Foundations
Factors
Nominal/Effective Interest Rate
Present Worth
100
What does MARR stand for?
Minimal Attractive Rate of Return
100
Find the correct numerical value for the following factor (F/P, 10%, 20)
6.7275
100
Nominal or Effective? effective 25% per year compounded monthly
Effective
100
State two conditions under which the do-nothing alternative is not an option.
Alternative decision must be chosen Each alternative has only cost cash flow estimates
200
What is the difference between simple and compound interest?
simple- only calculated on the principle compound- interest is calculated on the principle + interest
200
What is the present worth of $30,000 in year 8 at an interest rate of 10% per year?
$13,995
200
Nominal or Effective? 1% per week compounded continously
Nominal
200
A system must be replaced at a cost of $20 million 10 years from now. A fund is established for replacement has been established with the commitment of $1 million at the end of next year with 10% increases through the 10th year. If the fund earns at 5.25% per year, will the company have enough to pay for the replacements?
No it will not $512,000 short
300
At 10% per year simple interest, how long will it take for a deposit of $1000 now to accumulate to $100,000?
990 years
300
What is the present worth of a uniform series of 10 payments that begin one year from now in the amount of $6000 if the interest rate is 10% per year?
$36,867.60
300
Nominal or Effective? 16% per year
Effective
300
What is the present worth of a $40,000 bond that has a bond interest rate of 6% per year, payable semiannually? The bond matures in 20 years. The interest rate in the marketplace is 8% per year compounded semiannually.
$32,083.36
400
The difference between cash flow inflows and cash outflows is known as what?
Net-cash flow
400
Calculate the equivalent annual cost of fuel for mail trucks that records indicate costs $72,000 in year one, increasing by $1000 per year through year five. Use an interest rate of 8% per year.
$73,846
400
Convert an interest rate of 1.5% per month into a nominal interest rate over the following time period: quarter
4.5% per quarter
400
Determine the capitalized cost of $1000,000 now and $50,000 per year in years one through infinity at an interest rate of 10% per year compounded continuously.
-$575,421
500
How much can you borrow today if you promise to repay $20,000 two years from today at a compound interest rate of 20% per year?
$13888.89
500
A company that manufactures digital pressure gauges just borrowed $10,000,000 with the understanding that it will make annual payments of $2,000,000 for three years starting next year, and then pay off the balance in year 4. If the interest rate is 8% per year, how much will the company owe at the end of year 4?
$6,593,776
500
What is the future worth 4 years from now of a present cost of $242,000 to UPS at an interest rate of 18% per year compounded monthly?
$494,527
500
John wants to have the financial responsibility to withdraw $80,000 per year forever beginning 30 years from now. If his retirement account earns 8% per year interest and dividends, what is the required balance in year 29?
$1 million
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