Scribd
Upload
868 views1 page

Quiz - PW, FW, AW

This document contains instructions and questions for an exam consisting of 4 problems: 1. The first problem asks the student to use the present worth method to evaluate whether a small office building should install a retrofitted space-heating system costing $110,000 that would save $30,000 per year for 6 years. 2. The second problem asks the student to calculate: (a) the price that should be paid for a $5,000 face value bond paying 8% interest annually over 20 years to receive a 10% yield, and (b) the annual yield if the bond is purchased for $4,600. 3. The third problem asks the student to calculate the total annual cost of

Uploaded by

John A. Ceniza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
868 views1 page

Quiz - PW, FW, AW

This document contains instructions and questions for an exam consisting of 4 problems: 1. The first problem asks the student to use the present worth method to evaluate whether a small office building should install a retrofitted space-heating system costing $110,000 that would save $30,000 per year for 6 years. 2. The second problem asks the student to calculate: (a) the price that should be paid for a $5,000 face value bond paying 8% interest annually over 20 years to receive a 10% yield, and (b) the annual yield if the bond is purchased for $4,600. 3. The third problem asks the student to calculate the total annual cost of

Uploaded by

John A. Ceniza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Instructions:

a. This exam paper consists of (4) four questions. Deadline: 12-15-2020, 12noon via gmail
thru class representative.
b. For problem-solving type questions, show your solutions by attaching your answers in
pdf, doc and word file. BOX your final answers with signature.
c.

Name: ______________________________ Date/Section:_____________

1. A retrofitted space-heating system is being considered for a small office


building. The system can be purchased and installed for $110,000, and it
will save an estimated 300,000 kilowatt-hours (kWh) of electric power each
year over a six-year period. A kilowatt-hour of electricity costs $0.10, and
the company uses a MARR of 15% per year in its economic evaluations of
refurbished systems. The market value of the system will be $8,000 at the end
of six years, and additional annual operating and maintenance expenses are
negligible. Use the PW method to determine whether this system should be
installed.
2. A bond with a face value of $5,000 pays interest of 8% per year. This bond will be
redeemed at par value at the end of its 20-year life, and the first interest payment
is due one year from now. (a) How much should be paid now for this bond in order to
receive a yield of 10% per year on the investment? (b) If this bond is purchased now for
$4,600, what annual yield would the buyer receive?
3. A certain barangay wishes to purchase a certain equipment which be used in its
beautification program valued at P 400,000 by selling bond worth 5% that will mature in
30 years. The amount to retire the bonds will be raised by paying equal annual amounts
into a sinking fund that will earned 4%. What will be the total annual cost of the bond until
they mature. Assume that the bonds can be sold at par and redeemable year.
4. You purchased a building five years ago for $100,000. Its annual maintenance expense has
been $5,000 per year. At the end of three years, you spent $9,000 on roof repairs. At the
end of five years (now), you sell the building for $120,000. During the period of ownership,
you rented out the building for $10,000 per year paid at the beginning of each year. Use
the AW method to evaluate this investment when your MARR is 8% per year.

You might also like