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c. capital

d. annuity

1. ____ is the money returned to the owners of capital for use of their capital. 11. Common type of ____which involves payments, which occur at the end of each interest period

a. Interest a. Perpetuity

b. Cash b. Present worth of annuity

c. Loan c. capital

d. credit d. annuity

2. Any profit obtained through the uses of capital 12. Defined as the principal which would have to be invested at the present time at compound

a. Interest interest rate to yield a total

b. Cash a. Perpetuity

c. Loan b. Present worth of annuity

d. credit c. capital

3. In economic terminology, the amount of capital on which interest is paid is designated as the d. annuity

principal, and the rate of interest is defined as the amount of interest earned by a unit of 13. An annuity in which the first payment is due after a definite number of years.

principal in a unit of time a. Perpetuity

a. simple interest b. Present worth of annuity

b. compound interest c. deferred interest

c. nominal interest d. deferred annuity

d. interest on loan 14. It is an annuity in which the periodic payments continue indifferently.

4. When an interest period of less than 1 year is involved a. Perpetuity

a. simple interest b. Present worth of annuity

b. ordinary interest c. deferred interest

c. nominal interest d.deferredannuity

d .compound interest 15. Defined as the original cost of the equipment plus the present value of the renewable

5. This interest stipulates that interest is due regularly at the end of each interest period. perpetuity.

a. simple interest a. Perpetuity

b. ordinary interest b. Present worth of annuity

c. nominal interest c. deferred interest

d.compoundinterest d.capitalizedcost

6. In ______interest rate, other time units are employed butthe interest rate is still expressed on an 16. An ____design could be based on conditions giving the least cost per unit of time or the

annual basis. maximum profit per unit of production.

a. simple interest a. optimum economic

b. ordinary interest b. plant

c. nominal interest c. simple economic

d.compoundinterest d.plant economic

7. The concept of ______is that the cost or income due to interest flows regularly, and this is just 17. A determination of an “____condition” serves as a base point for a cost or design analyses, and

as reasonable an assumption for most cases as the concept of interest accumulating only at it can often be quantitized in specific mathematical form.

discrete intervals. a. optimum

a. continuous Interest b. plant design

b. Cash flow c. simple

c. Loan d.plant economic

d. credit 18. The ___has one distinct advantage over the analytical method.

8. The present worth of a future amount is the present ___which must be deposited at a given a. optimum

interest yield tom yield the desired amount at some future date. b. graphical

a. principal c. simple

b. Cash flow d.economical

c. capital 19. The point where total product cost equals total income represents the_____, and the optimum

d. credit production schedule must be at a production rate higher than that.

9. An ____is a series of equal payments occurring at equal time intervals. a. optimum

a. principal b. break-even point

b. interest c. annuity

c. capital d. balanced

d. annuity 20. The total product cost per unit of time may be divided into the two classifications of operating

10. The amount of an ___is the sum of all the payments plus interest if allowed to accumulate at a costs and ____costs.

definite rate of interest from the time of initial payment to the end of the term. a. optimum operating costs

a. principal b. Organization costs

Unit Operations Economics

c. annuity costs 28. The concept of this is based on converting an overall decision situation involving many

d. superproduction costs variables into a series of simpler individual problems with each of these involving a small

21. This depends on the rate of production and include expenses for direct labor, raw materials, number of total variables.

power, heat, supplies, and similar items which are function of the amount of material a. economics

produced. b. programming

a. operating costs c. linear programming

b. Organization costs d. dynamic programming

c. annuity costs 29. When quality constraints or restrictions on certain variables exist in an optimization situation, a

d. superproduction costs powerful analytical technique is the use of :

22. ______are due to expenses for directive personnel, physical equipment, and other services or a. Lagrange Multipliers

facilities which must be maintained irrespective of the amount of material produced. These b. Geometric Programming

are independent of the rate of production. c. steepest Ascent or Descent

a. operating costs d. dynamic programming

b. Organization costs 30. For the optimization situation in which two or more independent variables are involved,

c. annuity costs response surface can often be prepared to show the relationship among the variables one of

d. superproduction costs the early methods proposed for establishing optimum conditions from response surfaces is

23. Extra expenses due to increasing the rate of production are known as ____. known as the method:

a. operating costs a. Lagrange Multipliers

b. Organization costs b. Geometric Programming

c. annuity costs c. linear programming

d. superproduction costs d. steepest Ascent or Descent

24. In a true ___operation, no product is obtained until the unit is shut down for discharging. 31. A technique for optimization, based on the inequality relating the arithmetic mean to geometric

a. batch mean, with this method the basic idea is to start by finding the optimum way to distribute the

b. continuous total cost

c. semi-batch a. Lagrange Multipliers

d. semi-continuous b. Geometric Programming

25. In _____cyclic operations, product is delivered continuously while the unit is in operation, but c. linear programming

the rate of delivery decreases with time. d. steepest Ascent or Descent

a. batch 32. ____(CPM) and program evaluation and review technique) have received particular attention

b. continuous and have shown the desirability of applying mathematical and graphical analysis

c. semi-batch a. critical path method

d. semi-continuous b. critical planning method

26. _____cyclic operations are often encountered in the chemical industry, and the design c. careful planning and management

engineer should understand the methods for determining optimum cycle times in this type of d. none of the above

operation 33. The word ____is used as a general term for the measure of the amount of profit that can be

a. batch obtained from a given situation.

b. continuous a. profitability

c. semi-batch b. income

d. semi-continuous c. net income

27. It is a mathematical technique, for determining optimum conditions for allocation of resources d. sales

and operating capabilities to attain a definite objective. 34. It is the common denominator for all business activities before capital is invested to a project or

a. economics enterprise

b. programming a. profitability

c. linear programming b. income

d. dynamic programming c. net income

d. sales

35. ____on investments is ordinarily expressed on an annual percentage basis. The yearly profit

divided the by the total initial investment necessary represents the fractional return:

a. rate of return

b. interest income

c. profitability

d. annuity

36. ___is defined as the difference between income and expense.

a. profit

b. gross income

c. operating expenses

d. sales

Unit Operations Economics

37. This is a function of the quantity of goods and services produced and the selling price. a. a. double entry method

sales b. fixed percentage method

b. gross income c. sum-of-years digit method

c. operating expenses d. sinking fund method

d. profit 47. ___ is a science which deals with the attainment of the maximum fulfillment of society’s

38. The method of approach for a profitability evaluation is by ____, which takes into account the unlimited demands for goods and services.

time value of the money and is based on the amount of the investment that is unreturned at a. Political science

the end of each year during the estimated life of the project. b. Economics

a. marketing analysis c. Engineering Economy

b. gross income d. Social Science

c. discounted cash flow 48. It is the branch of economics which deals with the application of economics laws and theories

d. law of demand involving engineering and technical projects or equipments.

39. In the net present worth study, the procedure has involved the determination of an index or a. Political science

interest rate which discounts the annual ____to a zero present value when properly compared b. Economics

to the initial investment. c. Engineering Economy

a. marketing analysis d. Social Science

b. gross income 49. This refers to the products or services that are directly used by people to satisfy their wants.

c. cash flow a. Producer goods and services

d. selling price b. Consumer goods and services

40. The ____concept is useful for comparing alternatives which exist as possible investment c. Luxury Products

choices within a single overall project. d. Supply

a. marketing analysis 50. Those that are used to produce the goods and services for the consumer are called

b. sales inventory a. Producer goods and services

c. discounted cash flow b. Consumer goods and services

d. capitalized cost profitability c. Machineries and Technology

41. ____ is defined as the minimum length of time theoretically necessary to recover the original d. Supply

capital investment in the form of cash flow to the project based on total income minus all cost 51. This refers to the satisfaction or pleasure derived from the consumer goods and services.

except depreciation. a. Product Satisfaction

a. deadline b. Consumer’s contentment

b. due date c. Luxury Products

c. payout period d. Utility

d. maturity date 52. These are products that have an income-elasticity of demand greater than one.

42. The term ___ refers to a special type of alternative in which facilities are currently in existence a. Basic Commodities

and it may be desirable to replace these facilities with different ones. b. Consumer goods

a. reserves c. Luxury Products

b. replacement d.Supply

c. substitute 53. If the income elasticity of demand is greater than one, this means that

d. none of the above a. as income decreases, more income will be spent on the basic commodities

43. In the formula, P = F(1+I )-N , where I = interest rate per period and N the number of interest b. as income increases, more expenses will be made on the basic commodity products

periods is known as c. as income increases, more income will be spent on luxury items

a. sinking fund factor d. as income decreases, less will be spent on the basic commodity products

b. single payment present worth factor 54. It is the amount of goods and products that are available for sale by the suppliers

c. uniform series a. Producer goods and services

d. capital recovery factor b. Consumer goods and services

44. Which of the following relationships between compound interest factors is not correct? c. Machineries and Technology

a. Single payment compound amount factor and single payment present worth factor are d. Supply

reciprocals 55. The want or desire or need for a product using money to purchase it.

b. Capital recovery factor and uniform series present worth are reciprocals a. Supply

c. Capital recovery factor equals the sinking fund factor plus the interest rate b. Consumer goods and services

d. capital recovery factor and sinking fund factor are reciprocals c. Luxury Products

45. An “annuity” is defined as d. Demand

a. Earned interest due at the end of each interest period 56. The law of supply and demand, states that

b. Cost of producing a product or rendering a service a. “When free competition exists, the price of the product will be that value where supply is

c. Amount of interest earned by a unit principal in a unit of time equal to the demand”

d. A series of equal payments made at equal interval of time b. “When perfect competition exists, the price of the product will be that value where supply is

46. Which one of the following method is not a method of depreciating plant equipment for equal to the demand”

accounting and engineering economic analysis purposes?

Unit Operations Economics

c. “When free competition exists, the price of the product will be that value where supply is 65. It is the amount of money or payment for the use of a borrowed money or capital

greater to the demand” a. Annuity

d. “When perfect competition exists, the price of the product will be that value where supply is b. Interest

greater to the demand” c. Simple Interest

57. This is a form of market structure where the number of suppliers is used to determine the type d. Simple Annuity

of market. 66. This is defined as the basic annual rate of interest

a. Market Structures a. effective rate of annuity

b. Competition b. effective rate of interest

c. Free competition market c. nominal rate or annuity

d. Perfect Competition d. nominal rate of interest

58. This is a market situation wherein a given product is supplied by a very large number of 67. It is defined as the actual or exact rate of interest earned on a principal during1 year period

vendors and there is no restriction of any additional vendor from entering the market. a. effective rate of annuity

a. Market Structures b. effective rate of interest

b. Competition c. nominal rate or annuity

c. Free competition market d. exact simple interest

d. Perfect Competition 68. This refers to the difference between the future worth of a negotiable paper and its present

59. A place where the vendors or the sellers and vendees or the buyers come together is called worth.

a. Market Structures a. Depreciation

b. Market b. Market value

c. Free competition market c. Discount

d. Perfect Competition market d. Fair value

60. This is defined as the interest on a loan or principal that is based on the original amount of the 69. This refers to the sales of stock or share at reduced price

loan or principal. a. Depreciation

a. Ordinary Simple Interest b. Market value

b. Simple Interest c. Discount

c. Exact Simple Interest d. Fair value

d. Compound Interest 70. This is the deduction from the published price of services or goods.

61. This is based on one banker’s year. a. Depreciation

a. Ordinary Simple Interest b. Salvage value

b. Simple Interest c. Discount

c. Exact Simple Interest d. Fair value

d. Compound Interest 71. “Annuity” is simply defined as

62. __ is based on the exact number of days in a given year. a. series of equal payments occurring at equal time interval of time

a. Ordinary Simple Interest b. series of payments occurring at equal time interval

b. Simple Interest c. series of equal payments occurring at certain time interval

c. Exact Simple Interest d. series of divided payments at pay periods

d. Compound Interest 72. An annuity of a fixed time span is also called as

63. One banker’s year is equivalent to a. Ordinary annuity

a. 365 days b. Annuity Certain

b. 350 days c. Annuity Due

c. 12 months and 30 days d. Deferred Annuity

d. 12 months and 15 days 73. __ is the type of annuity where the payments are made at the beginning of each period starting

64. This is defined as the interest of loan or principal which is based on the amount of the original from the first period

loan and the previous accumulated interest a. Ordinary annuity

a. Ordinary Simple Interest b. Annuity Certain

b. Simple Interest c. Annuity Due

c. Exact Simple Interest d. Deferred Annuity

d. Compound Interest 74. An annuity where the payments are made at the end of each period beginning on the first

period

a. Ordinary annuity

b. Annuity Certain

c. Annuity Due

d. Deferred Annuity

75. It is when the first payment does not begin until some later date in the cash flow

Unit Operations Economics

a. Ordinary annuity c. value

b. Perpetuity d. capitalized cost

c. Annuity Due 86. Refers to the sum of its first cost and cost of perpetual maintenance of a property

d. Deferred Annuity a. Price

76. When an annuity does not have a fixed time span but continues indefinitely, then it is referred b. Market value

to as c. perpetual value

a. Ordinary annuity d. capitalized cost

b. Perpetuity 87. __ is a long term note or a financial security issued by businesses or corporation and

c. Annuity Due guaranteed on certain assets of the corporation or its subsidiaries.

d. Deferred Annuity a. Contract

77. This refers to the rate of interest that is quoted in the bond. b. Receipt

a. bond c. bond value

b. bond rate d. bond

c. bond value 88. This value implies that the property will still be use for the purpose it is intended

d. interest rate of bond value a. salvage value

78. It is the present worth of the future payments that will be received b. book value

a. book value c. use value

b. bond value d. depreciation

c. fair value 89. A depreciation computation method which is also known as Diminishing Balance Method

d. salvage value a. Sinking Fund Method

79. It is the amount a willing buyer will pay to a willing seller for a property where each has equal b. Straight-line Method

advantage and neither one of them is under compulsion to buy or sell c. Declining Balance method

a. Book value d. Break-even analysis

b. Market value 90. Also called as Constant- Percentage Method in depreciation method

c. Use value a. Sinking Fund Method

d. Fair value b. Straight-line Method

80. The amount of the property which the owner believed to be its worth as an operating unit is c. Declining Balance method

called d. Break-even analysis

a. value 91. This is also known as “Resale value”

b. Market value a. salvage value

c. Use value b. book value

d. Fair value c. use value

81. ___ is the amount obtained from the sale of the property. d. depreciation

a. book value 92. ___ is considered as the simplest type of business organization wherein the firm is controlled

b. bond value and owned by a single person

c. market value a. sole-proprietorship

d. salvage value b. Partnership

82. It is the worth of the property determined by a disinterested person c. Corporation

a. Book value d. Entrepreneurship

b. Market value 93. __ is a firm owned and controlled by two or more persons who are bind to an agreement

c. Use value a. sole-proprietorship

d. Fair value b. Partnership

83. It is the reduction or fall in the value of an asset or physical property during the course of its c. Corporation

working life due to the passage of time d. Entrepreneurship

a. Depreciation 94. It is a firm owned by a group of ordinary shareholders and the capital of which is divided up to

b. Depleting value the number of shares.

