
5-92 $1360
5-94 , 769
5-96 $4010
Chapter 6
6·2 3572
6-4 10,236
6-6 $234.28
6-10 2,759,875
6-12 , 5995
6-14 , 171.28
6-16 $3558
6-18 n=50
6-20 $98
6·22 $771
6-24 $23,179
6-26 , 2734
6-28 $42,817 quarterly ($42,799 by spreadsheet)
6-30 EUAC = $8429 >0
6-32 Buy for $5718 > lease for $5500
6· 34 new payment of $26,557 Is less
6· 36 EUAWL = $2692; EUAW5 = $3064
6-38 existing EUAC is $3957 > new of $3552
6--40 Hydro-dean's 150,000 < $223,003
6--42 EUAWA -$752 better than EUAW 8 -$1336
6-44 Hybrid $6385 < Mklsize 7273
646 EUACy $1218 < EUACx $1392
648 Rt 105 = $14,893, Rt 205 = $20,503, Rt 305 = $17,178
6-50 Cat $329 < A at $375 < Bat $520
6-52 36-month at $28.13
6-54 A at 504>B at $421
6-60 pay $843 more than receives for car
6-62 pmt = $579.98; $19,065 is owed after 2 yrs.
6-64 a) car price= $7527, b) save for 5.52 months, c) 0.25% per month or 3% APR
6-66 a) $550, b) beginning month so all principal, c) $545.45
6·68 a) payment $1049.21, b) 241.4 months,c) 108.2 months
6-72 $4675
Chapter 7
7-2 8.99%
7-A ')Q 11 OJl'..
38 of 61 1/25/2020, 11:40 AM
7-4 23.11%
7-6 nominal 15%, effective 16.08%
7-8 19.8%
7- 10 a) 9.4%, b) 4.8%
7- 12 11.4%
7-14 50%
7-16 10.25%-+ don't purchase
7-18 13.23%
7-20 a) 8.18%
7-22 21.14%
7-24 a) 7.70%, b) 8.00%
7-28 nominal 5.64%, effective 5.7%
7-30 7.48%
7-32 a) 8.15%, b) 8.55%
7 34 8 years w/nominal 11.96%
7-36 a) 8.99%, b) 9.40%
7-38 13.0%
7-40 effective 21.6%
7-42 a) 15.97%., b) 9.65%, c) 6.94%
7-44 11.37%
7-46 9.11%
7-48 11 .0%
7-52 7.98%
7-54 U 70 years used, then 6.58%
7-56 18.6%
7-62 do B since incremental B -A is 8%
7-64 do A since incremental B-A is 4.3%
7-66 do A since incremental A-Bis 23.1%
7-68 incremental RFID- bar code is 1.9% so do bar code
7-70 27.9% so select Alt A
7-72 a) lease genera.tor since 6.6% <8%, b) 11.3%
7-74 B -A 35.7%-+ B, C - B 16.2%-+ C
7-76 8.3% -+ B
7-78 7.4% < MARR, so select B
7-80 $1 26,348
7-82 12.24% for $1,000,000
7-84 0% for , 8000; -21 .3% for $7000
7-86 15.19%
Appendix 7A
7A-2 unique root at 12.8%
7A-4 roots 3.9% & 100%, MIRR of 10.3%
39 of 61 1/25/2020, 11:40 AM

7A-12 unique root at -10.45%
7A-14 a) roots 10% & 30%, MIRR of 8.8%, b) ot ethica]
7A•1'6 ignore negative root of -71.8%; IRR= 39.0%; MIRR= 16.46%
7A-18 ignore negative root of -63. 7%, use root of 11.6%
7A-20 unique root of 8.4%
Chapter 8
3-2 X for 0-8.6%, Y for 8.6-16.4%, then do nothing
3-4 b) neutralization with 20.8% incremental ROR
3-6 b) A-B increment 13.4% < MARR, select B
3. 3 a) 0-28.68% Thatch, 28.68-100% Slate; b) select Thatch
3 . 10 a) 0-12.6% ' ew, 12. 6-50% Used; b) Used radiator
3-12 a) 0-6.2% B, 6.2%-100% A; b) Select A
3-14 a) 0-10% A, 10-19.9% C, 19.9%-100% Do Nothing b) C
3-16 a) 0-6% A, 6-9.6% B, 9.6-100% C; b) Select B
8-18 a) 0-31.6% B, 31.6-100% Do nothing; b) Company B
3-20 a) 0-16.8% Sort-of, 16.8-27.3% U-Smt-M, 27 .3-100 othing; b) Select Son-Of
3-22 a) C for 0-4.7%, B for 4.7-6.9%., A for 6.9-8.2%, then do nothing;
b) same except, A for 6.9-100%
3-24 5-yr for 0-11.8%, 3-yr for 11.8-12.8%, 2-yr forl2 .8-16%, then 1-yr for all higher rates
3-26 a) C for 0-16.9%, A for 16.9%-100%; b) Select C
3-28 a) C for 0-4.2%, B for 4.2-11.0%, A for 11-100%;
b) Select A
3-30 D for 0-32.3%, A for higher rates
3-34 b) Dallas
3. 33 B-A 13.7% select A. C-B 12.4% select B, D-B 14.3% select D
3-40 a) Buy for 0-7%, Loan for 7-39.94%, Lease for rest;
b) Loan
Chapter 9·
9. 2 $10,465
9-4 223,734
9~6 $357,526
9·-8 , 38,126
9-10 £1.75 X 10'27
9·-12 $1391
9·- 14 $407,768
9 -16
1 $6108
9 -18
1 $4116
9·-20 $68,969
Q,_n <l: 1 'J'J 7C,R
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9,. 2.2 122,758
9,_24 a) $494,492, b) $424,772

