Instructions: For each question, click on the radio button beside your answer. When you have completed the entire quiz, click the “Submit my answers” button at the bottom of the page to receive your results.

Question 1:

A machine that costs $10,000 to buy and $1,500 per year to operate will save mainly labour expenses in packaging over 5 years. The salvage value at the end of 5 years is $800. To receive a 7% rate of return on investment, what is the minimum required annual savings in labour from this machine?
a) $3124.32
b) $1249.73
c) $2195.45
d) $3799.79

Question 2:

Jina invests $250 in a savings bond that is cashed in 5 years later for $400. What is The IRR for this investment?
a) 9.85%
b) 8.08%
c) 7.02%
d) 4.58%

Question 3:

By replacing an old piece of equipment with a new one, a manufacturing company will save $40,000 in rework per year. The new machine costs $200,000 and its life is 10 years. There is no salvage value. If the company uses an 8% interest rate, should the new equipment be installed?
a) Yes
b) No
c) Indifferent
d) No calculable

Question 4:

If you borrow $6000 at time 0 to be paid back in 6 equal payments of $1500, what is the IRR?
a) Between 10% and 11%
b) Between 9% and 10%
c) Between 13% and 14%
d) Between 12% and 13%

Question 5:

Consider the following cash flow of a project:

n	Net Cash Flow
0	-$4000
1	$600
2	$700
3	X

What is the value of X and is the project acceptable at MARR=7% with this value of X?
a) $5690.05 – acceptable
b) $3704.18 –acceptable
c) $5690.05 –Not acceptable
d) $3704.18 – Not acceptable

Higher Education

Engineering Economic Analysis, Third Edition: Chapter 7