c. Discounted value a. sole-proprietorship

d. Fair value b. Partnership

84. __ is the money worth of an asset or product c. Corporation

a. Price d. Entrepreneurship

b. Market value

c. value

d. Fair value

85. This refers to the present worth of all profits that are to be received through ownership of a

particular property

a. Price

b. Market value

Unit Operations Economics

95. It is defined as a distinct legal entity separate from the individuals who owns it and can engage 4. This includes all engineering aspects involved in the development of either a new, modified or

in any business transaction which a real person could do. expanded industrial plant is called

a. sole-proprietorship a. plant design

b. Partnership b. optimum design

c. Corporation c. process design

d. Entrepreneurship d. engineering design

96. Also known as joint-stock company or a cooperative 5. A chemical engineering specializing in the economic aspects of design is called

a. Incorporation a. plant engineer

b. Partnership b. cost engineer

c. Corporation c. design engineer

d. Entrepreneurship d. process engineer

97. This refers to the situation where the sales generated are just enough to cover the fixed and 6. This refers to the actual design of the equipment and facilities for carrying out the process

variable cost. a. process engineering

a. break-even b. plant design

b. Break even chart c. process design

c. break even point d. optimum design

d. none of the above 7. The final step before construction plans for plant and includes complete specifications for all

98. The break even chart shows components of the plant and accurate costs based on quoted prices are obtained

a. the relationship between income and fixed cost a. preliminary design

b. the relationship between the volume and fixed cost, variable costs, and income b. quick estimate design

c. the relationship between the assets and fixed cost, variable costs, and income c. firm process design

d. the relationship between the liabilities and fixed cost, variable costs, and income d. detailed design estimate

99. The level of production where the total income is equal to the total expenses is known as 8. A thorough and systematic analysis of all factors that affect the possibility of success of a

a. break-even proposed undertaking usually dealing with the market, technical, financial, socio-economic

b. Break even chart and management aspects is called

c. break even point a. pr5oject feasibility study

d. none of the above b. plant design

100. The sum of perpetuity is a/an c. project development and research

a. book value d. product development

b. zero value 9. Discusses the nature of the product line, the technology necessary for production, its availability,

c. infinite value the proper mix of production resources and the optimum production volume

d. bond value a. market feasibility

b. socio-economic feasibility

c. technical feasibility

d. management feasibility

Board Problems: 10. Discusses the nature of the unsatisfied demand which the project seeks to meet growth and

the manner in which it is to be met

1. Design based on conditions giving the least cost per unit time and maximum profit per unit a. financial feasibility

production b. management feasibility

a. battery limit c. market feasibility

b. break-even point d. technical feasibility

c. optimum economic design 11. A multiple effect evaporator produces 10, 000 kg of salt from a 20% brine solution per day. One

d. plant design kg of steam evaporates 0.7 N kg of water in N effects at a cost of P25 per 1000 kg of steam.

2. A flow diagram, indicating the flow of materials, unit operations involved, equipment necessary The cost of the first effect is P450, 000 and the additional effects at P300, 000 each. The life

and special information on operating temperature and pressure is a of the evaporator is 10 years with no salvage value. The annual average cost of repair and

a. schematic diagram maintenance is 10% and taxes and insurance is 5%. The optimum number of effects for

b. qualitative flow diagram minimum annual cost is

c. process flow chart a. 3 effect

d. quantitative flow diagram b. 5 effects

3. In plant design implementation, soil testing is done to determine c. 4 effects

a. pH d. 2 effects

b. load bearing capacity 12. A process requires 20, 000 lb/hr of saturated steam at 115 psig. This is purchased from a

c. porosity neighboring plant at P18. 00 per short ton and the total energy content rate (mechanical) in

d, viscosity the steam may be valued at P7. 5 x 10-6 per Btu. Hours of operation per year are 7200. The

friction loss in the line is given by the following equation

F = 187.5 Lq 1.8 mc 0.20 in ft-lbs/lbm

Unit Operations Economics

d 0.20 Di 4.8 a. 23, 900 ft3

b. 24, 200 ft3

Cf = 1.44 Di 1.5 L , in p/yr c. 25, 900 ft3

d. 23, 500 ft3

Where: L = length of straight pipe, ft.

q = steam flow rate, cu. ft. per sec 17. April 1992.

mc = steam viscosity cp. A unit of welding machine cost P45, 000 with an estimated life of 5 years. Its salvage value id

d = steam density, lb per ft3 P2, 500. Find its depreciation rate by straight-line method.

Di = inside diameter of pipe, inches a. 17.75% b. 19.88% c. 18.89%

The optimum pipe diameter that should be used for transporting the above steam is d.15.56%

a. 6 in b. 4 in c. 3 in 18. April 1997.

d. 5 in A machine has an initial cost of P50, 000 and a salvage value of P10, 000 after 10 years. Find

13. A smelting furnace operating at 2, 400oF is to be insulated on the outside to reduce heat losses the book value after 5 years of using straight-line depreciation.

and same on energy. The furnace wall consists of a ½ inch steel plate and 4 inch thick a. P12, 500 b.P30, 000 c. P16, 400

refractory inner lining. During operation without other insulation, the outer surface of the steel d.P22, 300

plate exposed to air has a temperature of 300oF. Ambient air temperature is at 90oF. 19. October 1992.

Operation is 300 days per year. Thermal conductivities in Btu per hr-ftoF are: steel plate = 26; The initial cost of a paint sand mill, including its installation, is P800, 000. The BIR approved

refractory =0.1; insulation to be installed = 0.025. The combined radiation and convection loss life of this machine is 10 years for depreciation. The estimated salvage value of the mill is

to air irrespective of material exposed is 3 Btu per hr-ft2-oF, annual fixed charge is 20 % of the P50, 000 and the cost of dismantling is estimated is estimated to be P15, 000. Using straight-

initial insulation cost. If heat energy is P5.0 per 10, 000 Btu and installed cost of insulation is line depreciation, what is the annual depreciation charge and what is the book value of the

P100 per inch ft2 of area, the optimum thickness of the outer insulation that should be installed machine at the end of six years.

is a. P74, 500 ; P340, 250

a. 8 in b. 12 in c. 10 in d. 6 in b. P76, 500 ; P341, 000

14. An organic chemical is produced by a batch process. In this process chemical X and Y react to c. P76, 500 ; P 342, 500

form Z. Since the reaction rate is very high, the total time required per batch has been found d. P77, 500 ; P343, 250

to be independent of the amount of materials and each batch requires 2 hr, including time for 20. November 1997.

charging, heating, and dumping. The following equation shows the relation between the The cost of the equipment is P500, 000.00 and the cost of installation is P30, 000. If the

pound of Z produced (lbz) and the pound of X (lbx) and Y (lby) supplied: salvage value is 10% of the cost of equipment at the end of five years, determine the book

value at the end of the fourth year. Use straight-line method.

lbz = 1.5(1.1lbxlbz +1.3lbylbz – lbxlby)0.5 a. P155, 000 b.P140, 000 c. P146, 000

d. P132,600

Chemical X costs P0.09 per pound, chemical Y costs P0.04 per pound and chemical Z sells 21. April 1998.

for P0.8 per pound. If half of the selling price for chemical Z is due to cost other than raw An equipment costs P10, 000 with a salvage value of P500 at the end of 10 years. Calculate

materials, the maximum profit obtainable per pound of chemical Z is the annual depreciation cost by sinking fund method at 4% interest.

a. P0.3 per lbz a. P791.26 b.P950.00 c. P971.12

b. P0.5 per lbz d. P845.32

c. P0.12 per lbz 22. November 1995.

d. P0.25 per lbz A machine costing P720, 000 is estimated to have a book value of P40, 545.73 when retired

15. One hundred gram moles of R are to be produced hourly from a feed consisting of a saturated at the end of 10 years. Depreciation cost is computed using a constant percentage of the

solution of A. (Cao = 0.1 gmole per liter). The reaction is A R with rate ГR = (0.2/hr) Ca. declining book value. What is the annual rate of depreciation in %?

Cost of reactant at Cao = 0.1 gram mol per liter is P3.75/g-mole A; cost of backmix reactor, a.28 b. 25 c. 16

installed complete with auxiliary equipment, instrumentation, overhead, labor depreciation, d.30

etc. is P0.075 per hr-liter. The conversion that should be used for optimum operation is 23. November 1998.

a. 45% b. 60% c. 50% AMD Corporation makes it a policy that for any new equipment purchased; the annual

d. 40% depreciation cost should not exceed 20 % of the first cost at any time with no salvage value.

16. One hundred lb moles of reactant A at a concentration of 0.01 lbmole per cuft is to be reacted Determine the length of service life is necessary if the depreciation used is the SYD method.

with reactant B to produce R and S. The reaction follows the aqueous phase elementary a.9 years b. 10 years c. 12 years d.19

reaction: years

24. November 1996.

A + B ------- R +S where k = 500 cuft/(lbmole-hr). At 6%, find the capitalized cost of a bridged whose cost is P250M and the life is 20 years, if

the bridge must be partially rebuilt at a cost of P100M at the end of each 20 years.

The amount of R required is 95 lbmoles/hr. Data: a. P275.3M b.P265.5M c. P295.3M

* in extracting R from the reacted mixture, A and B are destroyed d. P282.1M

* B costs P15 per lbmole in crystalline form, and is very soluble in aqueous solutions 25. October 1995

such that even when present in large amount does not affect A in solution A company must relocate one of its factories in three years. Equipment for the loading dock is

* capital and operating cost for backmix reactor is P0.10 per(cuft-hr). being considered for purchase. The original cost is P20, 000; the salvage value of the

The optimum backmix reactor size is:

Unit Operations Economics

equipment after three years is P8, 000. The company’s rate return on the money is 10% . 26. a

Determine the capital recovery per years. 27. a

a. P5, 115 b.P4, 946 c. P5, 625 d. P4, 28. a

805

26. October 1998. Answer Key

The annual maintenance cost of a machine shop is P69, 994. if the cost of making a forging is Objective Problems

P56 per unit and its selling price is P135 per forged unit, find the number of units to be forged

to break-even. 1. a

a.886 units b. 885 units c. 688 units 2. a

d.668 units 3. a

27. October 1990. 4. b

Compute for the number of locks that an ice plant must be able to sell per month to break 5. d

even based on the following data: 6. c

Cost of electricity P20.00 7. a

Tax to be paid per block 2.00 8. a

Real Estate Tax 3, 500.00 per month 9. d

Salaries and wages 25, 000.00 per month 10. d

Others 12, 000.00 per month 11. d

Selling price of Ice 55.00 per block 12. b

a. 1228 b. 1285 c. 1373 13. d

d.1312 14. a

28. April 1998 15. d

XYX Corporation manufactures bookcases that sell for P65.00 each. It costs XYZ Corporation 16. a

P35, 000 per year to operate its plant. This sum includes rent, depreciation charges on 17. a

equipment, and salary payments. If the cost to produce one bookcase is P50.00, how many 18. a

cases must be sold each year for XYZ to avoid taking a loss? 19. b

a. 2334 b. 539 c. 750 20. b

d.2333 21. a

22. b

Answer Key 23. d

Board Problems 24. a

25. d

1. c 26. d

2. b 27. c

3. b 28. a

4. a 29. d

5. b 30. b

6. c 31. a

7. c 32. a

8. a 33. a

9. c 34. a

10. c 35. a

11. d 36. d

12. a 37. c

13. c 38. c

14. c 39. d

15. c 40. c

16. a 41. a

17. c 42. a

18. b 43. b

19. b 44. d

20. c 45. d

21. a 46. a

22. b 47. b

23. a 48. c

24. c 49. b

25. c 50. a

Unit Operations Economics

51. d cost of a similar heat exchanger with 200 ft2 of heating surface in 1980 if purchased-cost-

52. c capacity exponent is 0.60 for surface area ranging from 100-400 ft2?

53. c a. $4 547.15

54. d b. $4 127.25

55. d c. $4 567.10

56. a d. $4523.00

57. b 2. efer to problem no. 1. If the purchased-cost-capacity exponent for this type of exchanger

58. d is 0.81 for surface areas ranging from 400-2,000 ft2, what will be the purchased cost of a

59. b heat exchanger with1, 000 ft2 of heating surface in 1985?

60. b a. $20 423.38

61. a b. $18 527.12

62. c c. $14 547.00

63. c d. $24 542.05

64. d 3. If the purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel

65. b tubes) with 100 ft2 of heating surface was $3,000 in 1980. Note that the purchase-cost-

66. d capacity exponent is not constant over range surface area requested. What will be the

67. b purchased cost of a heat exchanger with 700 ft2 of heating surface in 1985?

68. c a. $15 398.79

69. c b. $15 298.79

70. c c. $16 498.79

71. a d. $16 598.79

72. b 4. From the preceding question, what will be the purchased cost of the heat exchanger with

73. c 800 ft2 of heating surface in 1985?

74. a a. $18 046.32

75. d b. $18 146.32

76. b c. $17 046.32

77. b d. $17 146.32

78. b 5. Refer to problem no. 3. What will be the purchased cost of the heat exchanger with

79. b 1500 ft2 of heating surface in 1985?

80. c a. $38 363.62

81. d b. $48 363.62

82. d c. $18 363.62

83. a d. $28363.62

84. c

85. c 6. The purchase and installation cost of some pieces of equipment are given as a function

86. d of weight rather than capacity. An example of this is the installed cost of large tanks. The

87. d 1980 cost for an installed aluminum tank weighing 100,000 lb was $390,000. For a size

88. a range from 200,000 to 1,000,000 ld, the installed cost-weight exponent for aluminum

89. c tanks is 0.93. If an aluminum tank weighing 700,000 lb is required, what is the present

90. c capital investment needed?