9 -26
1 67,195
9'-28 , 83. 76/share
9,_30 B
9-32 5-story
9,_34 A-B B/C=0.75<1, D-B B/C= 1.07, Select D
9-36 D-C B/C=l.34, A -D B/ C=l.07, Select A
9 -38
1
I 1,998,425
9 -40
1
on-campus, incremental B/C is 1.2
9 44
1 1.9'-year payback pe1iod < 2 year
9 46
1 8.08 years
9 48
1 a) PaybackA = 5 yrs, Payback 6 = 6 yrs, b) $240.SM, c) pick A with EUAW = $2.08 vs. B with -$3.4M
9,. 50 a) B payback 3.6, b) D with FV=$25.33, c) A-B B/C=0.54, D-A B/C=l.47 Select D
9, 52 a) 1.01, b) X has shortest payback of 3.1 yrs, c) Z-Y B/C=3.2., X-Z B/C= l.06 select X
9-54 a) Chas shortest payback of 3yrs, b) B-C B/C=l.10, A-B B/C =l.03 Select A
9~60 6.9 years
9~62 15.1 yea.rs
9,. 64 20 days
9 -66
1
80%
9 •68
1
I 32,243
9-70 $7.922M
9-72 12.1 years
9,_74 , 175 min Fiasco resale
9,_76 44 cars
9,_78 13.5 years
9 -80
1 I 102,241
9 -82
1 4 weeks
9-84 a) 6 years, b) 7.8 years, c) both con'ect, but breakeven considers more
Appendix9A
9A-2 a) $34,166, b) $27,308, c) employer match $2975,employee $31,191
9A-4 a) 9.7%, h) 5.7%
9A-6 a) 35.5%, b) 31.5%
9A-8 34.8 yrs.
9A-10 a) $70,423, b) $30,181, c) $1,333, 144
9A-12 , 674,927
9A-14 7.66%
Chapter 10
10-2 EUAC 12 , 500 $6654, up to $7765, down to , 5543
10-4 a) Optimistic 22.9%, Most likely 7.9% b) 13.0%
41 of 61 1/25/2020, 11:40 AM
10-6 a) $4.00M, $3.27M, $2.49M, b) $3.26M
10-8 P(250) = .1, P(300) = .4, P(350) = .4

10-10 Sales Prob. Unit Pl'Gfit Pr0b.
3500 0.3 $26.00 0.25
6000 0.55 $33.00 0.45
9000 0. 15 $37.00 0.3
10-12 Bill Z=0.50, Al ranked higher at Z=0.72
10-14 Annual Profit, Prob.; $91,000, 8%; $115,500, 14%; $129,500, 9%; $156,000, 14%~ $198,000, 25%; $222,000,
17%; $234,000, 4%; $297,000, 7%; $333,000, 5%
10-16 a) P($18,000, 12 yr)= 0.033 & 8 other combinations,b) 25.4%, 7.47%., -4.55%
10-18 315 days
10-20 $1100
10-22 E(GPA) of A is 1.88 < E(GPA) of B is 2.00
10-24 Loss of $0.20
10-26 a) $3 .lOM, h) 6.95 yrs, c) $3.06M, d) don't match since PW nonlinear in time
10-28 $1328
10-30 3m for $48,120 E(EUAC)
10-32 $355,000
10-34 $184,965 both ways
10-36 a) $45,900, b) first cost $440,000, net $86,000, PW $45,900, c) same
10-38 a) 12.18%., b) 8.28%, c) interest formulas nonlinear so don't match
10-40 PW $6600 of B > PW , 6400 of A
10-42 repair $26,000 < as-is $28,000 < replace $30,000
10-44 repair $22,920 < repair & spillway $36,050 < add upstream dam $72,500
10-46 a) E(]oss) $420, b) logical to avoid catastrophic loss or to satisfy mortgage lender
10-48 E(PW) $8212, Opw $1158
10-50 <1pw $1622
10-52 332,619
10-54 a) $5951, b) 0.3, $65,686
10-56 PW(loss) 0.45, range -$204.5K to $265K, std. dev.$127.9K
10-58 Projects F, 5, 1, & 6 form efficient frontier
10-64 Answers may vary, mean $3126, std. dev. $6232
Appendix lOA
lOA-2 a) $15,880, b) $10,851, c) employer match $2175, employee $13,705
lOA-4 a) 5.8%, h) 2.9%
lOA-6 35.1 yrs.
lOA-8 a) $50,477, b) $455,402
lOA-1O 35 years; enjoy retirement
Chapter 11
11-2 Year 2 depredation is $0
42 of 61 1/25/2020, 11:40 AM
11-4 Year 2 depreciation is $0
11-6 a) $75,000, b) $150,000, c) $120,000, d) $30,000

