School

Texas A&M University **We aren't endorsed by this school

Course

ISEN 302

Subject

Finance

Date

Nov 13, 2023

Type

Other

Pages

4

Uploaded by MinisterNeutronSnail6 on coursehero.com

CHAPTER 6
ANNUAL CASH FLOW ANALYSIS (50 points)
Multiple Choice - Show your work
(5 points each)
6.1.
Evaluate the value of A from the cash flows shown in table below using an interest rate of 7%
compounded annually.
A) $734.63
B) $1,049.97
C) $955.11
D) $874.80
6.2. Determine the value of EUAW from the cash flow diagram shown below.
i = 9%.
0
1
2
3
4
5
6
A) $328.25
B) $377.75
C) $569.75
D) $451.06
6.3.
Given: Cash flows for an investment.
Year
1
2
3
4
5
Cash flow
$1400
1500
1600
1700
-2,000
Required: EUAC at 7% per year.
A) $674.63
B) $849.97
C) $925.68
Year
0
1
2
3
4
5
Cash Flow
-$15,000
5A
4A
3A
2A
5A
2000
7,500

D) $764.80
6.4.
Jason bought a car for $40,000 upon graduation from college with an engineering degree and
a very good job offer. A down payment of $5,000 was paid by his dad as graduation gift. The rest
of the amount was financed with Generous Motors at 6% nominal interest with 60 monthly
payments, the first payment which is to start at the end of 13
th
month. Determine his monthly
payment.
A) $583.33
B) $717.38
C) $652.68
D) $752.67
6.5.
An investment set up as a perpetual trust provides an annual disbursement of $25,000 for the
first 20 years and an undetermined amount from year 21. If the trust is set up with $500,000,
determine the disbursement that can be made from year 21 through infinity if the interest earned
is 6% per year.
A) $41,031
B) $54,000
C) $60,090
D) $58,500
6.6.
A couple, both engineering alums from a reputable engineering school has decided to set up
an endowment to help pay for 4 engineering scholarships at the rate of $X per year starting year
21 perpetually.
If $200,000 is invested in the trust today and if it earns a very good rate of return
of 12% per year, what will the amount of each scholarship starting year 21?
A) $49,756.2
B) $57,876
C) $62,110.5
D) $41,932
6.7.
For the cash flows given in the table below, evaluate the unknown value "A". Use an interest
rate of 6%.
Year
0
1
2
3
4
5
Cash flow
22,000
-2A
-2A
-2A
-2A
-5A

A) $1,982.57
B) $2,062.55
C) $1,862.55
6.8.
Choose the best alternative among the three alternatives given in the table below. Use of
annual cash flow analysis is required.
A
B
C
Initial cost
$4500
$1900
$1200
Annual benefit
$2800
$700
$300
Salvage value
$500
$900
0
Life in years
2 years
3 Years
Infinity
MARR
5%
A) A
B) B
C) C
6.9.
The cost data for two equipment alternatives are given below.
Determine the better alternative using the annual cash flow analysis.
A) Machine X
B) Machine Y
6.10.
Given the financial data for three mutually exclusive alternatives in the table below,
determine the best alternative using the annual cash flow analysis for a MARR of 8%.
A) A
Machine X
Machine Y
Initial cost
$200,000
$180,000
Net Annual Benefit
30,000
24,000
Salvage value
45,000
20,000
Life in years
20
15
MARR
9%
A
B
C
First cost
$45,000
$25,000
$20,000
O &M Cost/ year 10,000
4,000
1,900
Benefit/year
18,000
13,000
9,000
Salvage value
3,000
6,000
4,600
Life in years
5