LINDEBURG ESAS Terms Compilation PART 1 TO 12

How is the capital recovery factor (A/P,i,n) related to the uniform series sinking fund factor (A/P,i,n)? i is the effective annual rate of return, and n is the number of periods.

• (A/P,i,n)= (A/F,i,n)+ i

• (A/P,i,n)= (A/F,i,n)- i

• (A/P,i,n)= = ((A/P,i,n)/i))

• (A/P,i,n)= (((A/P)(i)(n))+n))/n

What is an annuity?

• the future worth of a present amount

• an annual repayment of a loan

• a series of uniform amounts over a period of time

• a lump sum at the end of the year

Which of the following expressions is INCORRECT?

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• (A/F,i,n)-i=(A/P,i,n)

When using net present worth calculations to compare two projects, which of the following could invalidate the calculation?

• differences in the magnitudes of the projects

• evaluating over different time periods

• mutually exclusive projects

• non-conventional cash flows

Assuming i= annual rate of return, n= number of years, F= future worth, and P= present worth, what is the future worth of a present amount P?

• P(1+i)ⁿ

• P(1+i)-ⁿ

• P(1+i)^n-1

• P(1+i)i

What must two investments with the same present worth and unequal lives have?

• Identical salvage values

• Different salvage values

• Identical equivalent uniform annual cash flows

• Different equivalent uniform annual cash flows

What is the formula for a straight-line depreciation rate?

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Which of the following is true regarding the minimum attractive rate of return used in judging proposed investments?

• It is the same for every organization.

• It is larger than the interest rate used to discount expected cash flow from investments.

• It is frequently a policy decision made by an organization’s management.

• It is not relevant in engineering economy studies.

Which of the following statement is NOT correct?

• A nominal rate of 12% per annum compounded quarterly is the same as 12%/4 = 3% quarter.

• $1 compounded quarterly at 3% for n yr has a future value of (1.03)⁴ⁿ

• Compounding quarterly at a nominal rate of 12%/yr is equivalent to compounding annually at a rate of 12.55%

• Effective rate of return in options (A), (B) and (C) is the difference between 12.55% and 12%.

• The statement given in options (A), (B) and (C) are correct. Only option (D) is false.

Which of the following situations has a conventional cash flow so that an internal rate of return can be safely calculated and used?

• You purchase a house and pay the bank in monthly installments.

• You lease a car and pay by the month.

• Your company undertakes a mining project in which the land must be reclaimed at the end of the project.

• You invest in a safe dividend stock and receive dividends each year.