EMIS8361

Given: Interest accrued over time = $10 and principal = $50. What should be done to arrive at the interest rate?

Divide $10 by $50 and multiply the result by 100.

True or false: Simple interest reflects the effect of the time value of money on the interest.

False

_____ leads to a decrease in the value of a given currency.

Inflation

_____ is the difference between an ending amount of money and the beginning amount.

Interest

_____ when a person or an organization saves, invests, or lends money and obtains a return of a larger amount over time.

Interest is earned

_____ when a person or organization borrows money (obtains a loan) and repays a larger amount over time.

Interest is paid

Which of the following is true of ethics and economic decisions?

It is possible for actions and intentions to come into conflict concerning a common moral.

What is the concept of the time value of money?

Money makes money over time.

Given: Principal of the loan = $12,000, i = 12%, and n = 12 years. Based on compound interest, what is the amount due after 12 years?

The amount due is $12,000 × (1+0.12)12

Select all that apply The steps below show how to determine the total compound interest for the given set of values. Given: Principal = $5,000, i =2%, and n = 15 years. Step 1: The formula to be used is A. Step 2: Substituting the values in the formula, we arrive at $B as the compound interest. Identify A and B. (Select all that apply.)

The formula A is the same as I = P(1 + i)n − P. B = $1,729.34

If the principal is $275 and the total end amount paid is $300, what should be done to determine the interest?

The principal should be subtracted from the end amount.

Given: i = 10%, principal = $1,000, and n = 10 years. Determine the simple interest and compound interest for the given set of values.

The simple interest is $1,000, and the compound interest is $1,593.74.

What are alternatives?

They are stand-alone descriptions of viable solutions to problems that can meet the objectives.

True or false: The minimum attractive rate of return (MARR) is established by managers and is used as a criterion against which an alternative's rate of return (ROR) is measured, when making the accept/reject investment decision.

True

True or false: When several inflows and outflows occur within the same period, the net cash flow is assumed to occur at the end of the period.

True

_____ morals are fundamental moral beliefs held by virtually all people.

Universal or common

Intangible factors are useful in decision making when

all the alternatives have the same economic benefit

Kate has $1,000 worth of savings. She can invest this either in the stock market or in a time deposit in a bank. The two options that Kate needs to choose from are referred to as

alternatives

For _____ interest, the interest accrued for each interest period is calculated on the principal plus the total amount of interest accumulated in all previous periods.

compound

If you want to purchase a new machine but do not have sufficient money, you could obtain a bank loan at an interest rate of 5% per year and pay for the machine in cash now. The interest rate is your _____.

cost of capital

It always costs money in the form of interest to raise capital. The interest, expressed as a percentage rate per year, is called the _____.

cost of capital

Cynthia decides to use her credit card, which charges an annual rate of 15%, to buy jewelry from an online store. In this scenario, Cynthia is using _____ to fund her purchase.

debt financing

The end-of-period convention in cash flows means that all cash inflows and cash outflows are assumed to take place at the ____ of the interest period in which they actually occur.

end

A collection of procedures that help businesses compare various alternatives from an economic point of view is termed

engineering economy

For the purpose of funding its projects, a corporation uses money generated through the sale of common stock and money retained in the business for future use. The method used by the corporation to raise funds is called _____.

equity financing

The code of ____ forms the standards to guide the decisions and actions of individuals and organizations in a profession.

ethics or morals

For a corporation, the established minimum attractive rate of return (MARR) used as a criterion to accept or reject an investment alternative will usually be _______ than or equal to the weighted average cost of capital (WACC) that the corporation must bear to obtain the necessary capital funds.

greater

$10 now will not purchase the same amount of gasoline for your car as $10 did 10 years ago. The reduction in the value of money is an example of _____.

inflation

A noneconomic factor is also known as a(n)

intangible factor

Engineering Economy

is undertaken after all the possible alternatives have been identified

The criterion used to select an alternative in engineering economy for a specific set of estimates is called a(n)

measure of worth

All the measures of worth account for the fact that

money makes money over time

The symbol for the number of interest periods (years, months, days) is _______

n

The _____ of a series of cash flows is shown at some time prior to a future value, F, or prior to the first occurrence of an equivalent series amount, A.

present value

In a cash flow diagram, time t = 0 is ____

the present point on a time scale

A startup shows cash inflows worth $3 million and cash outflows worth $1 million. What is the net cash flow of the startup?

$2 million

Reuben borrows $4,200,000 from a bank that charges a compound interest rate of 9.5%. How much money will he be paying the bank if the repayment tenure of the loan is 20 years?

$25,794,770.84

Given: Net cash flow = $1 million and disbursements = $2 million. What is the value of the receipts?

$3 million

A ___ sign indicates a cash inflow.

+

A(n) sign indicates a cash outflow.

-

Given: Beginning amount = $100 and ending amount = $200. Determine the interest.

100

If the interest rate is 15% per year, the amount of $200 now is equivalent to a cost of _____ in one year.

230

The Excel function that is used to determine the equal, periodic value is _____.

= PMT(rate, nper, pv, [fv], [type])

Which of the following Excel functions can be used to find the present value?

= PV(rate, nper, pmt, [fv], [type])