91. a a. $3 160 100

92. a b. $3 060 000

93. b c. $6 160 100

94. c d. $6 060 000

95. c 7. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel

96. c processing plant) is $300,000. The plant is to be an addition to an existing formaldehyde

97. a plant. The major part of the building cost will be for indoor construction, and the

98. b contractor’s fee will be 7% of the direct plant cost. All other costs are close to the

99. c average values found for typical chemical plants. On the basis of this information,

100. c estimate the total direct plant cost.

a. $879 000

b. $879 253

Problem Solving c. $890 560

d. $825 020

1. The purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel 8. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel

tubes) with 100 ft2 of heating surface was $3,000 in 1980. What will be the purchased processing plant) is $300,000. The plant is to be an addition to an existing formaldehyde

plant. The major part of the building cost will be for indoor construction, and the

Unit Operations Economics

contractor’s fee will be 7% of the direct plant cost. All other costs are close to the a. $154 793.41

average values found for typical chemical plants. On the basis of this information, b. $456 793.41

estimate the fixed capital investment. c. $129 793.41

a. $ 1 246 530 d. $209 793.41

b. $ 2 336 230 15. Referring to the previous problem, estimate the compound amount accumulated at the

c. $ 2 546 531 end of ten years, if the payment is made weekly?

d. $ 1 246 830 a. $143 951.49

b. $243 951.49

9. Refer to the previous problem and on the basis of this information, what is the total c. $443 951.49

capital investment? d. $643 951.49

a. $1 542 125 16. A multiple – effect evaporator is to be used for evaporating 400,000 lb of water per day

b. $1 478 570 from a salt solution. The total initial cost for the 1st effect is $18,000 and each additional

c. $1 532 120 effect costs $15,000. The life period is estimated to be 10 years, and the scrap value at

d. $1 468 530 the end of the life period may be assumed to be zero. The straight-line depreciation

10. The total capital investment for a chemical plant is $1,500,000 and the plant process 3M method is used. Fixed charges minus depreciation are 15% yearly based on the first cost

kg of product annually. The selling price of the product is $0.82/kg. Working capital of the equipment. Steam cost $1.50 per 1000 lb. Annual maintenance charges are 5% of

amounts to 15% of the total capital investment. The investment is from company funds, the initial equipment cost. All other cost is independent of the number of effects. The unit

and no interest is charged. Raw-material costs for the product are $0.09/kg, labor will operate 300 days per year. If the lb of water evaporated per pound of steam equals

$0.08/kg, utilities $0.05/kg, and packaging $0.008/kg. Distribution costs are 5% of the 0.85 x numbers of effects, determine the optimum number of effects for minimum annual

total product cost. Determine the percent change in total cost. cost.

a. 36.16% a. 2 effects

b. 45.32% b. 3 effects

c. 12.00% c. 5 effects

d. 35.61% d. 4 effects

11. It is desired to have a $ 9000 available from 12 years from now. If $ 5000 is available for 17. Determine the optimum economic thickness of insulation that should be used under the

investment at the present time, what is discrete annual rate of compound interest on the following conditions: Standard steam is being passed continuously through a steel pipe

investment would be necessary to give the desired amount? with an outside diameter of 10.75 in. The temperature of the steam is 400F, and the

a. 6.02% steam is valued at $1.80 per 1000 lb. The pipe is to be insulated with material that has a

b. 5.02% thermal conductivity of 0.03 Btu/h-ft2-F/ft. The cost of installed insulation per foot of pipe

c. 4.02% length is $4.5xIt, where It is the thickness of the insulation in inches. Annual fixed

d. 3.05% charges including maintenance amount to 20% of the initial installed cost. The total

12. An original loan of $2000 was made at 6 percent simple interest per year for 4 years. At length of the pipe is 1000 ft, and the average temperature of the surrounding may be

the end of this time, no interest had been paid and the loan was extended for 6 more taken as 70F. Heat transfer resistance due to the steam film, scale and pipe wall are

years at a new, effective, compound-interest rate of 8 percent per year. What is the total negligible. The air –film coefficient at the outside of the insulation may be assumed

amount owned at the end of ten years if no intermediate payments are made? constant at 2.0 Btu/h-ft2-F for all insulation thickness.

a. $4 935.45 a. $3257

b. $3 945.45 b. $4057

c. $4 945.45 c. $3057

d. $3935.45 The original cost for a distillation tower is $24,000 and the useful life of d. $4257

the tower is estimated to be 8 years. The sinking fund method for determining the 18. A proposed chemical plant will require a fixed capital investment of $10 million. It is

arte of depreciation is used, and the effective annual interest for the depreciation estimated that the working capital will amount to 25% of the total investment and annual

fund is 6 percent. If the scrap value of the distillation tower is $ 4000, determine the depreciation costs are estimated to be 10 percent of the fixed capital investment. If the

asset value at the end of 5 years. annual profit will be $3 million, determine the standard percent return on the total

a. $ 3,547.928 investment

b. $2 235.623 a. 22.5%

c. $2 547.928 b. 11.25%

d. $3 235.623 c. 34.5%

13. An annuity is due to being used to accumulate money. Interest is compounded at an d. 15.98%

effective annual rate of 8 %, and $1000 is deposited at the beginning of each year. What 19. If a plant will require a fixed capital investment of $10 million and the working capital will

will be the total amount of annuity due be after 5 years? amount to 25% of the total investment and annual depreciation costs are estimated to be

a. $1233.24 10 percent of the fixed capital investment. If the annual profit will be $3 million, what is

b. $1173.32 the minimum payout period (POP)?

c. $3573.2 a. 2.5 years

d. $183.23 b. 4 years

14. For the total year payments of $5000 for ten years, what will be the compound amount c. 3.5 years

accumulated at the end of ten years if the payment is at the end of the year? The d. 2 years

effective (annual) interest is 20% and payments are uniform.

Unit Operations Economics

20. An annual investigation of a proposed investment has been made. The following result a. $0.00297/lb

has been presented to management. The minimum payout period based on capital b. $0.0297/lb

recovery using a minimum annual return of 10 percent as a fictitious expense is 10 c. $0.2297/lb

years; annual depreciation costs amount top 8 percent of the total investment. Using this d. $0.2970/lb

information, determine the standard rate of return on the investment. 24. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales

a. 21% account for the month of August by “FiFo” method.

b. 10.5% a. $0.281/lb

c. 56.93% b. $0.028/lb

d. 11.5% c. $0.038/lb

21. The information given in the previous problem, applies to conditions before income d. $0.128/lb

taxes. If 34% percent of all profits must be paid out for income taxes, determine the 25. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales

standard rate of return after taxes using the figures given in the previous problem. account for the month of August by lifo method.

a. 7.93% a. $0.031/lb

b. 6.93% b. $0.041/lb

c. 4.93% c. $2.031/lb

d. 5.93% d. $1.041/lb

22. A capitalized cost for a piece of equipment has been found to be $55,000. This cost is For question nos. 27 – 31.

based on the original cost plus the present value of an indefinite number of renewals. An The following are the data gathered from the AMD Food Corporation:

annual interest rate of 12% was used in determining the capitalized cost. The salvage

value of the equipment at the end of the service life was estimated to be 10 years. Under

Cash $20,000

these conditions, what would be the original cost of the equipment?

a. $57 391.47

Accounts payable:

b. $27 291.47

B Company 2,000

c. $47 391.47

C Company 8,000

d. $37 291.47

For problems 24- 26.On Aug. 1, a concern had 10,000 lb of raw material on hand, which was

Accounts receivable 6,000

purchased at a cost of $0.030 per pound. In order to build up the reserve, 8000 lb of additional raw

Inventories 15,000

material was purchased on Aug. 15 at a cost of $0.028 per pound. If none of the raw material was

Mortgage payable 5,000

used until after the last purchase.

Common stock sold 50,000

23. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales

Machinery and equipment (at present value) 18,000

account for the month of August by current average method.

Furniture and fixtures (at present value) 5,000

Government bonds 3,000

Surplus 2,000

26. From the data given above, determine the total asset of the AMD Food Corporation.

a. $ 47, 050

b. $ 67, 000

c. $ 87, 050

d. $ 57, 000

27. Determine the total current assets of the AMD Food Corporation.

a. $ 11,000

b. $ 44,000

c. $ 22,000

d. $ 33,000

28. What is the total amount of the Current liabilities of the AMD Corporation?

a. $ 45,097

b. $ 85,097

c. $ 25,000

d. $ 15,000

29. What is the total amount of the Fixed Assets of the AMD Food Corporation?

Unit Operations Economics

a. $ 23,000 a. $6,100

b. $ 33,050 b. $7,100

c. $ 32,000 c. $7,900

d. $ 23,050 d. $6,900

During the month of October, the following information was obtained in the AC antifreeze retailing 33. Determine the current asset for MADSteel Company

company: a. $8, 700

b. $9, 500

Salaries $ 3,000 c. $8, 500

Delivery expenses 700 d. $9, 700

Rent 400 34. Determine the current liabilities of MADSteel Company

Sales 15,100 a. $5, 540

Antifreeze available for sale during October (at cost) 20,000 b. $1, 540

Antifreeze inventory on Oct. 31 (at cost) 11,000 c. $3, 540

Other expenses 1,200 d. $2, 540

Earned surplus before income taxes as of Sept.30 800 35. Determine the Quick ratio for MADSteel Company

a. 2.29

b. 9.87

30. Prepare an income statement for the month of October to determine the net income is for c. 2.56

the month of October. d. 9.56

a. $ 29,100 36. Determine the current ratio of MADSteel Company

b. $ 19,200 a. 2.74

c. $ 29,200 b. 2.56

d. $ 19,100 c. 2.64

31. From the data above, determine also the total gross income of the AC Antifreeze d. 1.98

Company. 37. A reactor of special design is the major item of equipment in a small chemical plant. The

a. $26,900 initial cost of a completely installed reactor is $60,000, and the salvage value at the end

b. $36,100 of the useful life is estimated to be $10,000. Excluding depreciation costs for the reactor,

c. $26,100 the total annual expenses for the plant are $100,000. How many years of useful life

d. $46,900 should be estimated for the reactor if 12 % of the total annual expenses for the plant are

The following information applies to MADSteel Company on a given date: due to the cost for the reactor depreciation? The straight-line method for determining

depreciation should be used.

Long-term debts $ 1,600 a. 4 years

Debts due within 1 year 1,000 b. 2 years

Accounts payable 2,300 c. 8years

Machinery and equipment (at cost) 10,000 d. 1year

Cash in bank 3,100 38. The initial installed cost for a new piece of equipment is $10,000, and its scrap value at

Prepaid rent 300 the end of its useful life is estimated to be $2,000. The useful life is estimated to be 10

Government bonds 3,000 years. After the equipment has been in use for 4 years, it is sold for $7,000. The

Social security taxes payable 240 company which originally owned the equipment employs the straight-line method for

Reserve for depreciation 600 determining depreciation costs. If the company had used an alternative method for

Reserve for expansion 1,200 determining depreciation cost, the asset (or book) value for the piece of equipment at the

Inventory 1,600 end of 4 years would have been $5240. The total income-tax rate for the company is

Accounts receivable 1,700 34% of all gross earnings. Capital-gains taxes amount to 34% of the gain. How much net

saving after taxes would the company have achieved by using the alternative (in this

case, reducing-balance) depreciation method instead of the straight-line depreciation

method?

a. $2161.60

b. $1261.07

c. $1171.70

d. $1161.60

32. Determine the cash asset for the MADSteel Company at the given date. 39. A piece of equipment is originally costing $40,000 was put into use 12 years ago. At the

time the equipment was put into use, the service life was estimated to be 20 years and

the salvage and scrap value at the end of the service life were assumed to be zero. On

this basis, the straight-line depreciation fund was set up. The equipment can now be sold

for $10,000, and a more advanced model can be installed for $55,000. Assuming the

depreciation fund is available for use, how much new capital must be supplied to make

the purchase?

Unit Operations Economics

a. $22,000 c. $26,356.72

b. $21,000 d. $16,285.72

c. $12,000 47. The total value of anew plant is $2 million. A certificate of necessity has been obtained

d. $11,000 permitting a write-off of 60 percent of the initial value ay 5 years. The balance of the plant

40. The original investment for an asset was $10,000, and the asset was assumed to have a requires a write-off period of 15 years. Using the straight-line method and assuming

service life of 12 years with $2,000 salvage value at the end of the service life. After the negligible salvage and scrap value, determine the total depreciation cost during the first

asset has been in use for 5 years, the remaining service life and the final salvage value year.

are reestimated at 10 years and $ 1,000, respectively. Under these conditions, what is a. $ 35, 555. 33/ yr

the depreciation cost during the sixth year of the total life is straight-line depreciation is b. $ 55, 333. 33/ yr

used? c. $ 35, 333. 33/ yr

a. $596.65/yr d. $ 53, 333. 33/ yr

b. $561.66/yr 50. A profit-producing property has an initial value of $50,000, a service life of 10 years, and

c. $678.65/yr zero salvage and scraps value. By how much would annual profits before taxes be

d. $566.66/yr increased if a 5 percent sinking-fund method were used to determine depreciation costs

A piece of equipment having a negligible salvage and scrap value is estimated to have a service instead of straight-line method?

life of 10 years. The original cost of the equipment was $40,000. Determine the following: a. $ 3 556.24

41. Based on the above data, determine the depreciation charge for the fifth year if double- b. $ 3 354.35

declining balance depreciation is used. c. $ 3 484.31

a. $ 3,567.2 d. $ 3.034.35

b. $ 3,276.80 51. In order to make it worthwhile to purchase a new piece of equipment, the annual

c. $ 4, 245.80 depreciation costs for the equipment cannot exceed $3,000 at any time. The original cost

d. $ 4,252.80 of the equipment is $30,000, and it has a zero salvage and scrap value. Determine the

42. The depreciation charge for the fifth year if sum-of-the-years-digits depreciation is used. length of service life necessary if the equipment is depreciated by the sum=of-the-years-

a. $ 4,363.64 digits method by the straight-line method.

b. $ 5,572.14 a. 19 years

c. $ 8,265.52 b. 23 years

d. $ 9,356.45 c. 17 years

43. The percent of the original investment paid off in the first half of the service life using the d. 18 years

double-declining balance method. 52. Referring to the previous number, determine the length of service life necessary if the

a. 32.8% equipment is depreciated by the straight-line method.

b. 67.4% a. 8 years

c. 23.4% b.10 years

d. 54.2% c. 12 years

44. The percent of the original investment paid off in the first half of the service life using the d. 9 years

sum-of-the-years-digits method.

a. 45.45% A materials-testing machine was purchased for $20,000 and was to be used for 5 years with an

b. 54.54% expected residual salvage value of $5,000. Graph the annual depreciation charges and year-end

c. 23.23% book values obtained by using:

d. 35.53% 53. By using Straight-line depreciation

45. The original cost of the property is $30,000, and it is depreciated by a 6 percent sinking- a. $ 6,000

fund method. What is the annual depreciation charge if the book value of the property b. $ 5,000

after 10 years is the same as if it had depreciated at $2,500/year by the straight-line c. $ 9,000

method? d. $ 7,000

a. $ 167.67/yr 54.By using Sum-of-digits depreciation

b. $ 267.67/yr a. $ 6,000

c. $ 289.67/yr b. $ 5,000

d. $ 189.67/yr c. $ 9,000

46. A concern has a total income of $1 million/year, and all expenses except depreciation d. $ 7,000

amount to $600,000/year. At the start of the first year of the concern’s operation, a

composite account of all depreciable items show a value of $850,000, and the overall 55. By using Double-declining balance depreciation

service life is estimated to be 20 years. The total salvage value at the end of the service a. $ 625

life is estimated to be $50,000. Thirty percent of all profits before taxed must be paid out b. $ 675

as income taxes. What would be the reduction in income-tax charges for the first year of c. $278

operation if the sum-of-the-years-digits methods were used for depreciation accounting d. $955

instead of the straight-line method? 56. An asset with an original cost of $10,000 and no salvage value has a depreciation charge of

a. $16,356.72 $2381 during its second year of service when depreciated by the sum-of-digits method.

b. $26,285.72 What is its expected useful life?