11-8 D 2 $33,337.50 BV2 $16,665
11-10 D 1 - MACRS $7000, Bonus $35,000
11- 12 D 2 a) $15,200, h) $18,240, c) $0, d) $24,320
11-14 D 2 a) $5000, h) $8000, c) $0, d) $12,245
11-16 D 4 $9500, BV 4 $78,000
11-18 D 2 a) $5000, h) $9375, c) $0, d) $12,245
11-20 A-Bonus, B-UO P, C-MACRS, D-DDB, E 150%DDB
11-22 D 2 a) $67,500, h) $100,000
11-24 0 2 $5600, BV2 $53,800
11-26 D 2 SL $15,000, DDB $22,222, Bonus $0, MAC RS $24,490
11-28 PW SL $720, DDB $761
11-32 PW a) $138,991, b) $149,453, c) $190,476, $174,920
11-36 D 2 a) $2500, h) $3000, c) $4445
11-38 D 8 a) SL $1667, Bonus $0, MACRS $669, b) PW SL $11,846, Bonus $14,286, MACR S $12,634
11-40 D 3 a) $4250, h) $8100, c) $10,494
11-42 D 4 , BV8 a) $13,500, $42,000, b) $15,360, $25,166, c) $7,494, $0
11-44 a) M/C2 $27,380, b) $270,500, c) $1050, d) 11.4%, e) $19,590, t) $91,000, g) $17,490
11-46 MV3 -BV3 le) $40,800, 2c) MV-BV=$60,000
11 48 a) $2000 loss, b) $8000 dep recap, c) $14,257 dep recap
11-50 a) -$37,677, b) -$2,5,438, c) -$73,304, d) $11,524
11-52 a) -$63,333, b) -$44,297, c) -$31,487, d) -$52,475
11-54 $1462.50 allowable depletion
11 -56 $3000.00 allowable depletion
11-58 a) $366,000, b)$1448.28 per million board feet
11-60 a) $200,000/yr, b) $118,750
11-62 $102,500/year
11-64 PW $1,421,716
Chapter 12
12-4 2.31M
12-6 28.58%
12-8 13.1%
12-10 a) 2.27 yrs, b) 3.02 yrs, 28.82%
12-12 a) 15.4%, b) 11.5%, c) 10.0%
12-14 -$217,183
12-18 12.5%, move fmward with the project
12.- 20 14.0%
12.- 22 7.52%, not desirable
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12-24 $17,741
12-26 14.8%, investment is satisfactory

12-28 a) 34.9%, b) 28.2%
12.- 30 11.1%
12-32 a) 2.15 yrs, b) $159,884, 33%, desirable investment
12-34 3.08 yrs
12-36 17,544
12-38 62,387, a good investment
12:-40 21.9%
12:-42 $ 28,233
12-44 $ 274,994
12-46 $54,254 max price
12-48 214 days
12-50 , 6172, a good investment
12-54 , 9887
12-56 a) 15.4%, b) 13.95%, c) 12.2%
12-60 Select Alt 2: a) $17,794, b) $2,090, c) 12.2%, d) $119,709, e) 2-1 incremental B/C 1.3
12-62 incremental A-C 117%, increm. B-A 74.3%, pick B
12-64 Alt. II has lowest PW cost at $6419
Appendix 12A
24009· $10
' '
12A-4 , 1800
12A-6 , 25,551.25
12A-8 a) $762.50, b) 723.50
12A-1O 1.88%
12A-14 $3125
12A-1•6 $ 280
12A-18 $5776
12A-2O $329.50 due to IRS
l 2A -22 , 2500 tax credit
l 2A -24 $367 tax savings
12A-26 $14,163 versus $10,688
12A-28 $6000
12A-32 $52,931
12A-34 a) 70 .9%, b) 17.1%, c) 12.0%, d) $1080, e) $82,353
12A-38 a) can afford, 26.6% < 43%, b) $333,162
Chapter 13
B -2 3 yrs, $18,146
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13--4 8 yrs, $6424
13-6 4 yrs, $8516

13-8 a) 8 yrs, $22,021; b) 5 yea.rs, $22,980
13,- 10 4 yrs, $16,861
13-12 6 yr, $2717
13-14 a) 7 yr, , 7182; b) 5 yr, $8039
B -15 Keep the bottling machine indefinitely
B -16 8 yrs, $6784
lJ.-26 Relevant costs are 1, 2, and 3
13-28 Each year: , 6650, , 6450, $6350, $6250
B -30 a) 4 yrs, $3100; b) Replace in year 2
B -32 Keep existing asset 3 more years
B -34 Upgrade $5659 vet""Sis $7840
13r36 Replace in year 3
13r38 a) 4 yrs, $2650; b) replace in year 5
13r39 First cost < $299,601
13-40 Implement today
13-42 Keep cab ownership $3496 vs $6750
13-44 Keep current line $1.983M vs. $3.544M
13,-46 Keep old car $Slll vs. $6109
13--48 Keep old lift $240 vs. , 822
13-50 New asset: $- 76,500; Existing a) -$28,875b) -$25,500 c) -$19.875
13-52 Choose C, PW $-1812
13-54 4 more years, $5015
13-56 11 years, $6316
Chapter 14
14-4 constant $ & real rate or inflated & market rate
14-6 , 122
14-8 4.75%
14-10 $29,670
14-1 2 14.62 km/liter
14-14 11.7%
14-16 5.07%
14-18 , 1.331, 2.90%
14-20 PW benefits at 11.3% equiv. i = $14,540 < cost
14-22 a) 0.3877%, h) 4. 753%, c) $55,682
14-24 3.17, or 3 to 4 pads
14-26 $1611
14-28 1.59%
14-30 $1203
14-32 2029, $1940
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14-34 yr 4 $66,915, 0.96%

