ECON204

Final

Answers

Q1) a) D*= Q*=(150 - 53)7(2*0.02) - 2425 boards per month
A

b) Profît=TR - TC <* 150Q - 0.02Q 2 - (42,000 + 53Q) plugging in 2425
for Q* yields the Max Profıt level as $76,612.5 per month
c) Break Even occurs when TR=TC ör when:
-0.02QA2 + 97Q - 42,000 equals zero. The roots are: Ql= 481 boards/month
Q2= 4369 boards/month
d) However the range of profitable demand/sales is 481 to 4000 boards per
month since Max Production Capacity is 4000 per month.
Q2) Let X= number of weeks to delay harvesting and R= total revenue as a
function of X. Then:
R= (1000 kilos + 1000 kilos* X)($3.00/kilo - $0.5/kilo * X) ör
R= $3,000 + $2,500X - $500XA2
dR/dX= $2500 - $1000X Equating to zero and solving yields X*= 2.5 weeks
since dRA2/dXA2 = - $1000 < O this extremum is a MAX
Then Max R is obtained by plugging X*-2.5 into the R equation to get:
R*= $6,125
Q3) ForSpeedA: ToolCost: $150/20 cycles = $7.5/cycle
Grinding: $25/cycle
Tool Setten ($8/hr)(1.5hrs/cycle) = $12/cycle
Overhead: ($3.75)(16hrs/cycle) =$61.88/cycle
' Total Cost= $ 106.3 8/cyele .
Cost /piece- $106.38 per cycle / (15 hrs per cycie)(400 pieces per cycle)
= $0.0177 per piece.
The corresponding fıgures for Speed B and C are: $0.0165 and $0.0162
Thus Speed C is the CHEAPEST speed.
Q4) Savings per year: $3000 times 80% = $2400

PV of Savings = $2400 (P/A, 8%, 15) = $20,544. Since this value EXCEEDS
$15,000 recommend INSTALLATION.
Q5) PV of Savings: $175,000 (P/A, 8%, 6) = $809,025. So this value represents
the max amount you can afford to spend.
Q6) Interest per mont = 0.08/12 = 0.0067
$3350 = $100(F/A, 0.0067, N) -» 33.5 = (F/A, 0.0067,N). Solving for Nyields
N=30.4 ör roughly 31 deposits
Q7) APR=8%,M=4, effective yearly interest= [l + 0.08/4]A4 - l = 8.24%
F= $5000 (F/P, 8.24%,3) = $5000(1.0824)A3 = $6340.5
Q8) raonthly interest= 8 percent/12 = 0.0067
P= $50(P/A, 0.0067,125) = $50 [ {(1.0067)A125 - l}/ {0.0067*(L0067)A125}]
P= $50 (84.48) = $4223.87

0.000 recommend INSTALLATİON.000 + 53Q) plugging in 2425 for Q* yields the Max Profit level as $76.000 equais zero.5 per month c) Break Even occurs when TR=TC ör when: -0. The corresponding fıgures for Speed B and C are: $0.000 + $2.$1000 < O this extremum is a MAX Then Max R is obtained by plugging X*=2. .0162 Thus Speed C is the CHEAPEST speed.5 weeks since dRA2/dXA2 = .$0.(42.38 per cycle / (15 hrs per cycle)(400 pieces per cycle) = $0. Then: R= (1000 kilos + 1000 küos* X)($3.75)(16hrs/cycte) =$61.0165 and $0.00/kiio .TC * 150Q . 15) = $20.53) / (2*0.125 Q3) ForSpeedA: Tool Cost: $150/20 cycles = $7.5/ki!o * X) ör R= $3. Q2) Let X= number of weeks to delay harvesting and R= total revenue as a function of X.02QA2 .42.5hrs/cycle) = $12/cycle Overhead: ($3. Since this vaiue EXCEEDS $15.5/cyc!e Grinding: $25/cycle Tool Setter: ($8/hr)(1. Q4) Savings per year: $3000 tirnes 80% = $2400 PV of Savings•= $2400 (P/A.544.38/cycle .$1000X Equating to zero and solving yields X*= 2.5 into the R equation to get: R*-$6.02QA2 + 97Q .02)=2425 boards per month b) Profit=TR .612.500X . 8%. Cost /piece= $106. The roots are: Q1= 481 boards/month Q2~4369 boards/month d) However the range of profitable demand/sales is 481 to 4000 boards per month since Max Production Capacity is 4000 per month.0177 perpiece.$500XA2 dR/dX= $2500 .ECON204 Final Answers Q1) a) D*= Q*(150 .88/cycle Total Cost= $106.