Unit Operations Economics

a. 6 years 63. The total depreciation after 5 years.

b. 4 years a. P819.12

c. 9 years b. P562.23

d. 2 years c. P456.26

57. An electronic balance costs P90, 000 and has an estimated salvage value of P8, 000 at the d. P895.23

end of its 10 years lifetime. What would be the book value after 3 years, using straight-line 64. Estimate the book value at the end year for 5 years.

method in solving for the depreciation? a. P1, 180.98

a. P 65,200 b. P5, 125.25

b. P 76,466 c. P1, 256.32

c. P 24, 674 d. P5, 235.00

d. P 21,758 65. Determine the rate of depreciation, the total depreciation up to the end of 8 th year and

A broadcasting corporation purchased equipment for P53, 000 and paid P1, 5000 for freight and book value at the end of 8 years for an asset that costs P15,000 new and has an

delivery charges top the job sites. The equipment has a normal life of 10 year with a trade-in value estimated scrap value of P2,000 at the end of 10 years by DBM.

of P5, 000 against the purchase of anew equipment at the end of the life. a. P 12,108

58. Referring to the problem above, determine the annual depreciation by straight-line b. P12, 008

method. c. P11,355

a. P4, 950 d. P10,245

b. P5, 950 66. Determine the rate of depreciation, the total depreciation up to the end of 8 th year and

c. P7, 950 book value at the end of 8 years for an asset that costs P15, 000 new and has an

d. P3, 950 estimated scrap value of P2, 000 at the end of 10 years by DDBM.

59. From the preceding number, determine annual depreciation by sinking fund method. Assuming a. P 12,583

interest 6 ½% compounded annually. b. P 10,483

a. P 3,668 c. P 12,483

b. P 1,575 d. P 10,583

c. P 4,245 67. Mr. Dim bought a calciner for P220, 000 and used it for 10 years, the life span of the

d. P6,258 equipment. What is the book value of the calciner after 5 years of use? Assume a scrap

value of P20, 000 for SLM;

A firm brought equipment for P56, 000. Other expenses including installation amounted to P4, 000. a. P 120,566

The equipment is expected to have a life of 16 years with a salvage value of 10% of the original b. P 120,452

cost. c. P 120,000

60. Determine the book value at the end of 12 years by SLM: d. P 130,000

a. P19, 500 68. Refer to the previous problem. What is the book value of the calciner after 5 years of

b. P20,555 use? Assume a scrap value of P22, 000 for textbook for DBM.

c. P15,582 a. P 96, 570.00

d. P18, 562 b. P 69, 235.00

61. Determine the book value at the end of 12 years by SFM: c. P 59, 235.00

a. P29, 520 d. P 69, 570.00

b. P29, 520 69. Refer to the previous problem. What is the book value of the calciner after 5 years of

c. P29, 520 use? Assume a scrap value of P20, 000 for textbook for DDBM.

d. P29, 520 a. P72 091

b. P72 356

c. P71 190

For numbers 62 – 64. A certain type of machine losses 10% of its value each year. The machine d. P72 090

cost P2, 000 originally. Make cut a schedule showing the following: 70. A structure costs P12, 000 new. It is estimated to have a life of 5 years with a salvage

62. By yearly depreciation value at the end of life of P1, 000. Determine the book value at the end of three years.

a.131.32 a. 733

b.132.12 b. 562

c.123.23 c. 252

d. 213.20 d. 377

71. Operator A produces 120 spindle/hr on a lathe. His hourly rate is $1.80. Operator B,

using an identical lathe, is able to produce 150 identically units/hr. The overhead charge

for a lathe is fixed at $2.50/hr. Determine operator B’s hourly rate so that his cost per

piece is identical to A’s.

Unit Operations Economics

a. $2.88 a. 11 years

b. $3.88 b. 12 years

c. 4.88 c. 14 years

d. 1.88 d. 13 years

72. In a type 1 warehouse, initial cost will be $24, 000.This warehouse has adequate 79. The total cost of a cast product consists of (1) the raw material cost that is directly

capacity for the near future, but 12 years from now an addition will be required that costs proportional to the weight, of the casting, (2) the machining cost that varies inversely as

$15, 000. A type 2 warehouse costs $34, 000. This type has the same capacity as the the weight, and (3) overhead cost that remains constant per unit produced regardless of

type 1 warehouse with its addition. What will be the present cost of the type 1 weight. Find the weight giving the minimum cost per casting.

warehouse? Which of these should be built, assuming that depreciation is negligible and a. W = (k1/k2)1/4 lb

that the interest rate is 7%? b. W = (k2/k1)1/2 lb

a. $30, 540 c. W = (k2/k1)1/4 lb

b. $30,660 d. W = (k1/k2)1/2 lb

c. $23, 548 80. Based on the previous problem, what is the minimum total cost?

d. $15,235 a. Ct = [k2(k2 / k1)1/2 = k2 (k1 / k2) 1/4+ Co]

73. Determine the equal (year-end) payments that will be available for the next four years if b. Ct = [k1(k2 / k1)1/2 = k2 (k1 / k2) ½ + Co]

we invest $4, 000 at 6%. c. Ct = [k1(k2 / k1)1/4 = k2 (k2 / k1) ½ + Co]

a. $2533.23 d. Ct = [k2(k1 / k1)1/4 = k2 (k1 / k2) ½ + Co]

b. $2322.25 81. Methyl alcohol condensed at 148 F is to be cooled to 100 F for storage at a rate of 10,

c. $1123.25 000gal/hr by water available at 75 F in a countercurrent heat exchanger. The over-all

d. $1154.36 heat transfer coefficient is constant and estimated at 200 Btu/ft 2-hr-F. Heat exchanger

74. A new snow removal machine costs $50, 000. The new machine will operate at a annual costs including operation are estimated at $2 per ft 2 including depreciation. The

reputed savings of $400 per day over the present equipment in terms of time and cooler is to operate 5, 000 hr/year, and the value of heat utilized is estimated at $5x10 -7

efficiency. If interest is at 5% and the machine’s life is assumed to be 10 years with zero per Btu. What is the estimated optimum cost of the heat exchanger if the cost for surface

salvage, how many days per year must the machine be used to make the investment is $9 per ft2?

economical? a. $4, 014

a. 15 days b. $4,123

b. 16 days c. $5,545

c. 14 days d. $5,123

d. 12 days 82. What is the most economical number of effects to use in the recovery of black liquor in a

75. Based on the sinking fund method and using the data in the previous problem, what paper plant if the following cost data are available? The annual fixed costs increase

number of days must the machine be used if the amount to be accumulated in 10 years essentially linearly with each effect (except for condensing, feeding, and other equipment

is a. $50, 000 costs for multiple units which may be considered to balance each other). If a fixed

b. $60,000 amount of evaporation is to be obtained and each units to have 1, 000 ft 2 of heating

c. $55,000 surface with a service life of five years, the annual fixed costs Cf would be (using cost

d. $45, 000 data of $25, 000 for a single evaporator of 5, 000 ft2, employing the 0.6 factor, and

76. Based on the sinking fund method and using the data in the previous problem, what neglecting the interest).

number of days must the machine be used if the amount to be accumulated in 10 years Cf =( 1, 000)0.6 25, 000 N ……. dollars per year

is $50, 000? 5, 000 5

a. 12 days where N is the number of effects.

b. 10 days Because of the steam economy in multiple-effect operation, the direct costs for steam

c. 14 days will decrease and the total of all annual direct costs, CD, has been established for this type of

d. 13 days operation as

77. A consulting engineer decides to set up an educational fund for his son that will provide CD = 65, 000 N -0.95 dollars

$3000 per year for 6 years starting in 16 years. The best interest rate he can expect to a. 4 effects

get is 5% compounded quarterly. He wants to accumulate the necessary capital by b. 2 effects

making quarterly deposits until his son starts college. What will be his needed quarterly c. 6 effects

deposit? d. 5 effects

a. $15, 210 83. A capitalized cost for a piece of equipment has been found to be $55, 000. This cost is

b. $16,213 based on the original cost plus the present value of an indefinite number of renewals. An

c. $15, 213 annual interest rate of 12% was used in determining the capitalized cost. The salvage

d. $16, 210 value of the equipment at the end of the service life was estimated to be 10 years. Under

78. A low carbon steel machine part, costing $350 installed, lasts 6 years when operating in these conditions, what would be the original cost of the equipment?

a corrosive atmosphere. An identically shaped part, but treated for corrosion resistance, a. $36, 861.47

would cost $650 installed. How long would the corrosion resistance part have to last to b. $32, 251.47

be at least as good investment as the untreated part? Assume money is worth 7% c. $27, 291.47

d. $37, 291.47

Unit Operations Economics

84. A heat treating furnace is used to preheat small steel parts. The furnace uses fuel oil a. $74.6

consisting $0.04 per gallon, with a heating value of 142, 000Btu/gal. The furnace has a b. $56.2

firebrick lining, the outside temperature of which is 1210 F, this is to be covered with c. $15.2

insulation costing $300 per 1000 board feet. The air temperature is 110 F. Operations is d. $14.0

7200 hr/yr. Conductivity is 0.028 for insulation in Btu/hr-ft2-F. Calculate the most 90. Determine the selling price in dollars per ton (100% mineral basis) required for which the

economical thickness of insulation. Furnace life is 8 years. Assume negligible cost of the n new equipment is justified.

temperature drop from insulation to air. a. $ 123.12

a. 5.52 in b. $ 123.50

b. 5.24 in c. $ 263.25

c. 5.48 in d. $ 263.13

d. 5.45 in 91. What is the % increase in recovery and rejection for the new process based on mineral

85. A batch inorganic chemical operations gives product C from two chemicals A and B and gauged?

according to the following empirical relation: a. 42.567%

C = 2.8 (AB – AC – 1.2 BC + 0.5C2 )0.5 b. 22.224%

where A, B and C are pounds of respective components. The reaction rate is sufficiently high to be c. 52.677%

neglected, and the time to make any batch is essentially the charging and discharging time, d. 12.235%

including heating up, which totals 1 hr. If A costs $0.10 per lb and B costs $0.05 per lb, what is the 92. A ties on a plant railroad sliding are to be replaced. Untreated ties consisting $ 2.50

ratio of B to A to give the minimum costs of raw materials per lb of product . what is the cost per lb installed have a life of 7 years. If created ties have a life of 10 years, what is the

of C? maximum installed cost that should be paid for treated ties if money is worth 8 percent?

a. $4.08 a. $3.15

b. $3.23 b. $3.10

c. $4.23 c. $3.25

d. $3.08 d. $3.20

86. Based from the previous problem, what is the cost per lb of C? 93. Powdered coal having a heating value of 13, 500 Btu/ lb is to be compared with fuel oil

a. $4.08 worth $2.00 per bbl (42 gal) having a heating value of 130,000 Btu/gal as a source of fuel

b. $3.23 in the processing plant. If the efficiency of the conversion of the fuel is 64% for coal and

c. $4.23 72 % for oil, with all other costs being equal, what is the maximum allowable selling price

d. $3.08 for coal per ton?

87. Seven million pounds of water per year is to be obtained from 8 percent solids slurry to a. $15.13 / ton

be filtered on a leaf filter to produce a cake containing 40 percent solids. The area of the b. $11.13 / ton

filter is 200 ft2. Tests show a value of 2 x 104 for k in pound units. The cake is not c. $21.13 / ton

washed. The dumping and cleaning time is 3 hr and costs $39 each cycle. Filtration d. $25.13 / ton

costs are $14 per hr, and inventory charges maybe neglected. What is the cycle time for 94. A steam boiler is purchased on the basis of guaranteed performance. However, initial

minimum costs? tests indicate that the opening (income) cost will be P400 more per year than

a. 0.014 hrs guaranteed. If the expected life is 25 years and money is worth 10 %, what deduction

b. 0.015 hrs from the purchase price would compensate the buyer for the additional operating cost?

c. 1 hr a. 3, 635.82 pesos

d. 0.25 hrs b. 3, 660.82 pesos

88. Referring to the previous problem, calculate the cycle time for maximum production. c. 3,560.82 pesos

a. 3.04 hrs. d. 3, 630.82 pesos

b. 2.04 hrs 95. If the sum of P12, 000 is deposited in an account earning interest at the rate of 9%

c. 3.52 hrs compounded quarterly, what will it become at the end of 8 years?

d. 1.02 hrs a. 14, 857.24

b. 34, 457.24

For nos. 89- 91. c. 14, 527.24

In processing 500 ton/day of ore assaying 50% mineral, 300 tons of concentrate containing 66.7 % d. 24, 457.24

are obtained at a cost of sales ( all fixed operating cost are excluded) of $15 per ton concentrate. 96. At a certain interest rate compounded quarterly, P1, 000 will amount to P4, 500 in 15

An investment of $200, 000 of concentrate that will assay 71% mineral. If the plant operates 200 years. What is the amount at the end of 10 years?

days/year, equipment must pay out in 5 years with interest at 15% and no salvage value and no a. 2, 125.17 pesos

additional labor or repair costs need to be considered. b. 2, 725.17 pesos

c. 2, 625.17 pesos

89. Based on the stated problem above, calculate the additional cost per ton of concentrate

for capital recovery on the new equipment.

