Information Systems And Engineering Economics Set 16

Q1 | In AE analysis revenues must cover two kinds of costs:– Operating costs and Capital recovery costs

Q2 | Operating costs are incurred by the operation of physical plants or equipment needed to provide service

Q3 | Capital recovery costs are incurred by purchasing assets to be used in production and service.

Q4 | _______________ are incurred by purchasing assets to be used in production and service.

Q5 | ____________ are incurred by the operation of physical plants or equipment needed to provide service

Q6 | Consider a machine that costs $20,000 and has a five-year useful life.At the end of the five years, it can be sold for $4,000 after all tax adjustments have been factored in. If the firm could earn an after-tax revenue of $4,400 per year with this machine, should it be purchased at an interest rate of 10%? (All benefits and costs associated with the machine are accounted for in these figures.)

Q7 | Inflation is a loss in the purchasing power of money over time.

Q8 | ____________ is a loss in the purchasing power of money over time.

Q9 | The same dollar amount buys less of an item over time is ____________

Q10 | Consumer Price Index (CPI) Measures prices of typical purchases made by consumers, based on a typical market basket of goods and services required by average consumers

Q11 | CPI does not take into the account the price of raw material, finished product and operating cost

Q12 | PPI measures average change over a time in selling prices by domestic producers of goods and services.

Q13 | Inflation rate is defined as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing power of goods and services.

Q14 | _________ rate is defined as the rate at which the cost general level of goods and services increases resulting in decreases of purchasing power of goods and services.

Q15 | Actual (current) dollars (An)is the dollar value that is “influenced” by inflation.

Q16 | Actual (current) dollars (An)is the dollar value that is “influenced” by _____________.

Q17 | ____ dollars is the dollar value that is “influenced” by inflation.

Q18 | Constant (real) dollars reflect constant purchasing power independent of the passage of time

Q19 | The current gasoline price is $4.15, and it is projected to increase next year by 5%, and 8% the following year, and -3% the third year. What is the average inflation rate for the projected gasoline price for the next 3 years?

Q20 | If the inflation rate is 6% per year and the market interest rate is known to be 15% per year. What is the implied real interest rate in this inflationary economy?

Q21 | If you experience a 6 % annual inflation, how long does it take to see the purchasing power being reduced in half?

Q22 | The CPI for 2000 was 171.2 and the projected CPI for 2008 is 220. What is the general inflation rate over the last 8 years?

Q23 | The average starting salary for engineers for 2008 is $53,000. What is the equivalent salary in terms of purchasing power of 2000? Assume that the general inflation rate over the last 8 years is known to be 4%.

Q24 | You are considering purchasing a $1,000 bond with a coupon rate of 9.5%, interest payable annually. If the current inflation rate is 4% per year, which will continue in the foreseeable future, what would be the real rate of return if you sold the bond at $1,080 after 2 years?

Q25 | You are purchasing an automobile priced at $20,000 by borrowing at 12% interest compounded monthly. The loan will be repaid in monthly installments for five years. What is the constant dollar value (value at the time of financing) of the 36th payment of this loan, if the general inflation rate is 5% compounded monthly?