# Engineering

## A construction firm owns a concrete batching plant on which there is a \$150,000 mortgage. The mortgage is at 7% and is to be paid off in 25 equal end-of-year payments. After the 13th payment, the firm refinances the balance at 6% to be paid off in 35 equal end-of-year payments. By refinancing, what will be the firm’s annual payments.

EXPERT ANSWER Determine the annual payments of the original mortgage.  This is a capital recovery problem. A = P (A/P, i%, N)                 i1 – 0.07; N1 = 25; P1 = \$150,000  è A = P (A/P, 7%, 25)  = \$150,000 (0.0858) = \$12,870.00 At the end of the 13th year, there are still twelve …

## How much must you deposit each year to have \$20,000 at the end of 15 years with money worth 7%?How much must you deposit each year to have \$20,000 at the end of 15 years with money worth 7%?How much must be deposited at the end of each 3 months at 8% interest compounded quarterly to have \$90,000 in 7 years?If \$46,000 is borrowed at 10% for 25 years, what equal end-of-year payments would be required to repay the loan by the end of the 25th year?A firm plans to replace a building 7 years from now. A fund was established which calls for a \$40,000 end-of-year deposit for the 7 year period. With interest at 8%, how much will be available in the fund to replace the building?

How much must you deposit each year to have \$20,000 at the end of 15 years with money worth 7%? How much must be deposited at the end of each 3 months at 8% interest compounded quarterly to have \$90,000 in 7 years? If \$46,000 is borrowed at 10% for 25 years, what equal end-of-year …

## Alpha Industry is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial outlay and annual revenues with respect to each of the technologies are summarized in Table 1. Suggest the best technology which is to be implemented based on the present worth method of comparison assuming 20% interest rate, compounded annually.

Alpha Industry is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial outlay and annual revenues with respect to each of the technologies are summarized in Table 1. Suggest the best technology which is to be implemented based on the present worth method of comparison assuming …

## If you make the following series of deposits at an interest rate of 10%, compounded annually, what would be the total balance at the end of 10 years?

EXPERT ANSWER Answer : (b) Given: A0 = \$800, A = \$1,500, i = 10%, N = 10 yearsFind: F∞ Note that there are two cash flow components in the series. The first one is asingle payment amount (\$800) at period 0 and the other is the \$1,500 equalpayment series. Also we are looking for …

## If you invest \$2,000 today in a savings account at an interest rate of 12%, compounded annually, how much principal and interest would you accumulate in 7 years?Two banks offer different interest rates on your deposit of \$10,000 over 3 years. Bank A offers an 8% interest compounded annually and Bank B offers an 8.5% simple annual interest. Which of the following statements is true?

EXPERT ANSWER Answer : (b)Given: P = \$2,000, i = 12%, N = 7 yearsFind: F7 F = += \$2, 000(1 0.12) \$4, 421.362. Answer : (d)

## Your county has asked you to analyze the purchase of some dump trucks. Each truck will cost \$45,000 and have an operating and maintenance cost that starts at \$15,000 the first year and increases by \$2,000 per year. Assume the salvage value at the end of 5 years is \$9,000 and the interest rate is 12%. The equivalent annual cost of each truck is most nearly

Your county has asked you to analyze the purchase of some dump trucks. Each truck will cost \$45,000 and have an operating and maintenance cost that starts at \$15,000 the first year and increases by \$2,000 per year. Assume the salvage value at the end of 5 years is \$9,000 and the interest rate is …

## If \$200 is deposited in a savings account at the beginning of each of 15 years and the account draws interest at 8% per compounded annually, the value of the account at the end of 15 years will be nearly:

If \$200 is deposited in a savings account at the beginning of each of 15 years and the account draws interest at 8% per compounded annually, the value of the account at the end of 15 years will be nearly: (a) \$6,000            (b) \$5,400            (c) \$5,900            (d) \$6,900 EXPERT ANSWER  Given: A = \$200, N = 15 years, i = 8%            Find: FApproach: …

## Pick up the correct statement from the following : A. A NPV profile graph shows the curvilinear relationship between the net present value of the project and discount rate employed. B. In a NPV profile, if discount rate is zero, then net present value is simply total cash inflows less the total cash outflows of the project. C. As the discount rate increases, the net present value profile slopes downward to the right. D. All of these

Pick up the correct statement from the following :A. A NPV profile graph shows the curvilinear relationship between the net present value of the project and discount rate employed.B. In a NPV profile, if discount rate is zero, then net present value is simply total cash inflows less the total cash outflows of the project.C. …

## Pick up the correct statement regarding financial statement analysis from the following. A. Final analysis always involves the use of various financial statement. B. The balance sheet is the summary of assests, liabilities and owner’s equity of business at a point in time. C. The income statement is the summary of revenues and expenses of a firm over a particular period of time, D. All the above.Pick tin the method used for project evaluation and selection in capital budgetting from the following : A. pay back period B. Internal ratio of return C. Net present worth D. All the above.

Which one of the following statements is correct ?A. The number of years required to recover the initial cash investment in a project, is called Pay Back period (PBP).B. The discount rate that equates the present value of the expected Net Cash Flow (CFs) with the Initial Cash Outflow (1C0) is known as internal rate …

## Current assests less inventories divided by current liabilities is known as A. Liquidity ratio B. Current ratio C. Acid-Test (or Quick) ratio D. Debts ratio.Which one of the following definitions, is correct ? A. The ratio of total debt to share holder’s equity is called ‘debt ratio’. B. The ratio debt-to-total assests is called Debt-to-total assest ratio. C. The ratio of earnings before interest and taxes for a particular reporting period to the amount of interest charges for the period, is called interest coverage ratio. D. All of these.Pick up the correct statement from the following : A. The ratios which slow profitability in relation to sales and those which show profitability in relation to investment, are called profitability ratios. B. The ratio of gross profit and net sales, is ‘c’alled profitability in relation to sales ratio. C. The ratio of net profit after taxes to total assests is known as profitability in relation to investment ratio D. All of these

Current assests less inventories divided by current liabilities is known asA. Liquidity ratioB. Current ratioC. Acid-Test (or Quick) ratioD. Debts ratio Which one of the following definitions, is correct ?A. The ratio of total debt to share holder’s equity is called ‘debt ratio’.B. The ratio debt-to-total assests is called Debt-to-total assest ratio.C. The ratio of …