Unit Operations Economics

d. 2, 845.17 pesos REQUIRED:

97. A one bagger concrete mixer can be purchased with a down payment of P8, 000 and $ of 1,000 ft2 in 1985

equal installments of P600 each paid at the end of every month for the next 12 months. If SOLUTION:

the money is worth 12% compounded monthly, determine the equivalent cash prize of using table 3, page 163 (Cost indexes as annual average)

the mixer. where: 1980 = 560, and 1985 = 790

a. 4, 753.05 pesos 0.6

b. 34, 753.05 pesos 400 ft2

cost = $3,000 2

100 ft

c. 24, 753.05 pesos

d. 14, 753.05 pesos

98. A certain company makes it the policy that for any new piece of equipment, the annual

depreciation cost should not exceed 10% of the original cost at any time with no salvage cost = $6,892.19

or scrap value. Determine the length of service life necessary if the depreciation method

use is straight line formula.

a. 10 years

0.81

b. 12 years 1,000 ft2 790

c. 18 years cost1985 = $6,892.19 2

d. 8 years 400ft 560

99. Solve the previous problem with the sinking fund formula at 8%

a. 8 years

b. 10 years

cost1985 = $20, 423.38

c. 6 years

d. 12 years 3. If the purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel tubes)

100. Determine the ordinary simple interest on $10, 000 for 9 months and 10 days if the rate with 100 ft2 of heating surface was $3,000 in 1980. Note that the purchase-cost-capacity exponent

of interest is 12%. is not constant over range surface area requested. What will be the purchased cost of a heat

a. $433.33 exchanger with 700 ft2 of heating surface in 1985?

b. $633.33 GIVEN:

c. $333.33 A = 100 to 2,000 ft2

d. $933.33 Present year = 1980

P1980 = $3,000

Answers: REQUIRED:

1985 purchase cost with 700 ft2

1. The purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel tubes) SOLUTION:

with 100 ft2 of heating surface was $3,000 in 1980. What will be the purchased cost of a similar Using table 3, page 163 (Cost indexes as annual average)

heat exchanger with 200 ft2 of heating surface in 1980 if purchased-cost-capacity exponent is 0.60 Where: 1980 = 560, and 1985 = 790

for surface area ranging from 100-400 ft2? For 200 ft2

GIVEN: 0.60

A1 = 100 ft2 i100-400 = 0.60 200 790

P1980 = $3, 000 i400-1,000 = 0.81 C1985 = $3,000

A2 = 200 ft2 100 560

REQUIRED:

$ of 200 ft2 in 1980 C1985 = $6,414.73

SOLUTION: For 300 ft2

0.6 0.60

200 ft 2

300

cost200 ft2 = $3,000 2

C1985 = $6,414.73

100 ft 200

C1985 = $8,181.50

cost 200 ft2 = $4, 547.15

For 400 ft2

0.60

400

2. Refer to problem no. 1. If the purchased-cost-capacity exponent for this type of exchanger is C1985 = $8,181.50

0.81 for surface areas ranging from 400-2,000 ft2, what will be the purchased cost of a heat 300

exchanger with1, 000 ft2 of heating surface in 1985?

GIVEN: C1985 = $9,722.91

A1 = 100 ft2 i100-400 = 0.60 For 500 ft2

P1980 = S3,000 i400-1,000 = 0.81

A2 = 200 ft2

Unit Operations Economics

0.81 0.81

500 800

C1985 = $9,722.91 C1985 = $15,298.79

400 700

C1985 = $11,649.13 C1985 = $17,046.32

For 600 ft2 For 1,000 ft2

0.81 0.81

600 1,000

C1985 = $11,649.13 C1985 = $17,046.32

500 800

C1985 = $13,503.00 C1985 = $20,423.39

For 700 ft2 For 1,500 ft2

0.81 0.81

700 1,500

C1985 = $13,503.00 C1985 = $20,423.39

600 1,000

C1985 = $15,298.79 C1985 = $28,363.62

4. From the preceding question, what will be the purchased cost of the heat exchanger with 800 ft 2

of heating surface in 1985? 6. The purchase and installation cost of some pieces of equipment are given as a function of

GIVEN: weight rather than capacity. An example of this is the installed cost of large tanks. The 1980 cost

A = 100 to 2,000 ft2 for an installed aluminum tank weighing 100,000 lb was $390,000. For a size range from 200,000

Present year = 1980 to 1,000,000 ld, the installed cost-weight exponent for aluminum tanks is 0.93. If an aluminum tank

P1980 = $3,000 weighing 700,000 lb is required, what is the present capital investment needed?

REQUIRED: GIVEN:

1985 purchase cost with 800 ft2 W1980 = 100,000 lb i200, 000-1,000,000 = 0.93

SOLUTION: C1980 = $390,000

For 700 ft2 REQUIRED:

0.81 C in $ for 700,000 lb

700

C1985 = $13,503.00

600

SOLUTION:

0.60 0.93

200,000 700,000

C1985 = $15,298.79 C = $390,000

1,000,000 200,000

C = $1,900,000

For 800 ft2

0.81 Present Cost

800

C1985 = $15,298.79

using table 3, page 163 (Cost indexes as annual average)

700

where: 1980 = 560, and 1985 = 904

904

C1985 = $17,046.32 C1990 = $1,900,000

560

5. Refer to problem no. 3. What will be the purchased cost of the heat exchanger with 1500 ft2 of C1990 = $3,060,000

heating surface in 1985?

GIVEN:

A = 100 to 2,000 ft2 7. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel processing

Present year = 1980 plant) is $300,000. The plant is to be an addition to an existing formaldehyde plant. The major part

P1980 = $3,000 of the building cost will be for indoor construction, and the contractor’s fee will be 7% of the direct

REQUIRED: plant cost. All other costs are close to the average values found for typical chemical plants. On the

1985 purchase cost with 1500 ft2 basis of this information, estimate the total direct plant cost.

SOLUTION: GIVEN:

For 800 ft2 Equipment Cost = $300,000

Contractor’s Fee = 7% of the direct plant cost

Unit Operations Economics

REQUIRED:

Total direct plant cost Fixed Capital Investment = $1, 246, 530

SOLUTION: 9. Refer to the previous problem and on the basis of this information, what is the total capital

Purchased Equipment 100% ($300,000)= $300,000 investment?

Purchased Installation 39% ($300,000) = GIVEN:

$117,000 Equipment Cost = $300,000

Instrumentation 13% ($300,000) = Contractor’s Fee = 7% of the direct plant cost

$39,000 Fixed capital investment = $1, 246, 530

Piping 31% ($300,000) = REQUIRED:

$93,000 Total capital investment

Electrical 10% ($300,000) = $30,000 SOLUTION:

Building 29% ($300,000) = $87,000 Fixed Capital Investment $1, 246, 530

Yard Improvements 10% ($300,000) = $30,000 Working Capital 74% ($300,000) =

Service Facilities 55% ($300,000) = $165,000 $222,000

Land 6% ($300,000) =

$18,000

Total Capital Investment = $1, 468, 530

Total Direct Plant Cost = $879,000

10. The total capital investment for a chemical plant is $1,500,000 and the plant process 3M kg of

8. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel processing product annually. The selling price of the product is $0.82/kg. Working capital amounts to 15% of

plant) is $300,000. The plant is to be an addition to an existing formaldehyde plant. The major part the total capital investment. The investment is from company funds, and no interest is charged.

of the building cost will be for indoor construction, and the contractor’s fee will be 7% of the direct Raw-material costs for the product are $0.09/kg, labor $0.08/kg, utilities $0.05/kg, and packaging

plant cost. All other costs are close to the average values found for typical chemical plants. On the $0.008/kg. Distribution costs are 5% of the total product cost. Determine the percent change in

basis of this information, estimate the fixed capital investment. total cost.

GIVEN: GIVEN:

Equipment Cost = $300,000 Total Capital Investment $1,500,000

Contractor’s Fee = 7% of the direct plant cost Product 3,000,000 kg annually

REQUIRED: Selling Price $0.82/kg

Fixed capital investment Working Capital 15% of the total capital

Raw Materials Cost $0.09/kg

Labor $0.08/kg

SOLUTION: Utilities $0.05/kg

Purchased Equipment 100% ($300,000)= $300,000 Packaging $0.008/kg

Purchased Installation 39% ($300,000) = Distribution Cost 5% of total capital cost

$117,000 REQUIRED: % change in total cost

Instrumentation 13% ($300,000) =

$39,000 SOLUTION:

Piping 31% ($300,000) = TPC = FC + WC +VO

$93,000 TPC = 0.35 + 0.040 + 0.25

Electrical 10% ($300,000) = $30,000

Building 29% ($300,000) = $87,000 TPC = 1or 100%

Yard Improvements 10% ($300,000) = $30,000 1.5

Service Facilities 55% ($300,000) = $165,000 x 500,000

Land 6% ($300,000) = by ratio and proportion =

$18,000 25 1,000,000

x = 8.84%

Engineering and Supervision 32% ($300,000) = $96,000

Construction Expense 34% ($300,000) = after producing only 500,000 kg of product

$102,000 TPC = 0.35 + 0.20 + 0.084 = 0.6384

$198,000

Constructor’s Fee 7% ($879,000) = $61,530 % change = 100 - 63.84

Contingencies 36% ($879,000) =

$108,000 % change = 36.16%

$169,530

Unit Operations Economics

11. It is desired to have a $ 9000 available from 12 years from now. If $ 5000 is available for 14. An annuity is due to being used to accumulate money. Interest is compounded at an effective

investment at the present time, what is discrete annual rate of compound interest on the annual rate of 8 %, and $1000 is deposited at the beginning of each year. What will be the total

investment would be necessary to give the desired amount? amount of annuity due be after 5 years?

GIVEN: GIVEN:

S = $ 9000 R = $1000

P = $ 5000 N = 5 yrs. I=8%

n = 12 REQUIRED: S5

REQUIRED: Interest, i SOLUTION:

SOLUTION: If no interest: S5 = R [ ( 1+ i) n – 1]/i

S = P (1 + i )n S5= $5000

$9000 = $5000(1 + i) 12 But with interest:

S5 = 1000[(1 + 0.08) 5-1]/0.08

i = 0.05 or 5.02 %

S5 = $ 5866.6009

12. An original loan of $2000 was made at 6 percent simple interest per year for 4 years. At the Per year: S = $5866.6009/5 = $ 1173.32

end of this time, no interest had been paid and the loan was extended for 6 more years at a new,

effective, compound-interest rate of 8 percent per year. What is the total amount owned at the end

of ten years if no intermediate payments are made? 15. For the total year payments of $5000 for ten years, what will be the compound amount

GIVEN: P = $2000 accumulated at the end of ten years if the payment is at the end of the year? The effective (annual)

i = 6% interest is 20% and payments are uniform.

n = 4 years GIVEN:

REQUIRED: SC R = $5000

SOLUTION: 20% annual interest

SS = P (1 + in) REQUIRED:

= 2000 [1 + 0.06(4)] S at the end of the year

SS = $2480 SOLUTION:

Extended for 6 years S = R [(1+ i) n – 1]/i

SC = $2480 (1 + 0.08)6 S = $5000[(1 +0.2) 10-1]/0.2

S = $ 129793.41

SC = $ 3,935.45

16. Referring to the previous problem, estimate the compound amount accumulated at the end of

ten years, if the payment is made weekly?

13. The original cost for a distillation tower is $24,000 and the useful life of the tower is estimated

GIVEN:

to be 8 years. The sinking fund method for determining the arte of depreciation is used, and the

R = $5000

effective annual interest for the depreciation fund is 6 percent. If the scrap value of the distillation

20% annual interest

tower is $ 4000, determine the asset value at the end of 5 years.

REQUIRED:

GIVEN: n = 8 years

S at the end of the year

V = $ 24,000

VS = $4000

REQUIRED: R

SOLUTION:

For new ieff = [1+ r/m) m-1

SOLUTION:

Ieff = [1 + 0.2/52) -1 = 0.2209

i Solving for S,

R (V VS ) S = R[1+ ieff) – 1]/ieff

(1 i)n 1

S = $5000 [1.02209) 10-1]/0.2209

S = $ 143951.4873

0.06

R (24000 4000)

(1 0.6)5 1 17. A multiple – effect evaporator is to be used for evaporating 400,000 lb of water per day from a

salt solution. The total initial cost for the 1st effect is $18,000 and each additional effect costs

R = $ 3,547.928 $15,000. The life period is estimated to be 10 years, and the scrap value at the end of the life

period may be assumed to be zero. The straight-line depreciation method is used. Fixed charges

minus depreciation are 15% yearly based on the first cost of the equipment. Steam cost $1.50 per

Unit Operations Economics

1000 lb. Annual maintenance charges are 5% of the initial equipment cost. All other cost is Use total effect = 3

independent of the number of effects. The unit will operate 300 days per year. If the lb of water

evaporated per pound of steam equals 0.85 x numbers of effects, determine the optimum number 18. Determine the optimum economic thickness of insulation that should be used under the

of effects for minimum annual cost. following conditions: Standard steam is being passed continuously through a steel pipe with an

GIVEN: outside diameter of 10.75 in. The temperature of the steam is 400F, and the steam is valued at

Initial cost = $18000 $1.80 per 1000 lb. The pipe is to be insulated with material that has a thermal conductivity of 0.03

Lb of water = 400000 lb Btu/h-ft2-F/ft. The cost of installed insulation per foot of pipe length is $4.5xIt, where It is the

Cost of additional effect = $15000 thickness of the insulation in inches. Annual fixed charges including maintenance amount to 20%

Life period = 10 of the initial installed cost. The total length of the pipe is 1000 ft, and the average temperature of

Salvage value = 0 the surrounding may be taken as 70F. Heat transfer resistance due to the steam film, scale and

Fixed charges = 15% of first cost pipe wall are negligible. The air –film coefficient at the outside of the insulation may be assumed

Steam cost = $1.50/1000 lb

Maintenance charges = 5% of first cost

Operation = 300 days/year

Lb of steam/lb water = 0.85 x no. of effects

REQUIRED:

Optimum number of effects for minimum annual cost constant at 2.0 Btu/h-ft2-F for all insulation thickness.

GIVEN:

SOLUTION: Steam

Let x = additional no. of effects 400F do = 10.75 in

Cost of equipment = 18000 + 15000x

FC = 0.15 (18000 +15000x) Do (with insulation) = 10.75 + 2 It

= 2700 + 2250 x Cost of steam = $1.80/1000lb

Thermal conductivity = 0.03 Btu/h-ft2-F/ft

Annual maintenance = 0.05(18000+15000x) Cost of insulation/ft = $4.5 It

= 900 + 750x Annual fixed charges + maintenance = 20% of Initial cost

Length = 1000 ft

T surrounding = 70F

Depreciation/yr = (18000+15000x)/10 h = 2 btu/h-ft2F

d = 1800 + 1500x REQUIRED:

Optimum economic thickness insulation

lb of steam = 400000lbH2O/day (300 days/yr)

0.85(x+1) SOLUTION:

= 1.41176 x 108 Cost of insulation = (4.5 It) (1000 ft ) = 4500 It

(x+1)

1000

FC = 500 It

x 1

= 70,588.23 / (x+1) cost of steam = m = UAo∆T

∆T = 400 – 70 =330F

Total Cost per year = CT = FC + Steam cost + depreciation + maintenance cost = 826 btu/lb

A = DoL =

10.75 2I t (1000)

CT = (2700 + 2250x) + (1800+1500x) + (900+750x) + (70588.23/x+1)

CT = 5400 + 4500x + 70588/(x+1)2 12

dC T 70588

4500

dx (x 1) 2

0 = 4500(x2+2x+1) – 70588

0 = 4500x2 + 9000x – 66088

2(4500)

x = 2.96

Unit Operations Economics

1 x = 10 M + 0.25x

Uo x = TCI = $13.33M

1 x w Do

ho kDln ROR = $3M

x100

Do do $13.33M

Dln

2 ROR = 22.5%

Dln

10.75 2I t (10.75)

10.75 I t

2 20. If a plant will require a fixed capital investment of $10 million and the working capital will

amount to 25% of the total investment and annual depreciation costs are estimated to be 10

1

Uo percent of the fixed capital investment. If the annual profit will be $3 million, what is the minimum

1 I t (10.75 2I t ) payout period (POP)?

2 0.03(10.75 I t )(12) GIVEN:

FCI = $10 M

Working capital = 25% TCI

of steam= Annual depreciation costs = 10% FCI

dTAC Annual profit = $3 M

900I t 458.8(10.75 2It)

dI t REQUIRED:

minimum payout period

SOLUTION:

depreciabl eFCI

1 POP =

profit dep' n

1 I t (10.75 2I t )

2 0.03(10.75 I t )(12) yr yr

TAC = 900 I t 2.31 ( 10.75 I t )(10.75 2I t ) = 10M

(10.75 I t )(2I t ) 2 0.935 $3M

0.1($10M)

0 = 900 I t 2.31 ( 10.75 I t )(10.75 2I t ) yr

(10.75 I t )(2I t ) 2 0.935 POP = 2.5 years

It = 1 TAC = $3228 21. An annual investigation of a proposed investment has been made. The following result has

= 1.5 TAC = $3054 been presented to management. The minimum payout period based on capital recovery using a

minimum annual return of 10 percent as a fictitious expense is 10 years; annual depreciation costs

It = 1.4 TAC = $3057

amount top 8 percent of the total investment. Using this information, determine the standard rate of

return on the investment.