025.1 = 8.4 ör roughiy 31 deposits Q7) APR=8%.1}/ {0. 0.24% F= $5000 (F/P.0067*(1.87 . So this value represents the max amount you can afford to spend Q6) Interest per mont = 0.08/12 = 0.0824)A3 = $6340. effective yearly interest= [1 + 0. 0. M=4.0067. 8.3) = $5000(1.48) = $4223.5 Q8) monthly interest= 8 percent/12 = 0. Solving for N yields N=30.5 = (F/A. 125) = $50 [ {(1.N).0067)A125 .000 (P/A.0067.Q5) PV of Savings: $175. 0. 8%.0067.0067 P= $50(P/A.0067)A125}] P= $50 (84. N) •> 33.0067 $3350 = $100(F/A. 6) = $809.08/4]A4 .24%.

000 pounds per year cost 2.$6.47X 2 .908 SA = 1.000 Ibs/yr X-0.500.$12^919 {SJ \ 500.2X2) .65 CA-CtN" -S6. ANSWER: CB(8 yeaı*s ago) = $2.136 i) T 10 = 400 (10)A"al36 . what would a l .0.(loğ 0.0.400 hours.189.0. The cost Y in Turkish liras per hour to produce electricity is Y = 12 + 0.5 points.91)/(log 2) = -0.500.000 YTL to ^ construct eight years ago. 1) An electric power plant uses soîid waste for fael in the production of electricity.27XA2.65.000 pound-per-year plant cost now? Suppose that Ihe corıstruction cost index has increased an average rate of 12% per year for the past eight years and the cost-capacity factor (X) to reflect economy of scale is 0.000(1. 2) i) Firjd the time required to produce the 10'th unit if the slope parameter of the learning ~~ is 91% and the fırst unit takes 400 hours.293 hrs. X ~ 1 5.3X + 0. Find the value of X that gives raaximum profit ANSWER: Profit = Total revenue .12 dX.watts maxiımzes profit cD\.500.000 Ibs/yr SB = 500. Each öne is worth 12.. ü) T24 . X = 1 5.ECON204 FİNAL NAME: There are 8 probîems.64 megawatts Note: .500.— = .000 ) .12)8 .189. n .(12 -f 0. ü) What would be the time required for the 24'thunit? ANSWER: K .Total cost = (15X .2XA2.908f1-500-000!0" .3X + 0. where X is in megawatts. s = 0.27X2) -14.7X-0. Revenue in liras per hour from the sale of electricity ia 15X .64 mega.000 CB(now) = $2.400 (24)A-°-136 .94 thus.260 hrs.500.91 (91% learning curve). 3) ifan ammonia plant that produces 500.