14-36 , 6.2OM, $5.52M
14-38 515,353, $251,826
14-40 35.1 months
14-44 a) $78,432, b) $96,235
14-46 $388,832
14-48 $104,172; $83,558; $69,859; $60,266
14-50 NPW B at -$573,852 < A at -$600,491
14-52 , 12,109 at 10.21%
14-54 C $267,848 > A $259,740 >B 242,896
14-56 C at $5688 PW, A at $6729
14-60 a) 150%, b) 66.8%, c) 31.9%, d) 27 .3%, e) 6.8%
14-62 a) 7.9%, b) 4.6%, c) 3.1%, d) 2.2%
14-64 a) 2.36%, b) 275.4
14-68 Z $31,562
14-70 a) $18,116, b) $16,105
14-72 a) $89,250; $93,266; $97,463, b) 4 .7%, c) $19,632, d) $391,843; e) $553,367
14-74 1.01%
14-76 a) 3.5%, b) 2.66%, c) 0.65%
14-78 a) $74,292, b) $41,134, c) $111,087
14-80 a) $67.68, b) $97.08
14-82 6.84%
14-84 Renting better $27,043 < $27,884
Chapter 15
15,-4 a) 8 .1%, b) 7.1%
15,-6 a) 9.5%, b) 8.0%
15,-8 9.3%, 8.1 %
15,-10 7.79%, 5.67%
15,-18 243.29
15--20 Projects 1, 3, 5, and 6; 28.6%
15--22 Projects D, E, F, and G; 14.6%
15--24 12.4% > 8%; yes
15,-26 19.46% < 20%; No
15,-28 a) all but 4, b) do 5, 9, 10, 2, 1, and 7, c) First 6, d) 14.0%
15-30 a) 18, 2B, 3A, & 4, b) $95K 3A, 2A, & lB, c) last accepted is 13.7% & first foregone 11.2%, d) $95K 3A, 2A, &
lB same as b)
Chapter 16
16-12 rea], use with constant value $s
16-14 A, B, C, F, and H should be funded B/C & IRR for $9M; Eat 13% is opportunity cost
16-16 a) 15.8%, b) 9.5%
16-18 0.56
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16-20 5.5 optimal PW

16-22 a) 521.70M Yuan, b) $76.27
16-24 B/C 1.06, choose pumping
16-26 1.7 for low road, 1.14 for high- low; choose high
16-28 A vs. existing 1.71, B vs. A 2.17, C vs. B 2.42, pick C
16-30 B vs. nothing 1.10, A vs. B 2.18, D vs. A 1.62, pick D
16-32 now -$4,571, 2 yrs $40, 172, 4 yrs $52,751, 5 yrs $50,192, repair in 4 years
16-44 a) $8,414,854, b) $5,546,628
Chapter 17
17-12 a) $735,000, b) $430,000
17-14 a) $3,300,000, b) 2.5
17-16 a) $98,000, b) 1.22, c) 0.73
17-18 a) $130,000, Current 1.295, Quick ratio 0.614
17-20 a) 1.80, b) 0.92
17-24 $10,175,000
17-26 $1,185,000
17-28 a) 3.77, b) 0.115
17-32 a) $18M, h) $10M, c) $69 ·
17-34 a) $5000/hour, b) $5,500,000
17-36 S $132, M $93, G $84
AppendixB
B-2 $920,290
B-4 $539.52
B-6 $4.39M
B~B $1104.65
B-1O $19,021
B-12. $1054
B-14 150.1 months = 12.5 years
B-16 15.07%
B-18 -14.98%, so ]ease
47 of 61 1/25/2020, 11:40 AM
40l(k) plan, 458-459

403(b) plan, 458
5-button spreadsheet caJculator, 92- 93, 112- 113, 614--6]7
A
Absolute address, 21, 612- 613
Absorption rnsting, '602~603
Accounting
absorption cos ting, 602- 603
add-lest or qukk ratio, 598
assets, 596
balance sheet, 59~ 598
cost, 595
cost of goods sold, 598
cun"enl ratio, 597- 598
data, 594
data hazards and use of, 9
direct costs, 601-602
equity, 597
financial ratios fro m balance sheet, 597- 598
financial ratios fro m income statement, 600
fundamental accounting equation, 595
genera), 595
income statement, 598-601
indi1"ect cost al.location, 602-603
indi1"ect costs, 601-602
interest coverage, 600
liabilities, 596- 597
linking balance sheet and income statement, 600- 601
problems wi th traditional cost accountin g, 603-604
profit margin, 60D
role of, 594-595
traditional cost accounting, 601- 604
working capital, 97
Acid-test ratio, 598
Actual dollars, 505-506, 509, 518-519
Adjusted gross income, 450-451
After-tax
cash flow table, 434-435
economk analysis, 433- 437
economk life problems, 48&---49 1
inflation, 520- 522
MARR, 439
rate of return, 437-439
rate of 11etum bonus depreciation, 437-439
rate of return estimating, 439
rate of 11eturn, project's estimating, 439
replacement analysis, 486---491
Allowable dep11edation, 408
Altematives
differences between, 159
identity feasible, 10-11
multiple, 171- 174
mutually exclusive, 161
select the best, 11- 13
48 of 61 1/25/2020, 11:40 AM
Amortization
of investment, 231
schedule, 212- 213
Analysis period 161
common muJtiple of lives, 208
for continuing requirement, 208-209
different from lives, 164- 167
infinite, 168- 171, 209-211
lives equal, 161- 164, 208
other, 211- 212
rate o( fleturn, 251- 154
Annual cash flow calculations, 198-203
Annual depreciation, 398-400
Annual equivalent
gradient and overhaul,. 202- 203
irregular cas h flows, 200-201
Annual percentage rate (APR), 95-97
Annuity, 110
due, 216-217, 243, 245
ordinary, 110
APR annual percentage rate, 95-101
Arithmetic gradient, 127- 133
present worth factor, 128-129
series, 127
unj(mm series factor, 129
Assets, 392- 393, 596
Audit results, 15
Average cost, 36-39
B
Balance sheet, 595-598
links with income statement, 600- 601
Bal.loon payment,. 234- 235
Base year, 514
Before-tax rate equal after-tax rate,. 437-439
Benefit, 9
Benefit and cost estimating, 47- 51
Benefit-cost ratio, 307, 564, 568- 572
analysis, 306-313
graph, 309- 310
incremental analysis, 572- 577
present worth index,. 310-313
Benefits estimating, 47
Beta approximation of mean, 350
Beta distribution, 350
Bond pricing, 179-181
Bonus depreciation, 437-439
after-tax rate of return, 437-439
plus ACRS depredation for taxes, 409-411
or taxes, 401-403
Book cost, 43
Book value, 396- 397
BmTowed money
cost of, 539
inflation, 541- 542
typical PW plot, 238
viewpoint, 159
Brainstmming, 11
Breakeven, 33--39
analysis, 3 18-322
chart, 38- 39, 318
49 of 61 1/25/2020, 11:40 AM
spreadsheets, 322- 326