19. A proposed chemical plant will require a fixed capital investment of $10 million. It is estimated GIVEN

that the working capital will amount to 25% of the total investment and annual depreciation costs Payout period = 10 years

are estimated to be 10 percent of the fixed capital investment. If the annual profit will be $3 million, Minimum annual return = 0.10 of fictitious expense

determine the standard percent return on the total investment

Annual depreciation cost = 8% TCI

REQUIRED

Standard rate of return

GIVEN:

SOLUTION

FCI = $10 M

Working capital = 25% TCI Payout period = FCI

Annual depreciation costs = 10% FCI averagepro fit avedep' n

Annual profit = $3 M

REQUIRED: yr yr

% return on investment (ROR) Ave. profit = annual profit – expenses

SOLUTION: = x – 0.10TCI

annualprof it

ROR = 10 = 0.85TCI

TCI (x 0.10TCI) 0.8TCI

But TCI = FCI + WC

x = 0.105 TCI

Let x = TCI

Unit Operations Economics

For problems 24- 26.On Aug. 1, a concern had 10,000 lb of raw material on hand, which was

%rate of return = annualprof it x10 0

purchased at a cost of $0.030 per pound. In order to build up the reserve, 8000 lb of additional raw

TCI material was purchased on Aug. 15 at a cost of $0.028 per pound. If none of the raw material was

ROR = 10.50% used until after the last purchase.

24. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales

22. The information given in the previous problem, applies to conditions before income taxes. If account for the month of August by current average method.

34% percent of all profits must be paid out for income taxes, determine the standard rate of return SOLUTION:

after taxes using the figures given in the previous problem. Ave = $ (0.030 + 0.028 + 0.031) / 3

GIVEN:

Payout period = 10 years Ave = $ 0.0297/ lb

Minimum annual return = 0.10 of fictitious expense

Annual depreciation cost = 8% TCI 25. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales

34% of all profits must be paid out for income taxes account for the month of August by “FiFo” method.

REQUIRED SOLUTION:

Standard rate of return after taxes 10,000 lb = $ 0.030

SOLUTION:

Profit = 0.105TCI (before taxes) other 2000 lb cost = $ 0.028/lb

Profit = 0.105TCI – 0.34(0.105TCI) (after taxes) 26. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales

Profit = 0.0693TCI account for the month of August by lifo method.

ROR = annualprof it x10 0 ANSWER: recent price = $ 0.031/lb

TCI

= 0.0693TCI x100 For question nos. 27 – 31.

TCI The following are the data gathered from the AMD Food Corporation:

ROR = 6.93% Cash $20,000

23. A capitalized cost for a piece of equipment has been found to be $55,000. This cost is based Accounts payable:

on the original cost plus the present value of an indefinite number of renewals. An annual interest B Company 2,000

rate of 12% was used in determining the capitalized cost. The salvage value of the equipment at C Company 8,000

the end of the service life was estimated to be 10 years. Under these conditions, what would be the

original cost of the equipment? Accounts receivable 6,000

GIVEN: Inventories 15,000

k = $55,000 i = 12% Mortgage payable 5,000

Vs = 0 n = 10 yrs. Common stock sold 50,000

REQUIRED: Cv Machinery and equipment (at present value) 18,000

SOLUTION Furniture and fixtures (at present value) 5,000

Government bonds 3,000

k = C R (1 i) V

n

Surplus 2,000

(1 i) 1

n s

Vs = 0 27. From the data given above, determine the total asset of the AMD Food Corporation.

55 000 = CR (1 0.12)

10 ANSWER:

BALANCE SHEET

(1 0.12)101 ASSETS EQUITIES

CR = $37 291.47 Current Assets Current Liabilities

CR

k= Cv Cash $ 20,000 Accounts Payable

(1 i) n 1 Accounts Receivable 6,000 MC Company $ 2,000

Cv = 55 000- 37291.47

Inventories 15,000 MD Company 8,000

(1 0.12)10 1

Cv =$37 291.47

Government Bonds 3,000 Mortgage Payable 5,000

Total $ 44,000 Total $ 15,000

Unit Operations Economics

Fixed Assets Stockholder’s Equity Rent

400

Machinery & Equipment 18,000 Common Stocks Sold 50,000 Other Expenses

Furniture & Fixtures 5,000 Total $ 50,000 1,200

Total $ 23,000 Surplus 2,000 Net Income $

19,200

Total $ 2,000

Total Assets $ 67,000 Total Equities $ 67,000

32. From the data above, determine also the total gross income of the AC Antifreeze Company.

ANSWER:

Total Assets: $ 67, 000 From the income statement;

Gross Income = $36,100

28. Determine the total current assets of the AMD Food Corporation. The following information applies to MADSteel Company on a given date:

ANSWER: From the balance sheet;

Total Current Asset = $ 44,000

Long-term debts $ 1,600

29. What is the total amount of the Current liabilities of the AMD Corporation? Debts due within 1 year 1,000

ANSWER: From the balance sheet; Accounts payable 2,300

Total Current Liabilities = $ 15,000 Machinery and equipment (at cost) 10,000

30. What is the total amount of the Fixed Assets of the AMD Food Corporation? Cash in bank 3,100

ANSWER: From the balance sheet; Prepaid rent 300

Total Fixed Assets = $ 23,000 Government bonds 3,000

Social security taxes payable 240

Reserve for depreciation 600

During the month of October, the following information was obtained in the AC antifreeze retailing Reserve for expansion 1,200

company: Inventory 1,600

Accounts receivable 1,700

Salaries $ 3,000

Delivery expenses 700

Rent 400

Sales 15,100

Antifreeze available for sale during October (at cost) 20,000

Antifreeze inventory on Oct. 31 (at cost) 11,000

Other expenses 1,200

Earned surplus before income taxes as of Sept.30 800 33. Determine the cash asset for the MADSteel Company at the given date.

31. Prepare an income statement for the month of October to determine the net income is for the ANSWER: Cash Asset = $6,100

month of October.

ANSWER:

AC Antifreeze Retailing Company Cash Assets

Income Statement Cash in Bank $ 3,100

As of October Government Bonds 3,000

Income Total 6,100

Sales $ Current Assets

15,100 Accounts Receivable 1,700

Antifreeze available for sale 20,200 Cash in Bank

Earned Surplus before income 3,100

800 Government Bonds 3,000

Total Gross Income 36,100 Inventory 1,600

Deductions Prepaid Rent

Antifreeze inventory on Oct.31 11,600 300

Salaries

3,000

Delivery 700

Total

9,700

Unit Operations Economics

Total expenses annually exc. Depreciation = $ 100,000

i = 0.12

Long-term Debts 1,600 REQUIRED: n using SLM

Current Liabilities SOLUTION:

Departments due within 1 year Vo Vs

d=

1,000 n

Accounts Payable 2,300

Social Security Taxes payable 240 x = total annual expenses inc dep’n/yr

Total

x = 100,000 + 0.12x

5,140

x = $ 13,636.36 = d

60,000 10,000

13,636.36 =

34. Determine the current asset for MADSteel Company n

n = 3.67

ANSWER: Current Asset = $9, 700 n = 4 years

39. The initial installed cost for a new piece of equipment is $10,000, and its scrap value at the end

35. Determine the current liabilities of MADSteel Company of its useful life is estimated to be $2,000. The useful life is estimated to be 10 years. After the

equipment has been in use for 4 years, it is sold for $7,000. The company which originally owned

ANSWER: Current Liabilities= $3, 540 the equipment employs the straight-line method for determining depreciation costs. If the company

had used an alternative method for determining depreciation cost, the asset (or book) value for the

piece of equipment at the end of 4 years would have been $5240. The total income-tax rate for the

36. Determine the Quick ratio for MADSteel Company company is 34% of all gross earnings. Capital-gains taxes amount to 34% of the gain. How much

net saving after taxes would the company have achieved by using the alternative (in this case,

SOLUTION: Quick Ratio = Current assets – Inventory reducing-balance) depreciation method instead of the straight-line depreciation method? GIVEN:

Vo = $10,000

Current liabilities Vs = $2,000

V4 DBM = $5,240

= $9,700– $1, 600 n = 10 years

$3, 540 V4 SLM = $7,000

Tax = 0.34

Quick Ratio = 2.29 REQUIRED: Net saving after taxes

SOLUTION:

37. Determine the current ratio of MADSteel Company SLM:

$7,000 – 7,000 (0.34) = $4,620

SOLUTION: Current ratio = current assets DDB:

$5,240 – 5,240 (0.34) = $3,458.40

Current liabilities Net saving after taxes = $4,620 - $3,458.40 = $1161.60

= $9, 700 40. A piece of equipment is originally costing $40,000 was put into use 12 years ago. At the time

the equipment was put into use, the service life was estimated to be 20 years and the salvage and

$3, 540 scrap value at the end of the service life were assumed to be zero. On this basis, the straight-line

depreciation fund was set up. The equipment can now be sold for $10,000, and a more advanced

Current ratio = 2.74 model can be installed for $55,000. Assuming the depreciation fund is available for use, how much

new capital must be supplied to make the purchase?

GIVEN:

38. A reactor of special design is the major item of equipment in a small chemical plant. The initial Vo = $40,000

cost of a completely installed reactor is $60,000, and the salvage value at the end of the useful life Vs = 0

is estimated to be $10,000. Excluding depreciation costs for the reactor, the total annual expenses a = 12

for the plant are $100,000. How many years of useful life should be estimated for the reactor if 12 n = 20

% of the total annual expenses for the plant are due to the cost for the reactor depreciation? The REQUIRED: New Capital needed

straight-line method for determining depreciation should be used. SOLUTION:

GIVEN: Vo Vs

Vo = $60,000 d=

Vs = $10,000 n

Unit Operations Economics

40,000 0 da = $ 3,276.80

d=

20 43. The depreciation charge for the fifth year if sum-of-the-years-digits depreciation is used.

GIVEN:

$2,000 Vo = $40,000

d=

yr Vs = 0

Va = Vo – ad n = 10

REQUIRED: da & % paid off

Va = 40,000 - 8 ( 2000 ) SOLUTION:

Va = $24,000 SYDM

New Capital = 55,000 – (24,000 + 10,000)

10 5 1

da = 2 ( 40,000)

New Capital = $21,000 10 10 1

da = $ 4,363.64

41. The original investment for an asset was $10,000, and the asset was assumed to have a

service life of 12 years with $2,000 salvage value at the end of the service life. After the asset has 44. The percent of the original investment paid off in the first half of the service life using the

been in use for 5 years, the remaining service life and the final salvage value are reestimated at 10 double-declining balance method.

years and $ 1,000, respectively. Under these conditions, what is the depreciation cost during the GIVEN:

sixth year of the total life is straight-line depreciation is used? Vo = $40,000

GIVEN: Vs = 0

Vo = $10,000 n = 10

Vs = $2,000 REQUIRED: da & % paid off

a=5 SOLUTION:

n = 12 5

REQUIRED: d during the sixth day V 5 = 40,000 1 2 = $13,107.20

SOLUTION:

10

Vo Vs

d= 13,107 .2

n % paid off = = 32.768%

40,000

10,000 2,000

d= % = 32.8

12

$666 .67 45. The percent of the original investment paid off in the first half of the service life using the sum-

d=

yr of-the-years-digits method.

GIVEN:

Va = Vo – ad

V 5 = 10,000 - 5 (666.67) = $6666.65

After 5 years of use:

6666 .65 1,000

da =

10

da = $566.65/yr

A piece of equipment having a negligible salvage and scrap value is estimated to have a service

life of 10 years. The original cost of the equipment was $40,000. Determine the following:

42. Based on the above data, determine the depreciation charge for the fifth year if double-

declining balance depreciation is used.

GIVEN:

Vo = $40,000

Vs = 0

n = 10

REQUIRED: da & % paid off

Solution:

da = 40,000 ( 1-2/10)5-1 2/10

Unit Operations Economics

Vo = $40,000 SOLUTION:

Vs = 0 Using SYDM:

n = 10 da = 2 ( 850,000 –50,000 ) = $ 76,190.48

REQUIRED: da & % paid off Gross Earnings = Total income – total expense

GE = $ 1,000,000 – ( $600,000 + 76,190.48 ) = $ 323,809.52

SOLUTION:

SYDM Net Profit = $ 323,809.52 (1 - 0.45) = $ 178,095.24

V1 = 40,000 – 4,363.64 = $ 35,636.36 Income tax = 0.45 (323,809.52) = $ 145,714.28

V2 = 35,636.36 - 4,363.64 = $ 31,272.72 Using SLM:

V3 = 31,272.72 - 4,363.64 = $ 26,909.08 Vo Vs

d=

V4 = 26,909.08 - 4,363.64 = $ 22,545.94 n

V5 = 22,545.94 - 4,363.64 = $ 18,181.8

850 ,000 50,000

d=

18,181 .80 20

% paid off = = 45.45%

40,000 $40 ,000

d=

% = 45.45 yr

Basis: 1 yr

46. The original cost of the property is $30,000, and it is depreciated by a 6 percent sinking-fund

method. What is the annual depreciation charge if the book value of the property after 10 years is GE = $ 1,000,000 – (600,000 + 40,000) = $ 360,000

the same as if it had depreciated at $2,500/year by the straight-line method? Net Profit = $ 360,000 (1 - 0.45) = $ 198,000

GIVEN:

Vo = $30,000 Income Tax = 0.45 ($ 360,000) = $ 162,000

i = 0.06

Reduction in net profit = $198,000 - $178,095.24 = $19,904.76

n = 10 years

REQUIRED: Reduction in income tax = $162,000 - $ 145.714.28 = $16,285.72

da = $2,500/yr

da using SFM if Va SLM = Va SFM Reduction in income tax = $16,285.72

SOLUTION:

Using SLM: 48. The total value of anew plant is $2 million. A certificate of necessity has been obtained

Va = 30,000 – 10 (2,500) permitting a write-off of 60 percent of the initial value ay 5 years. The balance of the plant requires

Va = $ 5,000 a write-off period of 15 years. Using the straight-line method and assuming negligible salvage and

scrap value, determine the total depreciation cost during the first year.