4) it is estimated that a certain piece of equipınent can save 22.4 YTL for this piece of equipment 5) AK Uyanık has decided to purchase a car.000 YTL fıve-year loan? The annual interest rate (APR) is 36% compounded monthly.0616778 (l + APR/mo)12= 10616778 APR/mo .000 (4. AH of the working capitai would be recovered at the end of year 10. APR .000 (P/A. The annual. at which time the land can be sold for 400.000*0.000 YTL. it is expected that the product will result in sales of 750.204.1148 -16.000 YTL.0361 = 722 YTL P (of remaining 40 payments) = 722 (P/A. 3%. .000 YTL per year in labor and material costs.l = 0.89 YTL 7) A company is considering constructing a plant to manufacture a proposed ne w product.000 YTL. a) Ali knows the effective annual interest rate is 6.000 YTL. 7%. 36 months) .l = 0. 40) ör P = 722 * 23.500 (A/P.0304) = 288.1002) = 90.5%) . and 100. The car costs 10.20.000 YTL and the equipment for 50. The same answer can be obtained using the Capital Recovery (A/P) formula of Table 4. the building for 350.3 on p 150.000 YTL and Ali will pay 500 YTL as a down payment and plans to pay the remainder of the loan off in equal monthly payments över the next three years. if cornpounding occurs monthly? b) What is Ali's monthly car payments? ANSWER: .000 YTL additional working capitai is required.(12) (0.000 YTL.80 YTL. (a) (l + APR/mo)12. 3%. What is the annual percentage rate (APR) .6% per vear (b) A = 9.000 (A/P. The land costs 300. f 6) What is the principal remaining after 20 monthly payments have been made on a !^ 20.16778 %.500 (0.5% / mo. 5) = 22.204. If the company requires a MARR of 7% per year on projects of comparable risk.000 YTL per year for 10 years. 60) .688.5% per month.0616778. 0. determine if it should invest in the new product line. Use the PW method. materials and ali other items are estimated to total 475.4 The company can justify spending up to 90. the equipment costs 250. ANSWER: A = 20. how much could be justified now for the purchase of this piece of equipment? ANSWER: P = $22.00499 ör « 0.9.$1. the building costs 600.000 YTL. If the cpmpany must eanı 7% annual retıırn on such investments. expenses for labor. The equipment has an expected life of five years and no salvage value.

Market Value = 400. i'%.12 / 24 .000 YTL Revenue = 750.250. The company advertises an interest rate of l .7 %.000 .100.000 = 800.5 % per month.426 ör 42.OOOYTLcash? ANSWER: l.12= 1417.042 YTL interest: (1. 24) = 16.000(7.000 YTL + (750. 24) = $1.960 YTL > O Therefore.1417.03)12 .015) .042 YTL)(24) (0.05 = 16.Ş.000 YTL Credit Investigation: 35 YTL Credit Risk Insurance: 7 YTL Total: 1.600.042 + 375.000 .-300.000 YTL per year PW (7%) = -1.000 + 50.375.000/59.000)(P/A.9355 Thus.000 YTL per year .6% per year. 24) (P/A.l = 0.000 YTL loan to be repaid in 24 montihly installments.000 .250.000(0.900. They proceed to calculate an interest rate in the following manner: Amount requested: l.475.12 YTL Monthly Payment . 8) An individual approaches Kurnaz Finans A. 7 %.12 YTL Total Owed: 1.05 YTL What effective annual interest rate is this person paying if s/he leaves Kurnaz Fİnans with l.000 + 275.000 = -1.000 YTL Expenses = -475. .250.000 + 350. 10) = -1.0236) + 900.000 YTL (P/F.250. 138.05 (P/A.59. they should invest in the new product line. iefiective = (1.000 .5083) = l. for 1. i'%. 3%.ANSWER: Capital Investment . 10) H.81 From Appendix C: (P/A.000 = 59.

1.2005 Exam Duration:90 minutes Prof Dr> S ' ' ^mitOktayFırat R.Yt has to be O. SSK .A. . histogram ör normal probablity plot of errors -Homoscedasticity. for i .. Murat Bilsel » Soîve each problem on the sanıe sheet. find the coefficient of correlation. GOOD LUCK! 1. . . Durbin-Watson test d) (10 Points) Deri ve relationship between t and F distributions.n /\ Error sum of squares will be equal to zero. scatter plot of error terms -Independence of errors. » Sharing caleulators is not allowed.7. c) (5 Points) What are the assumptions of regression analysis and how can they be evalualed? -Normality of error.707 1 V2 b) (5 Points) When.2. (35 Points) Briefly answer the following questions a) (5 Poists) If error sum of squares is equal to regression (explained) sum of squares and b ı = -0.t is equal to the obscrved value Y. use the back side if necessary. will the unexplatned variation ör error sum of squares be equal lo zero? SSB = /=! Y. » No books.STUDENT'S NAME: Solutions MARMARA IJNIVERSITY FACULTY OF ENGINEERING DEPARTMENT OF INDUSTRIAL ENGINEERING jd®®İ>L ^SSlF ^İÜP^ IE 252 FİNAL EXAM 7. notes ör cheatsheets are allowed. . if the regression estimate Y. r = -J-s-0..for every i.6.SSE SST = SSR + SSE = 2.SSR SSR SSR l ~SST2-SSR2 = r = -\!r2 where r takes the sign of &.

