1) The following investment is classified as?

NCash flow

0–$1,200

1$600

2$1,000

3–$450

 

a.  Simple – 1 Actual ROR

b.  Non-Simple – 1 Actual ROR

c.  Simple – up to 2 Actual RORs

d.  Non-Simple – up to 2 Actual RORs

 

2) A new product design is expected to require $10,000 in tooling which will be worth nothing in 5 years when the project ends.  Assuming an interest rate of 10% annually and annual expenses of $3,000 to produce 3000 units per year.  What is the average cost per unit?

$1.00

188

$2.39

$1.67

 

3) Using the rule of 72, how many years will it take to double your investment if the nominal interest rate is 12% compounded continuously?

a.  7.20 years

b.  5.65 years 

c.   5.68 years 

d.   6.00 years

 

4)  What is the Present Cost of  a 5 year service contract where you will pay $5000 initially, and this will decrease at a rate of $500/year starting in year one (i.e. your year 1 payment will be $4,500) and will end in year 5 (i.e. 6 total payments).  (i=10% annually compounded)?

a.-$17,204

b.-$19,954

c.-$18,628

d.-$19,523

    • 10 years ago
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