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(econ115)[2009](s)midterm~mlwongaa^_10225.pdf
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Econ 115 Engineering Economics and Finance Name:______________
Spring, 2009 ID:_________________
Midterm Exam
Instructor: YU, Yan Lecture #:____________

General instruction: This is a closed-book exam. You may use calculators. Steps of calculation must be shown, including functional symbol of factors (such as (P/A, 10%, 6)) and its value (here 4.3553). Draw cash flow diagram whenever possible (it counts for 10% of total marks). You have 120 minutes for this exam.




































Question 1 (10 points) How much money should be deposited each year for 12 years if you wish to withdraw $3,000 each year for five years, beginning at the end of the 15th year? Let i=10% per year.


















Question 2 (10 points) Two structural designs for a large public monument in Indonesia are under evaluation. Use the repeatability assumption and the Capitalized Worth method to determine which design should be selected if the service period of the monuments is indefinite and the interest rate is 2% per year. (The initial costs need to be paid every time the alternatives are repeated.)
alternative
A
B

Initial costs
$310,000
$325,000

Annual maintenance costs
$23,000
$24,500

Usual life, years
8
11


















Question 3 (20 points) A 24-hour music network plans to add satellite technology to allow its expansion into other major southern markets. The network expects the monthly revenue to increase by $380,000 from new cable subscription fees. The satellite will require an initial cost of $2 million with monthly operating and maintenance costs of $340,000. It will have a $122, 000 salvage value after 6 years. Calculate IRR (in terms of annual rate of return) of this investment. (Must use linear interpolation and draw the relevant graph. No interest tables provided for this question. Please use relevant formulas to calculate.)





































Question 4 (30 points) As the supervisor of a facilitys engineering department, you consider mobile cranes to be critical equipments. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the table below. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternatives A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year, i.e. the total annual cost of leasing and operating the crane is $66,000+$28,800.) The MARR is 15% per year. Which alternative should be chosen based
(a)
(10 points) the PW method; and


(b