40YTL/kg) = 148.000.000 + 90.500.1)(-800) D'=- 0.00YTL 0.1D 2 -(800 + 30D) = 78(240) .30) ± (78 .000(40YTL)j = 2..[$2.000 (40YTL)] = 2. ECON 204 Ql) D = 780 .0.000(70YTL)] .000(90YTL) + 10.20 lb)($6/lb) = 30.1 D « a-c.l Öp units per month.1(240)2 .[800 + 30(240)] = 4.000.00YTL .960 YTL per month (profıt) -(78 .00 148.Total cost = 78D-0.7.75YTL 6.800.44: 54 >2 = — = 462. D =2b 78-30 2(0.1) = 240 units per month (Eqn 2 -10) Profit (Loss) = Total revenue . or 462 units / month (integer production) D1 Q2) Profıt(Loss) = Total Revenue .5 -48 ±44.90.2 -48 + 4454 = _^L^ni=173 or 1 8 units / month -0.54 -0.30)2 .2 _ 48 .Total Cost (90% Capacity) .00 0.00YTL (25 Ib .0. p = 78 .75 YTL Plastic Molding (20 kg)(7.000 YTL per year Q3) CostFactor Casting/pc Machining/pc Weight Penalty / pc Total Cost /pc Brass-Copper Alloy (25 kg)(3.000 YTL per year (100% Capacity) = [90.[$2.35YTL/kg) = 83.000 (90YTL) .00 YTL 11 9.000 + 100.ANSERS TO FİNAL.4(-0.

(4 hrs/day)($40/hr) .000 YTLthreshold.(Production rate)(Production tirne)($4/part) . (it is a case of "History is bunk").(7 hrs/day)($40/hr) -$2155.09) (15 parts/hr)(7 hrs/day)($4/part) . This value by far exceeds the 850.(Production time)($40/hr) Process 1: Profit per day = (35 parts/hr)(4 hrs/day)($30/part)(l-0.$2640/dav Process 2: Profit per day = (15 parts[hr)(7 hrs/day)($30/part) (1-0.Cost per day = (Production rate)(Production tirne)($30/part) (l -(% rejected+% tested)/100) . Q4) The original (sunk) cost of 375.60/day Process l should be chosen to maximize profit per day.40(22) = -20 -f 360 .The current value of the land is at least 2.000 YTL is irrelevaut for current decision making purposes. . Upshot: Pegasus should NOT build the training facility at this location.160 = $180 / week Profit per day = Revenue per day .5 millîon YTL (the developer's offer "proves" it).2) (35 parts/hr)(4 hns/day)($4/part) .(b) Q3) Total Profit = ~5(22) + 180(2) .

803 2. s 6 o//. compounded annually. X $858 D. D. F.Find the value X.219 ^=$14.50O F= $14.008 F= $13.v « ı ııı t A .237 F= $17. ^=$920 $1275 $X .SOO A.Ü l.LFind the fiıture worth F of the following cash flow at 10% interest. that makes the following two cash flow series equivalent at i = 10%? $1275 $105 O $105 t t t t $ X ö A.$ l. C.'3 _ A . X= $636 B. ^=$765 = C. B.

000). " Year Cash FIow 0 1 2 $-2.You are considering an investment that costs $2. what should be the minimum revenue in year 3. C. A. B. 1 l a.200 o <n "V ' * £-*\ • li±IL. You are very confident about the revenues during the first two years but you are unsure about the revenue in year 3. r . X=$220 X=$132 X=$300 X=$274 < —^ -T. D.000 $1.000.000 $1. if youJ^op^JoLmake atleast 10% rate of return on your investment ($2.3. 6 C. it is expected to have a useful life of 3 years.

