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Quiz-No 3

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22 views

Quiz-No 3

Uploaded by

Aiman Padilla Abreu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Quiz no.

Comparison of Alternatives

1. A company purchases a piece of construction equipment for rental purposes. The expected
income is P3100 annually for its useful life of 15 years. Expenses are estimated to be P355 annually.
If the purchase price is 25,000 and there is no salvage value, what is the prospective rate of return,
neglecting taxes?

(A) 5.2%

(B) 6.4%

(C) 6.8%

(D) 7.0%

Problem 2 to 3 refer to the following situation.

An industrial firm uses an economic analysis to deter- mine which of two different machines to
purchase. Each machine is capable of performing the same task in a given amount of time. Assume
the minimum attractive rate of return is 8%.

Use the following data in this analysis.

Machine X machine Y

Initial cost 6000 12,000

Estimated life 7 years 13 years

Salvage value none 4000

Annual maintenance cost 150 175

2. What is the approximate equivalent uniform annual cost of machine X?

(A) P1000

(B) P1120

(C) P1190

(D) P1300

Solution

3. What is the approximate equivalent uniform annual cost of machine Y?

(A) P1160

(B) P1300

(C) P1490

(D) P1510
4. A machine has an initial cost of 40,000 and an annual maintenance cost of P5000. Its useful life is
10 years. The annual benefit from purchasing the machine is P18,000. The effective annual interest
rate is 10%. What is the machine's benefit-cost ratio?

(A) 1.51

(B) 1.56

(C) 1.73

(D) 2.24

Consider the following mutually exclusive alternatives with the following sequences of cash flows:

MARR = 15%

Salvage Value = 200,000

n Alternative A Alternative B Alternative C


0 -1,050,000 -1,400,000 -750,000
1 225,000 350,000 150,000
2 225,000 350, 000 150,000
3 225,000 350,000 150,000
4 225,000 350,000 150,000
5 225,000 350,000 150,000
6 225,000 350,000 150,000
7 225,000 350,000 150,000
8 225,000 350,000 150,000
9 225,000 350,000 150,000
10 225,000 350,000 150,000
Determine the following:

5. Present worth of alternative A,

6. Future worth of Alternative B,

7. Annual worth of alternative, C

8. IRR of alternative A,

9. IRR of alternative B, and,

10. Determine the best among the 3 alternatives using PW method.

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