Engineering Economics — Quiz 6

Questions in this quiz (10)

1. If the real interest rate is $$4\%$$ and the inflation rate is $$3\%$$, the combined market interest rate is most nearly:

   • $$6.9\%$$
   • $$7.0\%$$
   • $$7.1\%$$
   • $$7.3\%$$

2. A project generates the following cash flows in actual inflated dollars: Year $$1$$ = $$12000$$, Year $$2$$ = $$12720$$, Year $$3$$ = $$13483$$. Using a market interest rate of $$10\%$$, the present worth is most nearly:

   • $$31240$$
   • $$31551.47$$
   • $$32540$$
   • $$33190$$

3. A project generates annual benefits of $$8000$$ in constant today's dollars for $$4$$ years. Using a real interest rate of $$7\%$$, the present worth is most nearly:

   • $$26100$$
   • $$27100$$
   • $$28100$$
   • $$29100$$

4. A bond with a face value of $$1000$$ and a $$6\%$$ annual coupon rate is currently selling for $$950$$. The bond matures in $$10$$ years. The approximate yield to maturity is most nearly:

   • $$6.3\%$$
   • $$6.8\%$$
   • $$6.6\%$$
   • $$7.1\%$$

5. A homebuyer takes out a $$420000$$ mortgage at $$5.8\%$$ annual interest compounded monthly for $$30$$ years. The monthly payment is most nearly:

   • $$2350$$
   • $$2460$$
   • $$2530$$ $$2610$$
   • $$2610$$

6. A $$250000$$ mortgage has a $$5.5\%$$ annual interest rate compounded monthly and a $$25$$ year term. After making $$72$$ payments, the remaining loan balance is most nearly:

   • $$209500$$
   • $$216800$$
   • $$223400$$ $$229900$$
   • $$229900$$

7. A $$180000$$ loan at $$5.2\%$$ annual interest compounded monthly is to be repaid over $$20$$ years. For the first monthly payment, the interest portion is most nearly:

   • $$690$$
   • $$720$$
   • $$780$$ $$810$$
   • $$810$$

8. A company can buy equipment for $$95000$$ with annual maintenance costs of $$3500$$ and sell it for $$25000$$ after $$6$$ years. Alternatively, the company can lease the equipment for $$20000$$ per year paid at the beginning of each year. Using a discount rate of $$9\%$$, which option has the lower present worth of costs?

   • $$Buy, with PW=88420$$
   • $$Buy, with PW=92160$$
   • $$Lease, with PW=88420$$
   • $$Lease, with PW=92160$$

9. An industrial system has an initial cost of $$250000$$, annual operating costs of $$18000$$, annual environmental compliance costs of $$9000$$, and a salvage value of $$30000$$ at the end of $$12$$ years. Using a discount rate of $$8\%$$, the life cycle cost is most nearly:

   • $$365000$$
   • $$395000$$
   • $$420000$$ $$455000$$
   • $$455000$$

10. A company invests $$600000$$ in equipment that reduces carbon emissions by $$2500$$ tons of $$CO_2$$ per year. If carbon credits are valued at $$45$$ per ton and the equipment has a $$15$$ year life, the net present value at $$7\%$$ interest is most nearly:

    • $$480000$$
    • $$565000$$
    • $$640000$$
    • $$720000$$