D* = 2 units/vveek dD • — . Q2) (a) Total Revenue = p D = (l 80 .'.6944 l 750 v = s/ . Note: The second derivative of the cost model with respect to velocity is: dv v The value of the second derivative will be greater than O for n > O and v > 0.5D)D = 1 80D ~ 5D2 Tota! Cost = (40D)D = 40D2 Total Profıt = -5D2 + 1 80D .— • — .0.= -90 < O .= 10.25 mph to minimize the tötal cost of operation and perishable cargo.10D + 180 .6944 so. maximum profil 2 dD .Econ 204 Spring 2007 Answers to Midterm l v2 dv (75Ö V=33 - V k To find k. V 0.25 miles/hr. The ship should be operated at an average velocity of 10.40D2 J (Proflt) = .80D . Thus we have found a minimum cost velocity. we know that Q — = $100/mile at v = 12 miles/hr n -^ = kv 2 = k(12)2 = 100 n and k = 100/144 = 0. 90D =180.

AH of the above 24 Opportunity cost can be best defined as a. d. ali sunk costs. Tom is not a rational consumer. d. c. Torn considers hamburger a normal good. e. the opportunity cost is what you saved on the price of the ticket by not going. 25 If you choose to study for tomorrow's exam ail evening instead of going to a basketball game. the cost of making öne additional unit. understand society. A decrease in the demand for hotdogs. the cost of finding profit-making opportunities. D. We can conclude that A. there is no opportunity cost as long as the game is free. As a result.21. Suppose that hotdogs are on sale (Bindirimli satış"). Last Name: First Name: Branch: . a. An increase in the demand for hoîdog buns. D. c. understand global affairs. b. the value of the best alternatlve given up when making a choice. learn a way of thinking. Torn consfders hamburger ah inferior good. An increase in the quantrty demanded of hotdogs. the opportunity cost is merely the cost of the ticket. d. b. The figüre shows what happens to Tom's demand for hamburger as his incorne increases. we might expect to see: A. the explicit cost of an acth/ity. B. be an informed voter. Answer: D 23 We study eçonomics in order to a. C. B. c. the opportunity cost is the enjoyment foregone by not belng at the game. you have not considered the opportunity cost. e. b. C. Answer: B 22. Tom considers hamburger a iuxury good. Both B and C. e.

ANSWERS TO MT2 ANSWERS TO MT2 ANSWERS TOMT2 ANSWERS TO MT2 ANSWERS TOMT2 .

987.1236) =440YTL (5.3382) .987. 2) = 440YTL (P/A.7.OOOYTL (P/A.12) = 5.10 YTL You can afford to pay as much as 40. 5) . 6%.260 (5.645 (F/P. 6% . 4)(P/F.10)](F/P.000 (0. So the debt will keep grovving. we have [A (F/A. 3) Original Payments = A = 200. and P I2 = PIO (F/P.85 YTL 2) P = 9.000YTL (P/A.645 YTL New Payment = 14. 6%.5) = 178. 10%. 6%.10%.6) = 9000(4. 23) . 6%. IS! = 6 years = 12 6-month periods A = 5.1808)] (1.0726) = 14. For instance: Balance at EOY 12 = 178.10 YTL for the equipment. 6%. 7) By letting P İ2 = Pı2'.0628) = 314 YTL . 4) i / 6 months = 10% / 2 = 5%.137 YTL As you can see the debt is GROWING.520 YTL Balance at EOY 7= 14.7 Thus the new annuity Does not even cover the interest.000 YTL (A/F.10). it will not be repaid.6371) = 198. 6) + l.3553) + 1000(3.645 (1.OOOYTL (A/P.000 YTL (0. 6%.5824) A = 165. 7) [A(13.06= 10718.520 YTL (P/A. 6% . 6%. 10%.14.645*0. Thus with such a LOW annuity it will NEVER be repaid.5645) = 40. 6%.3034) = 178.520 (12.1699) (. 5%. 2) Pn' (of withdrawals) = 440YTL (P/A.7260 (F/A. 30) = 200.1) Pıo (of deposits) = A (F/A.520(0.5) = 7260 But note that the yearly interest is: 178.