Budgeting personal, 462-464
Business expenses, 428--429
Business n.msaction, 595
Buy term an d invest the difference, 462
C
Calculator, 5-button, 112- 113, 614--617
Ca pital allocation line, 386--388
Ca pital budgeting, 552- 554
Capital cost of, 540- 541
Ca pital expendjtu.res, 428--429
Capital gafos, 397
and losses, 439--441
for nondepredated assets, 439--441
Ca pital rationing, 552- 554
Ca pital recovery costs, 201- 202
Capital sou rces of, 538- 539
Capitalized cost, 168-169
Cash cost, 43
Cash How, 30-82, 91- 92
annual eq uivaJe11t. 198--199
approach, 483-484
categories, 62
computing, 80-82
diagrams, 61~64, 80'---81
with different patterns, 118--123
income depredation, 392- 293
Cash vaJ ue benefit, 461
Challenger, 291
incremental comparisons,. 291- 293
Chance node, 359
Choice table, 282, 287, 289
Combined incremental tax rate, 433
Comparing depreciation methods, 411-413
Composite cost index, 516- 513
Composite value, 551
Compound am ount factor
single payment 90-95
unifmm series, 110-118
Com pound interest, 83, 85
Com poundin g and payment period s differ, 139--141
Compounding subperiods, 97
Conseq uences
ext ra-market, 10, 13- 14
intangible, 10, 13--14
ma.rket, 10, 13-14
Constan t dol.lars ve_rsus then-current dollars, 510- 513
Constan t value dollars, 505-506
Consumer price in dex, 516--518
Continuous alternatives benefit--<:ost ratio graph, 309--310
Continuous compounding effective interest rate, 100- 101
Conventional B/C ratio, 569--570
Corporate income taxes
after-tax analysis, 433-437
business expenses, 429
capital expenditures, 428-430
capita] gains and losses, 439--441
estimating A RR, 439
estimating projects after-tax rate of return, 438-439
investment tax credit, 437
50 of 61 1/25/2020, 11:40 AM
rates, 430-432
taxable income, 428--430
Cost, 9
average, 36-39
basis, 396-397
book, 43
of borrowed money, 539
of capital, 40--541
of capital, weighted average, 540-541
cash, 43
depletion, 414-415
estimatin g, 47- 51
external, 46-47
fixed, 36-39
of goods sold, 598
incremental, 42--43
indexes, 55-56
internal, 46-47
life-cycle 43
life-cycle committed, 44-45
life-cycle design change, 45-46
marginal, 36-39
nonrecunfog, 41-42
opportunity, 40--41
and price index, 55- 56
recurring, 41--42
sunk, 39--40
variable, 36-39
Cost accounting, 595, 601~
problems wi th traditional, 603-604
Cost-push infJation, 503
Costs
externaJ, 566-567
internal, 566-567
societal, 17- 18
Coupon interest rate,. 179
Criteria, 11
Cunent ratio, 597- 598
D
Data block, 20-21, 137
in spreadsheets, 611
Death benefit, 461
Debt, 539
repayment, 84-86
Decision making, 4
process, 6-15
Decis.ion node, 358
Decision tree, 358
Declining balance depreciation, 398, 400-401
Deductible, 459
Defender~ 291
incremental comparisons, 291- 293
Defined benefi t, 338- 339, 458
Defined cont:libution, 338-339 459
Deflation definition, 502
Demand-pu.lJ inflation, 03
Depletion, 4 14-416
Depreciable life, 394
Depreciated versus expensed, 394-395
Depreciation, 392- 393, 600-601
51 of 61 1/25/2020, 11:40 AM
al]owable, 408
and asset disposal, 397- 398
basics, 393---398
bonus, 437--439
calculation fundamentals, 396-397
capital gains, 397
changes in tax code, 391-392
comparing methods, 411--413
declining balance, 398, 400-401
losses, 397
MACRS (see MACRS), 403-409
recapture, 397
spreadsheets, 4 16---417
straight-line, 398-400
sum-of-years' -digits, 398
for taxes-bonus depreciation, 401--403
for taxes-bonus plus MACRS,. 409--411
for taxes-MACRS , 403-409
time and value-bas,ed,. 398-401
unjt-of-production, 41 3--414
Desca rtes' rule of signs, 267
Design to cost, 578
Deteriorating, 393
Deterioration due to aging, 477-478
Direct c-osts, 601- 602
Disbenefits, 580- 81
Disbursement, 80-81
Discounted payback period, 317
Discrete probability distribution, 352
Di versification, 384
Dominated projects, 367- 368
Do-nothing alternative common error, 14
Doubl,e declining baJance, 400
E
Economic analysis choosing method, 293
Economic criteria
fixed input, 12, 160-161, 204
flxed input benefit-cost ratio, 307
fixed output, 12- 13, 160-161, 204
flxed output benefit-cost ratio, 307
neither input nor output fixed, 12, 160-16 1, 204
neither in put nor output fixed benefit-cost ratio,. 307
Economk decision-making fo r current costs, 19-22
Economic decision trees,. 358-364
Economk efficiency, 160
Economic equivalence moment diagram, 123- 125
Economic life, 472-477
of after-tax, 48-6- 491
new asset, 472-477
opportunity cost of new alternatives, 477
overhauls, 475-477
problems, 486-491
salva ge value, 475-477
spreadsheet, 474-475, 486---491
unplanned repairs, 4 77
Effective interest rate, 97- 100
continuous compounding, 100-101
Efficient frontier, 367- 368, 369-370, 384
End-of-year convention, 158
Engineering decision making ethical dime11sions, 15-19
52 of 61 1/25/2020, 11:40 AM
Engineering economic analysis

