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:

Compute the net present worth of each project at i=15%. Which project or projects are acceptable?

Period	Cash Flow, Project A	Cash Flow, Project B
0	-13,000	-11,000
1	4000	5000
2	3000	5000
3	11,000	8,000

a) Project B is acceptable.
b) Project A is acceptable.
c) Both projects are acceptable.
d) Neither project is acceptable.

Question 2:

An NGO has just completed a new engineering complex worth $25 million. A campaign has planned to raise funds for future maintenance costs, which are estimated at $1.5 million per year. Assuming that the NGO can create a trust fund that earns 6% interest annually, how much has to be raised now to cover the perpetual string of $1.5 million in annual costs?
a) $20 million
b) $800,000
c) $10 million
d) $25 million

Question 3:

A 6%, 10-year bond has a $1000 face value. You want to earn at least 8% annually, compounded semi-annually on this investment. How much should you pay for this bond?
a) $560.222
b) $983.021
c) $864.109
d) $540.659

Question 4:

A newly constructed dam costs $4 million. This dam needs renovation every 10 years at a cost of $800,000. Annual repairs and maintenance are estimated to be $50,000 per year. If the interest rate is 4%, what is the capitalized cost of the bridge?
a) $6,916,000
b) $7,420,000
c) $890,000
d) $789,000

Question 5:

The city of Abbotsford is building a new library. There are two alternatives for insulating and heating the building. An interest rate of 8% will be used and the library will have an estimated life of 40 years. Which alternative is better?

Costs	Alternative A	Alternative B
Building cost	$1.5 M	$2 M
Furnace cost	$90 K	$80 K
Annual heating cost	$10 K	$5 K

a) Alternative A is better.
b) Alternative B is better.
c) Both of them have the same cost
d) Neither is viable.

Higher Education

Engineering Economic Analysis, Third Edition: Chapter 5