Therefore if we include this 100. He can earn 100.000 Own Salary 30.500.000 YTL for his land and equipment After paying the bank loan of 3.Economic Profit Revenue: 5.000 YTL Costs: Variable: 4.000 10.000 FOREGONE income among the "costs" We see Halis making an ECONOMİC LOSS of 90.000 YTL Depreciation: 60.000.000 YTL .000 interest on that amount Thus liquidation seems to be better than working the farm.000 YTL BUT the real poînt to be noticed is the following: If Halis Çok Uyanık LIQUfl)ATES his farm he can get 4.000.000 YTL.000 YTL he can walk away with 1.990.000.000.000 (in the real ör value lost sense) interest Expense: 400.000 (in the Oppoıtunity Cost sense) Total Costs "Economic Profît": 4.

Q5) i / qtr = 12% / 4 = 3%.0616778 (l-H/mo) 12 = 1.000 Interest Expense: 400.1255 ör 12.#1.990.25 YTL över the life cycle of each radiator.9.500 YTL (F/P.I19.000.000 Own Salary: 50.500 YTL (3.l = 0.500 YTL (A/P.465 YTL ÖR /" r-12%.^= l-f —— -l -0.5% / mo.3%.12.9.3719) < 3. 36 months) .40) = 7.0616778. 0.465 YTL Q6) (a) (l + i/mo)12 .16 YTL for the thennal windows.0304) = 288. 8%. N « 10 years = 40 quarters F = 7.16 YTL Thus.2620) .5% per month.5%) = 6% per vear (b) A .24. 18) < 350 (9.500 YTL (3. 10) .80 YTL Q7) Accounting Profit: Revenue: 5.2620) = 24.00YTL .The Brass-Copper alloy should be selected to save İ48.l = 0. M-4.55% F = 7.000 Total Costs 4.000 Accounting Profit: 10.7.000 YTL Depreciation: 40.0616778 i/mo .55%.75YTL 28.000 YTL Costs: Variable: 4.500 YTL (0.280. Q4) P < 350YTL (P/A. the homeovvner can afford to spend no more than 3.280.00499 ör « 0.500 YTL (F/P. r = (12) (0.500.000 YTL .

it will produce a net income (after operating expenses) of $9.000 per'year.000 per year for 4 years. Thereafter the special equipment will save $1. When she borrows the $1000 she talks the banker into letting her repay the remaining debt of the first loan and the entire amount of the second loan in 14 equal annual payments. Compute the amount of each of the 14 payments. The first of these 14 payments would be made öne year after she receives the $1000.000 per year for the next 6 years.Spring 2005 MIdTerm 2 There ar e 4 questions each worth 25 points. it is safe to assurae the machine will have no serap value at the end of 10 years. The loan is to be repaid in equal mstallments över 30 years. what must the market/resale value be at the end of 6 years to justify the investment? You must earn 8% on your investment?? 3) A person has borrowed $200. However just after the sixth payment is made the terms on the remaining balance are renegotiated. The new terms are: annuity $15. interest on the unpaid balance 4%. Immediately after her third payment she borrows another $1000 also at 8% interest.000.l .000 at 8% compounded annually. FORMULAS: F/A: (l + i ) * * N . How much can you afford to pay for this equipment now if you require an 8% annual return on your investment?? 2) You can buy a machme for $125. 1) You purchase special equipment that saves you $9. If you plan to keep the machine for 6 years.000. When will the debt be repaid? 4) A woman arranges to repay a $2000 bank loan in 10 equal payments at 8% effective annual interest rate. Showyour w ör k.l / i P/A: (l + i)**N-l/i(l+i)**N A/F: i/(l+i)**N-l A/P: i(l + i)**N / (l + i)**N .

14) = $309.000*(P/A. 8%. 30) = $17.000*(F/P.000*(P/A.000*(A/P.4 3) Original A= $200.8%.8%.24) = $186.10) = $298 Debt at EOY3 = $298*(P/A.6) = $125.8%.7) + $1.$2551.N) •* N=17.693.P0= $1.000*(F/A.760*(P/A.6) P0= $43.339.992 = $15.10) + $8.000 $186.000*(A/P.8%.000*(P/A.5 .8%.8%.8%.5*(A/P. new Annuity^ $15.3 2) F6 + $9.4%.5 New A= $2551.6) F6=$132.000 .992 The above UNPAID balance carries interest of 4%.760 Debt at EOY6 = $17.5years ör (adding 6) N=24 4) Original A= $2.8%.