assumptions, 158-160
bonowed money viewpoint, 159
ignoring inflation, 509
incorporating inflation, 509
price indexes, 518
role of, 5~6
viewpoint, 159
Eq uity, 539, 597
Eq uivaJence, 86-39
depends on interest rate 8~9
differences in plans, 88
Eq uivaJent uniform annual: benefit, 198
cost, 198
worth, 198
Estimated data, 348
range, 348- 351
Estimating
a.ccuracy, 49
by analogy, 50
benefits, 47
cost and plice indexes, 55-56
costs, 48- 51
detailed, 48
difficulties, 50-51
learning curve, 58~61
per-unit model, 5 l
power-sizing model, 56-57
rough, 48
segmenting model, 53- 54
sernidetailed, 48
triangulation, 57- 58
Ethical dilemmas, 17- 19
Ethical lapses, 16
Ethics, 15-19
Exchange rates, 503
Expected vaJue, 355-358
Expensed, 429
versus depreciated, 394-395
item, 394
External cost, 46-47, 566-567
External interest rate, 272- 274
Extra ~market consequences, 10, 13- 14
F
Factor arithmetic gradient
present worth, 128-129
uniform series, 129
Factor geomenic series present worth, 135-136
Factor notation, 90-91
Factor relationships between, 125-126
Factor single payment
compound amount, 90-95
present worth, 93
Factor uniform s,eries
capital recovery, 114-115
compound amount, 110- 118, 112
present worth, 115
sinking fund, 112- 114
FE exam
oractice problems, 657~676
53 of 61 1/25/2020, 11:40 AM
pracnce promems, o::i1-t110
spreadsheets, calcuJators, 617-618