Using SFM: GIVEN:

30,000 –5,000 = R (1+ 0.06)10 - 1 / (0.06) Vo = $2,000,000

R = $ 1,896.70 / 10 yr Vs = 0

da = $ 189.67/yr n = 15

a=5

47. A concern has a total income of $1 million/year, and all expenses except depreciation amount Vs = negligible

to $600,000/year. At the start of the first year of the concern’s operation, a composite account of all REQUIRED: d after 1 year

depreciable items show a value of $850,000, and the overall service life is estimated to be 20 SOLUTION:

years. The total salvage value at the end of the service life is estimated to be $50,000. Thirty Vo new = 2,000,000 – 2,000,000 ( 0.6) = $ 800,000

percent of all profits before taxed must be paid out as income taxes. What would be the reduction Vo Vs

d=

in income-tax charges for the first year of operation if the sum-of-the-years-digits methods were n

used for depreciation accounting instead of the straight-line method?

GIVEN: 80,000 0

d=

Total income = $ 1 million/yr 15

Annual expenses exc dep’n = $600,000

For the 1st yr of operation: d = $ 53, 333. 33/ yr

y = $ 850,000

n = 20 yr

Vs = $ 50,000 50. A profit-producing property has an initial value of $50,000, a service life of 10 years, and zero

Income tax rate = 0.45 salvage and scraps value. By how much would annual profits before taxes be increased if a 5

percent sinking-fund method were used to determine depreciation costs instead of straight-line

REQUIRED: method?

Reduction in income taxes if SYDM is used instead SLM GIVEN:

Unit Operations Economics

Vo = $50,000,000 Vo = $20,000

Vs = 0 Vs = $5,000

n = 10 n=5

REQUIRED: Annual profits increase REQUIRED: da & Va

SOLUTION: SOLUTION:

5 SLM

1

0.05 1

Using SFM: Va = 50,000 - (50,000-0)

!0 Vo Vs

1 0.05 d=

1 n

Va = $28034.35

Using SLM 20,000 5,000

d= = $ 3,000

Vo Vs 5

d=

n Va1 = Vo – ad = $17,000

d = $ 25,000 Va2 = $14,000

inc = $28034.3 - $25,000

Va3 = $11,000

inc = $ 3.034.35

Va4 = $ 8,000

51. In order to make it worthwhile to purchase a new piece of equipment, the annual depreciation Va5 = $ 5,000

costs for the equipment cannot exceed $3,000 at any time. The original cost of the equipment is

$30,000, and it has a zero salvage and scrap value. Determine the length of service life necessary 54. By using Sum-of-digits depreciation

if the equipment is depreciated by the sum=of-the-years-digits method by the straight-line method. GIVEN:

GIVEN: Vo = $20,000

da = $ 3,000 Vo = $30,000 Vs = 0 Vs = $5,000

REQUIRED: n n=5

SOLUTION: REQUIRED: da & Va

Using SYDM: a=1 SOLUTION:

da = 2 ( n-1+1)/ n (n+1) x ( Vo –Vs )

3000n2 + 3000 n = 60000n n

d= (Vo-Vs)

n = 19 years

nt

52. Referring to the previous number, determine the length of service life necessary if the nt = 15

equipment is depreciated by the straight-line method.

GIVEN: 5

da = $ 3,000 Vo = $30,000 Vs = 0 d1 = 15 (20,000-5,000) = $ 5.000

REQUIRED: n

d2 = $ 4,000

SOLUTION: d3 = $ 3,000

Using SLM: a=1 d4 = $ 2,000

Vo Vs d5 = $ 1,000

d=

n Va1 = Vo – d = $ 15,000

Va2 = $ 11,000

3000 = 30000n Va3 = $ 8,000

n= 10 years Va4 = $ 6,000

Va5 = $ 5,000

A materials-testing machine was purchased for $20,000 and was to be used for 5 years with an

expected residual salvage value of $5,000. Graph the annual depreciation charges and year-end 55. By using Double-declining balance depreciation

book values obtained by using: GIVEN:

GIVEN:

Unit Operations Economics

Vo = $20,000 A broadcasting corporation purchased equipment for P53, 000 and paid P1, 5000 for freight and

Vs = $5,000 delivery charges top the job sites. The equipment has a normal life of 10 year with a trade-in value

n=5 of P5, 000 against the purchase of anew equipment at the end of the life.

REQUIRED: da & Va 58. referring to the problem above, determine the annual depreciation by straight-line method.

SOLUTION: GIVEN:

DDBM Co = P53, 000 + 1,500 = 54,500

Vs = 2 5,000 = 0.5

f = 2

CL = P5, 000 L = 10

20,000 REQUIRED: da using SLM

Vo SOLUTION:

CO C L

a 1 d=

Va 1 =

Vo 1 f

= 20,000

1 0.5

= $ 10,000 L

Va2 = $ 5,000 54,500 5,000

d=

Va3 = $ 2,500 10

Va4 = $ 1,250

d = P4, 950

Va5 = $ 625

59. From the preceding number, determine annual depreciation by sinking fund method. Assuming

interest 6 ½% compounded annually.

56. An asset with an original cost of $10,000 and no salvage value has a depreciation charge of

GIVEN:

$2381 during its second year of service when depreciated by the sum-of-digits method. What is its

Co = P53,000 + 1,500 = 54,500

expected useful life?

CL = P5, 000 L = 10

GIVEN:

REQUIRED: da using SFM

Vo = 120,000

SOLUTION:

Vs = 0

a=2 d= CO CL = 54,500 5,000 =

P49 ,500

da = $2381/yr F 13.3846

F

REQUIRED: n , 6.5% , 10

SOLUTION: n = 2(n-a+1)/(n (n+1) x ( Vo-Vs) A A,6.5% ,10

2381n2 + 2381n = 2n –2 (10,000) d= P 3,668

2381 n2 - 17619n + 20,000 = 0 A firm brought equipment for P56, 000. Other expenses including installation amounted to P4, 000.

By quadratic formula: n = 5.9998 The equipment is expected to have a life of 16 years with a salvage value of 10% of the original

n = 6 years cost.

57. An electronic balance costs P90, 000 and has an estimated salvage value of P8, 000 at the 60. Determine the book value at the end of 12 years by SLM:

end of its 10 years lifetime. What would be the book value after 3 years, using straight-line method GIVEN:

in solving for the depreciation? Co = P56,000 + 4,000 = P60,000

GIVEN: CL = 0.1 Co

Co = P90, 000 L = 10

CL = P8, 000 i = 0.12

L = 10 REQUIRED: C12 using SLM

n=3 SOLUTION:

REQUIRED: d using SLM CO C L

SOLUTION: d=

CO C L L

d=

L d12 = P3, 375 (12) = P 40,500

90,000 8,000 C12 = Co - d12 = 60,000 – 40,500

d= = P 8,200

10 C12= P19, 500

D3 = n(d) = 3(8,200) = P24,600

61. Determine the book value at the end of 12 years by SFM:

C3 = CO - D3 = 90,000 - 24,000 GIVEN:

Co = P56, 000 + 4,000 = P60, 000 CL = 0.1 Co

C3 = P 65,200 L = 10

i = 0.12

REQUIRED: C12 using SFM

SOLUTION:

Unit Operations Economics

CO C L 60,000 6,000 P54 ,000 Co = P15, 000

d= = = = P 1,263 CL = P2, 000

F F 42.7533 REQUIRED: d8 & V8

, 12% , 16 SOLUTION:

A A,6.5% ,10

CL = 2,000

D 12 = d F 12% , 16 10

15,000 = 0.1825 or 18.25%

A,

1263 (24.1331) k=1- L

C

O

d12 = P30, 480 C9 = Co (1 – k) 8 = P 2,992

D8 = Co - C8 = 15,000 – 2,992

C12 = Co - d12 = 60,000 – 30,480 D8 = P 12,008

66. Determine the rate of depreciation, the total depreciation up to the end of 8th year and book

C12= P29, 520

value at the end of 8 years for an asset that costs P15, 000 new and has an estimated scrap value

of P2, 000 at the end of 10 years by DDBM.

For numbers 62 – 64. A certain type of machine losses 10% of its value each year. The machine

GIVEN:

cost P2, 000 originally. Make cut a schedule showing the following:

Co = P15, 000

62. By yearly depreciation

CL = P2, 000

REQUIRED: d8 & V8

GIVEN:

SOLUTION:

Co = P2, 000

dep’n = 10% 2 2

REQUIRED: C5 dR = = = 0.2 or 20 %

SOLUTION: L 10

Year Book value at Dep’n (10%) Total dep’n Book 8 8

value 2 2

the beginning at the end

C8 = co 1 L = 15,000 1 10 = P2, 517

1 P 2,000 P 200 P 200 D9 = Co - C8 = 15,000 – 2,517

P 1,800 D9 = P 12,483

2 1,800 180 380

1,620 67. Mr. Dim bought a calciner for P220, 000 and used it for 10 years, the life span of the

3 1,620 162 542 equipment. What is the book value of the calciner after 5 years of use? Assume a scrap value of

1,458 P20, 000 for SLM;

4 1,458 145.8 687.8 GIVEN:

1,312 Co = P220, 000

L = 10

5 1,312.20 131.22 819.12 1,180.98 n=5

REQUIRED: D5 & C5

63. The total depreciation after 5 years. SOLUTION:

GIVEN: SLM

Co = P2, 000 dep’n=10%REQUIRED: C5 n Co CL

ANSWER: P819.12 D5 =

5220,000 20,000

= = P100, 000

L 10

C5 = Co – D5 = 220,000 – 100,000 = P 120,000

64. Estimate the book value at the end year for 5 years. C5 = P 120,000

Answer from the above table: P1, 180.98

65. Determine the rate of depreciation, the total depreciation up to the end of 8th year and book 68. Refer to the previous problem. What is the book value of the calciner after 5 years of use?

value at the end of 8 years for an asset that costs P15,000 new and has an estimated scrap value Assume a scrap value of P22, 000 for textbook for DBM.

of P2,000 at the end of 10 years by DBM. GIVEN:

GIVEN:

Co = P220, 000

L = 10

n=5

REQUIRED: D5 & C5

SOLUTION:

Unit Operations Economics

n n = 12

CL L REQUIRED: present cost of warehouse 1

Cs= Co = (220 ,000 ( 22,000 /220 ,000 )^(5/10)= P 69,570 SOLUTION:

Co

P = S/ (1+i) n

= 15, 000 x 0.444 = $6660

Cs = P 69, 570.00

the present cost of type 1 is seen to be 24, 000 + 6660 = $30, 660. Since this is smaller than the

69. Refer to the previous problem. What is the book value of the calciner after 5 years of use? type 2 building, it is more economical to build

Assume a scrap value of P20, 000 for textbook for DDBM.

GIVEN: 73. Determine the equal (year-end) payments that will be available for the next four years if we

Co = P220, 000 invest $4, 000 at 6%.

L = 10 SOLUTION:

n=5 R = $4, 000 0.06 (1 + 0.06) 4

REQUIRED: D5 & C5 = $4, 000 (0.28859)

SOLUTION: (1 + 0.06) 4 - 1

5 5

C5 = Co 1 2 2

= P220 ,000 1

10

R = $1154.36

L

Cs = P 72, 090 74. A new snow removal machine costs $50, 000. The new machine will operate at a reputed

savings of $400 per day over the present equipment in terms of time and efficiency. If interest is at

70. A structure costs P12, 000 new. It is estimated to have a life of 5 years with a salvage value at 5% and the machine’s life is assumed to be 10 years with zero salvage, how many days per year

must the machine be used to make the investment economical?

the end of life of P1, 000. Determine the book value at the end of three years.

SOLUTION:

GIVEN:

Co= P12, 000 CL =P1, 000 L=5 Assume straight-line depreciation and no salvage value.

REQUIRED: Va Annual depreciation = 50, 000 – 0 = $5, 000

SOLUTION: 10

Co - Cl = 12,000 - 1,000 = P 11,000

Average annual unearned interest = ½ [50, 000 x 0.05 + 50, 000 (0.05)] = $1375

10

Year Year in reverse order Dep’n during the year Book value

Annual cost = $6375

1 5 5/15 (11,000) = 3,664 P 8,333

To invest in the machine, the yearly savings must at least be equal to $6375. The number of days

2 4 4/15 (11,000) = 2,933 5,400

3 3 15 (11,000) = 2,200 3,200 m the machine must be used is therefore

4 2 2/15 (11,000) = 1,467 1,733

m = 6375 / 400 = 15.9 or 16 days

5 1 1/15 (11,000) = 733 1,000

75. Based on the sinking fund method and using the data in the previous problem, what number of

71. Operator A produces 120 spindle/hr on a lathe. His hourly rate is $1.80. Operator B, using an

days must the machine be used if the amount to be accumulated in 10 years is $50, 000?

identical lathe, is able to produce 150 identically units/hr. The overhead charge for a lathe is fixed

SOLUTION:

at $2.50/hr. Determine operator B’s hourly rate so that his cost per piece is identical to A’s.

SOLUTION: R = S i / [(1+i)n – 1 ]

For i = 5% and n = 10

Cost per unit for operator A = 1.80 + 2.50 = $0.0358

120

i/[(1+i)n – 1 ] = 0.0795

Let x = hourly rate of operator B. Then;

x + 2.50 = $0.0358

150 therefore R = 50, 000 x 0.0795

x = $2.88 R = $3975

72. In a type 1 warehouse, initial cost will be $24, 000.This warehouse has adequate capacity for

76. A consulting engineer decides to set up an educational fund for his son that will provide $3000

the near future, but 12 years from now an addition will be required that costs $15, 000. A type 2

per year for 6 years starting in 16 years. The best interest rate he can expect to get is 5%

warehouse costs $34, 000. This type has the same capacity as the type 1 warehouse with its

compounded quarterly. He wants to accumulate the necessary capital by making quarterly deposits

addition. What will be the present cost of the type 1 warehouse? Which of these should be built,

until his son starts college. What will be his needed quarterly deposit?

assuming that depreciation is negligible and that the interest rate is 7%?

SOLUTION:

GIVEN: i = (1+ 0.05 )4 - 1

4

Present cost = $15, 000

i = 0.051

Present worth factor, i = 7%

Unit Operations Economics

dCt/dW = k1 – k2/W

Six equal payments of $3, 000 are required; their worth at the beginning of the 16th year is

the minimum cost can be ascertained by equating the right hand side of the above eqn to 0.

