1)The following investment is classified as?

N |
Cashflow |

0 |
–$1,200 |

1 |
$600 |

2 |
$1,000 |

3 |
–$450 |

a. Simple – 1 Actual ROR

b. Non-Simple – 1 Actual ROR

c. Simple – up to 2 Actual RORs

d. Non-Simple – up to 2 Actual RORs

2)A new product design is expected to require $10,000 in tooling which will be worth nothing in 5 years when the project ends. Assuming an interest rate of 10% annually and annual expenses of $3,000 to produce 3000 units per year. What is the average cost per unit?

$1.00

188

$2.39

$1.67

3) Using the rule of 72, how many years will it take to double your investment if the nominal interest rate is 12% compounded continuously?

a. 7.20 years

b. 5.65 years

c. 5.68 years

d. 6.00 years

4) What is the Present Cost of a 5 year service contract where you will pay $5000 initially, and this will decrease at a rate of $500/year starting in year one (i.e. your year 1 payment will be $4,500) and will end in year 5 (i.e. 6 total payments). (i=10% annually compounded)?

a.-$17,204

b.-$19,954

c.-$18,628

d.-$19,523