Peasibility analysis, 133
Pinancial ratios
from balance sheet, 597- 598
from income statement, 600
Pinancing, 159
Pi.rst cost, 62
Fixed mst, 36-39
Pixed input, 12
Pixed output, 12- 13
f unctional notation, 90-91
Fundamental accounting equation, 595
Future worth analysis, 304-306
G
Gain on asset disposal, 397
General accounting, 595
General obligation munici paJ bonds, 567- 568
Generally accepted accounting principles, 393
Geometric average, 340
Geometric gradient, 133-136
series, 133
Geometric mean, 339-340
Geometric series present worth factm~ 135- 136
GOAL SEEK, 253-254
Government opportunity cost, 568
Gradient uniform series factor, 129
GraphkaJ approach, 280
Green engineering, 17- 18
Gross income, 450--451
I
Income statement, 392- 393, 598-601
links with baJance sheet, 600'---60 1
IncrementaJ analysis, 246-251, 280
benefit-cost ratio, 572- 577
graphica l solutions, 280--291
multiple altematives, 280
IncrementaJ benefit-c-ost ratio, 572- 577
IncrementaJ cost, 42--43
IncrementaJ rate ofretum, 246-25 1
Incremental tax rate, 432
combined , 453
Increments of borrowing, 24S-250
Increments of investment, 249'---250
Index commodity, 516-518
Index composite, 51-6-518
Indexes price, 513- 518
Indirect cost, 9, 601-602
aJJocation, 602~603
Individual income tax
capital ga.ins and losses, 439c...441
itemized deductions, 451
personal exemption, 451
rates, 451-45 2
standard deduction, 451
tax refund, 4 1
taxable income, 450--455
withholding, 451
Infinite analysis pedod, 168-171, 209~211
54 of 61 1/25/2020, 11:40 AM
In flation
a.ctua.l doHars, 505-506
after-tax calcuJations, 520- 522
cash flows at different rates, 518- 519
causes, 502- 503
composite versus commodity indexes, 516-618
constant dollars versus then-current dollars, 510- 513
consumer price index, 516-518
definition, 502
deflation, 159-160
different rates per period, 520
ignoring, 509
including, 509
indexes, 513-518,
producer price index, 516-5Ul
rate, 503
real and mal"ket interest rates, 503-504
real dollars, 505-506
spreadsheets, 523-525
Insurance, 363- 364, 365-366, 459-462
automobiJe, 460-461
liability, 460
life, 461-462
Intangible consequences, 10, 13-14
Intangible property, 395-396
Interest, 82
compound, 83, 85
coverage, 600
formula notation, 90
on loan , 214
sim ple, 82- 83
Interest rate
adjusting MARR for risk,. 549-551
cost of capital, 542- 548
difficulties in solv1ng for~ 266-274
effective, 97- 100
and equivalence, 88-89
MARR values used in industry, 551- 552
nominal, 95-101
opportunity cost govemment, 568
opportunity cost of capital, 542- 548
opportunity cost taxpayer~ 568
plot versus PW, 237- 240
real and market, 503
s.electing in public sector, 567- 568
s.electing, 536- 54
spreadsheets and opportunity cost of capital, 545-548
InternaJ cost, 46-47, 566-567
InternaJ rate of return, 230-232
modified, 272- 274
Interpolation, 118
Investment, 159
Investment tax credit, 43 7
Investments are everywhere, 242- 246
lITegular cash flows, annual equivalent, 200- 201
Itemized deductions, 451
J
Joint probability distributions, 353- 355
K
55 of 61 1/25/2020, 11:40 AM
Ka]dor Cri terion, 11
L
Leaming curve, 58-61
Leasing, 243-246
Least common multiple, 164
Liabilities, 596-597
Ufe-cycle, 43--44
cost, 43
cost committed, 44-45
cost design change, 45--46
Liq uidity, 316
Liq uidity or speed of retu rn versus profitability, 316-318
Lives different from analysis period, 164- 167
Lives equaJ analysis period, 161- 164
Loans
amortization schedule, 212- 213
are everywhere,. 242- 246
balance due, 213
buy or lease, 243- 246
buying insurance, 243- 246
fees or discounts, 240-242
interest, 2 14
and investments parking permit, 242- 243
paying off earJy, 215-216
principal, 214
repayment plans, 86-88
Loss, 397
on asset disposal, 397
on disposal, 397
M
ACRS, 403-309
compa1ing depredation methods, 411-413
depredation for taJces, 403-409
percentage derivation, 406-409
percentage tables, 405--406
property class, 404-405
recovery perio d, 404--405
spreadsheet function VDB, 4 16-417
arginal cost, 36-39, 479-483, 489
after-tax, 489
arginal tax rate,, 432
arket consequences, 10, 13-14
arket interest rate, 503
MARR, 230
after-tax, 540-541
for individuals, 538
see minimum attractive rate of return, 548-549
aximizing profit, 12
ini:mum Attractive Rate of Return, ( ARR), 171- 172, 230, 548-549
adjusting for risk and unce1tai.nty, 549-551
representative values, 551- 552
selecting, 536- 27
inJmum cost Hfe, 486-491
after-tax, 486-491
odel building, 13
odifled accelerated cost recovery system (see MACRS), 403-409
odified B/C ratio, 570
Mnrl ifi1>rl intpm;il 1"':ll t1> of rPt11m ?77- '7 7,1
56 of 61 1/25/2020, 11:40 AM
odified internal r.He of return, 272- 274
oment diagram economic equiva]enc,e, 123--125
oney supply,. 502
oiSt likely estimate, 348-351
ultiple altemativeiS, 171- 174
incremen tal. ana.lysis, 280
ultiple objectives, 22- 23
ris k and return, 368-370
ultiple rates of rerum,. 267
ultiple s1g11 changes: projects with, 268-272
what to do, 267- 268
utually exclusive, 280
aJternatives, 161, 230
aJternatives elemen ts in comparing, 290-291
N
eeds/savings/wants, 463
et benefits to the users, 571- 572
et present worth cr1teria, 161- 164
om1nal. dol.lars, 505- 506
omfoal interest rate, 95- 101
onrernrring cost, 41--42
PW plot, 237- 240
0
Obsolescence, 394, 477--478
0MB A94 Directive, 568
Opportunity cost, 40--41, 542- 548
of capital, 542- 548, 568
of new aJ ternatives, 477
perspective for existin g asset firs t coiSt, 483-485
Opportunity first cos t, 483--484
Optimal economic li fe, 468-49 1
Optimisti c estimate, 348-351
Ordinary an nuity, 110
Ordinary gains depl'eciation recapture, 397
Outcome node, 359
Overhaul cost, 200, 202
Overhauls, 475--477
Overhead, 9
Ownership, 549
p
Par (face) value, 179
Payback period, 313- 318
limitations, 316
Percentage deplet ion, 415-416
Perkins foans, 457--458
Personal budgeting, 462-464
Personal exemption, 451
Personal property, 395- 396
Pessimistic estimate, 349-351
Planning horizon, 161
Power-sizing model, 56- 57
Premiums, 459
Present worth analysis, 160
Present worth index, 310c-313
benefit-cost ratio, 310-313
Present worth time period for analysis, 161- 174
Price indexes, 513- 518
Prime rate, 539
57 of 61 1/25/2020, 11:40 AM
ProbabiJity, 351- 353

ProbabHity joint distri butions, 353-355
Probability of loss, 354-355
Profit and Joss statement, 598
Profit ma.rgin, 600
Profitability, 316
Profit-loss breakdown chart, 38-39
Project duration, 78-580
publk sector,. 578-580
Project financing, 577- 578
public sector, 577- 5 78
Project life, 161
Project politics, 582- 583
publk sector, 582- 583
Promote the genera.I welfare, 564- 565
Property types, 395-396
Pruned branch, 359
Public sector
analysis viewpoint, 565- 567
invesunent objective, 564-565
project duration, 578- 580
project financing, 577- 578
project politics, 582- 583
s,electing interest rate, 567- 568
Purchasing power~ 502
PW plot versus interest rate, 237- 240
Q
Quick assets, 598
Quick ra tio, 598
R
Ran king projects
with benefit/cost ratio or present worth index, 552- 554
rate of return, 552- 554
Rate of return, 230
calculating, 232- 240
difficulties in solving for~ 266--2.74
Real dollars, 505- 506, 509
Real interest rate, 503
Real options, 374
Real propelty, 395-396
Receipt, 80-81
Recovery period, 394
Rernrring cost, 41--42
Replacement analysis, 477--479
after-tax, 486--491
after-tax spreadsheets, 486--491
common scenario, 478--479
first costs for existing and replacement assets, 483--485
future alternatives, 485-586
management attitudes, 478
other scenarios, 483
Resolving consequences, 13- 14
Retirement
accounts,. 458--459
defined benefit, 338- 339
defined contribution, 338-339
Revenue bonds, 567- 568
Risk, 339, 364-367, 368-370, 549
diversification reduces, 384-388
58 of 61 1/25/2020, 11:40 AM
real options, 374
and return, 386-388
versus return, 367- 370
standard devia tion, 364-367
of unplanned repair, 472-474
RuJe of 78 's, 153
s
Salvage vaJlle, 62, 199- 201, 396, 400- 401, 475-477
as benefit, 205- 206
as cost, 205- 206
with double declining balance depreciation, 400c...401
Scenario, 138-139, 348- 351
Section 179, 394
Section 179, 402
Segmenting
estimates, 53-54
model, 3- 54
Sensitivity analysis, 318-322
Shadow prices, 10
S.im ple interest, 82-83
Sim ulation, 370- 374
Single payment
compound amount factor, 90--95
formulas, 90-9
present worth factor, 93
Societal costs, 17- 18
Sources of capital, 538-539
Spreadsheet, 5-button caJculator, 92- 93
Spreadsheet X PV, 178-179
Spreadsheets, 136-139
absofate address, 612
after-tax replacement analysis, 486-491
amortization scheduJe, 212- 213
to analyze Joans, 212- 2 16
annuity functions, 112- 113
block functions, 137- 139
breakeven analysis, 322- 326
copy command, 611- 613
cumulativ,e in vestments and opportunity cost of capital, 545- 548
data block, 611
depreciation, 416-417
drawing cash flow diagrams, 64
economk life, 474-475
economic life after-tax, 486-391
formulas, 611
graphical comparison of altema:ti.ves, 280
inflation, 523-525
introduction, 6 10-613
present worth, 177- 178
relative address, 612
sensitivity analysis, 322- 326
what-if analysis, 325- 326
Stafford loans, 456-457
Stage cons truction, 318
Standard deduction, 451
Standard deviation, 364
StatisticaUy independent, 353
Straight-line depredation,. 398-400
Student loans, 456-458
59 of 61 1/25/2020, 11:40 AM
interest dedl!ction, 454--455
Sum-of-years' -digits depl'eciation, 398
SUMPROD CT, 351

Sunk cost, 39-40, 159
T
Tangible property, 395-396
Tax cred.its vs , tax deductions, 453-454
Tax Cuts and Jobs Act, 401-403, 430-432, 451-452
Tax rates
combined federal and state, 432-433
corporate,. 430-432
individllaJ, 451--452
Tax refu nd, 451
Taxable in come, 450-451
flrms, 429-430
ind.ivid uaJ, 450-455
Taxpayer opportunity cost,. 568
Technique of equivalence, 86
Time val ue of money, 82- 8'6
calcuJators, 614-624
Tl'easmy stock, 539
Triangulation, 57- 8
estimating, 7- 58
Trust Me, You' U I se This, 76- 77
u
Uncertainty, 549
Uneq ual lives, 164-167, 208, 478
Uniform payment series, 110
Uniform rate,. 133
Uniform series
capital recovery factor, 114- 115
compound amount factor, 110- 118, 112
formulas, 110- 118
present worth factor, 115
sinking fond factor, 112- 114
Uniformity ofA, G, and g, 133
Unit-of-production depreciatio n, 413-414
Unplanned repairs, 477
V
Valllation income depreciation, 392- 393
Vallie engineering, 10-11
Variable cost, 36-39
Viewpoint, 565- 567
60 of 61 1/25/2020, 11:40 AM
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Engineering Economic Analysis - Pages 650 - 695 https://print.vitalsource.com/print/9780190931940?brand=Yuzu&from=...

25% Compound Interest Factors 25%

1 1.250 .8000 l.0000 1.2500 1.000 0.800 0 0 1

30% Compound Interest Factors 30%

35% Compound Int erest Factors 35%

40% Compound Interest Factors 40%

45% Compound Interest Factors 45%

1 1.450 .6897 l.0000 1.4500 1.000 0.690 0 0 1

50% Compound Interest Factors 50%

60%, Compound Interest Factors ·6 0%

l 1.600 .6250 1.0000 1.6000 1.000 o.6r 0 0 1

C. Analyses (e.g., breakeven, benefit-cost, life cycle)

5. Engineering Economics (3-5 questions)

Crop Cos"'t per acre Inrnme/acre at 1'00% Yield Es1imated Yield(%)

Estimating in Enyineering Economy

Lane paint $500 per mile per lane

Mile markers $18 per unit

Flexible roadside delineators $32 per unit; spaced at 1000 feet

The bids that DOT receives should be in what range of costs?

·C ompound Interest, Single Cash Flows

(b) 6.5 years

Nominal and Effective Interes:t Rates

Continuous Compounding Interest Rate

Gradient Cash Flows

Rate of Return Analysis

(a) Less than 2%

Benefit-Cost Ratio Analysis

Sensitivity and Breakeven Analysis

Useful Life (years)

D- Whkh of the following is a valid reason to consider replacing an existing asset?

Year Total Marginal Cost

(a) After Year 1

Project First Cost (SM), PW($M)

(c) Invest in all projects to maximize PW.

(c) 1.47; 0.73

$22 per unit

Total operating revenues $1200

b) pt= 5.8; 2 nd = 6.6; 3iu = 7.2

2-62 N = 25.12 so by 26 th unit

4-92 a) 1.50%, pmt = $587, ia = 19.56%

7A-8 unique root at 11.8%

9,_24 a) $494,492, b) $424,772

10-6 a) $4.00M, $3.27M, $2.49M, b) $3.26M

10-8 P(250) = .1, P(300) = .4, P(350) = .4

11-6 a) $75,000, b) $150,000, c) $120,000, d) $30,000

12-26 14.8%, investment is satisfactory

13--4 8 yrs, $6424

13-6 4 yrs, $8516

14-34 yr 4 $66,915, 0.96%

16-20 5.5 optimal PW

40l(k) plan, 458-459

spreadsheets, 322- 326

Engineering economic analysis

spreadsheets, calcuJators, 617-618

Ka]dor Cri terion, 11

ProbabiJity, 351- 353

SUMPROD CT, 351

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