P = R [ ( 1+ i )n – 1] / i (1 + i ) n

= 3000 [ (1+0.051)6 – 1] / 0.051 ( 1+0.051)6 W = ($ x lb)1/2 = lb

P = $15, 210 ( $/lb)1/2

77. The engineer has 15 years to accumulate this fund. His quarterly deposits are determined by u Therefore, minimum cost occurs when:

sing the sinking factor. There are 15 x 4 or 60 interest payments to be made at a quarterly interest W = (k2/k1)1/2 lb

rate of 0.0125

SOLUTION:

R = Si/[(1+i)n – 1 ] 80. Based on the previous problem, what is the minimum total cost?

Using n = 60 SOLUTION:

R = $15, 210 ( 1/88.5745) Ct = [k1(k2 / k1)1/2 = k2 (k1 / k2) ½ + Co]

R = $172.00 where 88.5745 represents the amount of annuity.

81. Methyl alcohol condensed at 148 F is to be cooled to 100 F for storage at a rate of 10,

78. A low carbon steel machine part, costing $350 installed, lasts 6 years when operating in a 000gal/hr by water available at 75 F in a countercurrent heat exchanger. The over-all heat transfer

corrosive atmosphere. An identically shaped part, but treated for corrosion resistance, would cost coefficient is constant and estimated at 200 Btu/ft 2-hr-F. Heat exchanger annual costs including

$650 installed. How long would the corrosion resistance part have to last to be at least as good operation are estimated at $2 per ft2 including depreciation. The cooler is to operate 5, 000 hr/year,

investment as the untreated part? Assume money is worth 7%. and the value of heat utilized is estimated at $5x10-7 per Btu. What is the estimated optimum cost

SOLUTION: of the heat exchanger if the cost for surface is $9 per ft2?

R=P [ i(1+i)n ]

[ (1+i)n - 1] SOLUTION:

= 350 x 0.2098 Since the outlet temperature is fixed;

R = $73.50 per year required ∆t is fixed at 100 – 75 = 25 F

c.r.f. = 73.50/ 650.00 = 0.113 5, 000

for n = 14 crf = 0.114 ∆t1 = (M/R) (T1 – t1) = 4/5 x 103 (148 – 75) = 11.7 F

n=x crf = U x 25 200 x 25

0.113

n = 15 crf = 0.109 crf = Outlet temp. for water : 148 – 11.7 = 136 F

0.109 cp = 0.5

ρ methanol = 0.79g/cc

Difference = 15 -14 = 1.00 0.005 0.004 q = 10, 000 x 8.33 x 0.79 (0.5)(148 -100) = 1, 580, 000 Btu/ hr

ln (25/11.7)

x = 14.20 years

q = UA∆t

79. The total cost of a cast product consists of (1) the raw material cost that is directly proportional A= 1, 580, 000

to the weight, of the casting, (2) the machining cost that varies inversely as the weight, and (3) 200 x 17.7

overhead cost that remains constant per unit produced regardless of weight. Find the weight giving A = 446 ft2

the minimum cost per casting. Estimated optimum cost: 446 x 9 = $4, 014

SOLUTION:

Let Ct = total cost 82. What is the most economical number of effects to use in the recovery of black liquor in a paper

Cw = cost based on weight plant if the following cost data are available? The annual fixed costs increase essentially linearly

Cm = machining cost with each effect (except for condensing, feeding, and other equipment costs for multiple units

Co = overhead unit cost which may be considered to balance each other). If a fixed amount of evaporation is to be

W = weight obtained and each units to have 1, 000 ft2 of heating surface with a service life of five years, the

Cw = k1W (direct proportion of raw material cost to weight) annual fixed costs Cf would be (using cost data of $25, 000 for a single evaporator of 5, 000 ft 2,

Cm = k2/W (inverse proportion of machining cost to weight) employing the 0.6 factor, and neglecting the interest).

Co = Co (constant value)

Cf =( 1, 000)0.6 25, 000 N ……. dollars per year

The minimum total cost can be determined by differentiating cost with respect to weight. 5, 000 5

Unit Operations Economics

x

where N is the number of effects. cost of fuel = 30.8 x 1gal/142000 Btu ($0.04/gal)(7200hr/yr

Because of the steam economy in multiple-effect operation, the direct costs for steam x

will decrease and the total of all annual direct costs, CD, has been established for this type of

operation as cost of fuel = 0.06246705

CD = 65, 000 N -0.95 dollars x

Ct = 1, 900 N = 65, 000 N-0.95 x

Differentiating: dCt = 1, 900 – 61, 800 N -0.95 = 0 dTc = -0.06246705 + 0.3 = 0

2

dN x

N = 5.95 or 6

x = 5.48 in

83. A capitalized cost for a piece of equipment has been found to be $55, 000. This cost is based 85. A batch inorganic chemical operations gives product C from two chemicals A and B according

on the original cost plus the present value of an indefinite number of renewals. An annual interest to the following empirical relation:

rate of 12% was used in determining the capitalized cost. The salvage value of the equipment at

the end of the service life was estimated to be 10 years. Under these conditions, what would be the C = 2.8 (AB – AC – 1.2 BC + 0.5C2 )0.5

original cost of the equipment?

where A, B and C are pounds of respective components. The reaction rate is sufficiently high to be

GIVEN: k = $55, 000 neglected, and the time to make any batch is essentially the charging and discharging time,

i = 12% including heating up, which totals 1 hr. If A costs $0.10 per lb and B costs $0.05 per lb, what is the

Vs= 0 ratio of B to A to give the minimum costs of raw materials per lb of product . what is the cost per lb

N = 10 yrs of C?

REQUIRED : Cv

SOLUTION:

k = CR ( 1 - i)n + Vs GIVEN:

(1 + i )n – 1 Reaction:

55000 = CR ( 1 – 0.12)10 A+B C

(1 + 0.12 )10 – 1 1 hr – time per batch

CR = $37, 291.47 A = $0.10/lb

B = $ 0.05/ lb

k = Cv + CR REQUIRED: minimum cost of raw materials / lb of product

(1 + 0.12 )10 – 1 SOLUTION:

Cv = $37, 291.47 Ratio of B: A = 0.5

Assume: 1 LB OF a AND 1LB OF b are used in the making of C

84. A heat treating furnace is used to preheat small steel parts. The furnace uses fuel oil consisting

$0.04 per gallon, with a heating value of 142, 000Btu/gal. The furnace has a firebrick lining, the C = 2.8 ( 1 – C – 1.2C + 0.5C2 ) 0.5

outside temperature of which is 1210 F, this is to be covered with insulation costing $300 per 1000 dC = 1.4 ( 1 – C – 1.2C + 0.5 C2) 0.5

board feet. The air temperature is 110 F. Operations is 7200 hr/yr. Conductivity is 0.028 for

insulation in Btu/hr-ft2-F. Calculate the most economical thickness of insulation. Furnace life is 8 equating to 0

years. Assume negligible temperature drop from insulation to air.

GIVEN: 0 = 1.4 (-2.2 +C)

Heat treating furnace 0 = -3.08 +C

T1 = 1210 F C = $3.08

T2 = 110 F

Cost of fuel oil $ = 0.04 / gal 86. Based from the previous problem, what is the cost per lb of C?

Heating value = 142000 Btu/gal GIVEN:

Cost of insulation = $300/1000bdft Reaction:

Operation = 7200 hrs/yr A+B C

k = 0.028 Btu 1 hr – time per batch

REQUIRED: Most economical thickness of insulation A = $0.10/lb

SOLUTION: B = $ 0.05/ lb

Basis: A = 1 ft1 REQUIRED: cost per lb of C

q = - kA∆T SOLUTION:

= - (0.028)(1)(110-1210) By ratio and proportion:

x If A = $0.1 /lb and B = $0.05/lb

q = 30.8 C = $3.08/ lb

Unit Operations Economics

Let x additional cost of equipment

87. Seven million pounds of water per year is to be obtained from 8 percent solids slurry to be FCI = $15 + x

filtered on a leaf filter to produce a cake containing 40 percent solids. The area of the filter is 200 Annual share with 15% interest

ft2. Tests show a value of 2 x 104 for k in pound units. The cake is not washed. The dumping and = 0.15 (15+x)

cleaning time is 3 hr and costs $39 each cycle. Filtration costs are $14 per hr, and inventory = 2.25 + 0.15x

charges maybe neglected. What is the cycle time for minimum costs? with 5 year payment period

GIVEN: 15 + 0.15x

7000000 lbwater/yr – can obtained from 8% slurry 5

A filter = 200 ft2 Cost of equipment invested:

Dumping and cleaning time = 3 hr = $200, 000 x / 300 tons/day (200 days/yr)

Filtration costs = $14/hr =3.33 x

REQUIRED: cycle time for minimum cost tons of concentrate per year

SOLUTION: = [500 (0.5) + 300 (0.667) + 300 (0.71) ]tons/day ( 200d/yr)

Q = A ( k θf) 0.5 = 19893 / x +1

= 200 ( 2x104)(θf)0.5 Cost total/yr = FCI + Cost concentrate + Annual Charges + Investments

7, 000, 000 lb/ yr is also equal to 799.08 lb/hr Ct = 15 +3.825x +(19893/x+1) 9+ 2.25 +0.15x +3.33x

799.08 = 200 ( 2x104)(θf)0.5 dCt/dx = 3.48x - 19893/ (x+1)2 = 0

θf = 0.014 hrs 3.48 ( x2 +2x +1) – 19893 = 0

88. Referring to the previous problem, calculate the cycle time for maximum production. by quadratic equation:

GIVEN: x = $74.6

7000000 lbwater/yr – can obtained from 8% slurry

A filter = 200 ft2 90. Determine the selling price in dollars per ton (100% mineral basis) required for which the cost

Dumping and cleaning time = 3 hr of the n new equipment is justified.

Filtration costs = $14/hr GIVEN:

θf = 0.014 hrs 500 tons/day of ore with assay of 50 % mineral

REQUIRED: cycle time for maximum production 300 tons/day of ore with assay of 66.7% mineral

Fixed cost = $15/ton

SOLUTION: Operation = 200 days/year

θtotal = θf + θw + θd Pay out period = 5 years

θw = 0 ; since the cake is not washed Interests = 15%

θf = 0.014 hrs No salvage value

θd = 3 hrs REQUIRED: selling price

SOLUTION:

θtotal = ( 0+0.014+3) Since x = $74.6

θtotal = 3.04 hrs. 19893 / (74.6 + 1) = $ 263.13

91. What is the % increase in recovery and rejection for the new process based on mineral and

For nos. 89- 91. gauged?

In processing 500 ton/day of ore assaying 50% mineral, 300 tons of concentrate containing 66.7 % GIVEN:

are obtained at a cost of sales ( all fixed operating cost are excluded) of $15 per ton concentrate. 500 tons/day of ore with assay of 50 % mineral

An investment of $200, 000 of concentrate that will assay 71% mineral. If the plant operates 200 300 tons/day of ore with assay of 66.7% mineral

days/year, equipment must pay out in 5 years with interest at 15% and no salvage value and no Fixed cost = $15/ton

additional labor or repair costs need to be considered. Operation = 200 days/year

Pay out period = 5 years

89. Based on the stated problem above, calculate the additional cost per ton of concentrate for Interests = 15%

capital recovery on the new equipment. No salvage value

GIVEN: Selling price = $ 263.13

500 tons/day of ore with assay of 50 % mineral REQUIRED: efficiency

300 tons/day of ore with assay of 66.7% mineral SOLUTION:

fixed cost = $15/ton E = 500(0.5) + 300(0.6667) – 300(0.71)

Operation = 200 days/year 500(0.5) + 300(0.6667)

Pay out period = 5 years E = 52.677%

Interests = 15%

No salvage value 92. A ties on a plant railroad sliding are to be replaced. Untreated ties consisting $ 2.50 installed

REQUIRED: additional cost per ton concentrate have a life of 7 years. If created ties have a life of 10 years, what is the maximum installed cost that

SOLUTION: should be paid for treated ties if money is worth 8 percent?

Unit Operations Economics

GIVEN: F = 24, 457.24

Untreated ties = $2.50 96. At a certain interest rate compounded quarterly, P1, 000 will amount to P4, 500 in 15 years.

n=7 What is the amount at the end of 10 years?

Created ties = X SOLUTION:

n = 10

REQUIRED: maximum installed cost For 15 years, P = 1000

n = 4 (15); 6o periods

SOLUTION: F = 4, 500

Getting the annual depreciation cost

F= P (1+i)n

0.08 = (2.50/7) – ( x /10) 4, 500 = 1, 000 (1+ i)60

X – 2.50 i = 0.02538

n = 4 (10); 40 periods

93. Powdered coal having a heating value of 13, 500 Btu/ lb is to be compared with fuel oil worth F= 1, 000 (1 + 0.02538)40

$2.00 per bbl (42 gal) having a heating value of 130,000 Btu/gal as a source of fuel in the F = 2, 725.17 pesos

processing plant. If the efficiency of the conversion of the fuel is 64% for coal and 72 % for oil, with

all other costs being equal, what is the maximum allowable selling price for coal per ton? 97. A one bagger concrete mixer can be purchased with a down payment of P8, 000 and equal

installments of P600 each paid at the end of every month for the next 12 months. If the money is

SOLUTION: worth 12% compounded monthly, determine the equivalent cash prize of the mixer.

Powdered coal SOLUTION

Let x be the selling price per ton P = 8, 000 = 600 ( 1 – (1+ 0.01)-12)\

0.01

(X / ton)(ton/ 2000lb) (lb / 13500Btu) (0.64) P = 14, 753.05 pesos

= 2.37 x 10 -8- /Btu

Fuel Oil 98. A certain company makes it the policy that for any new piece of equipment, the annual

(2.00/bbl) (bbl/42gal) (gal/130000Btu)(0.72) depreciation cost should not exceed 10% of the original cost at any time with no salvage or scrap

= 2.67x 10 -7 / Btu value. Determine the length of service life necessary if the depreciation method use is straight line

Equating both prices: formula.

X = $11.13 / ton SOLUTION

94. A steam boiler is purchased on the basis of guaranteed performance. However, initial tests Vs = 0

indicate that the opening (income) cost will be P400 more per year than guaranteed. If the d = 0.10 V

expected life is 25 years and money is worth 10 %, what deduction from the purchase price would d = V –Vs

compensate the buyer for the additional operating cost? n

SOLUTION 0.10V = V – 0

n

A = 400 n = 10 years

N = 25 i = 0.10

P = 400 ( 1 – ( 1+0.10)-25)

0.10 99. Solve the previous problem with the sinking fund formula at 8%

P = 3, 630.82 pesos SOLUTION

0.10V = (V-0) ( 0.08)

95. If the sum of P12, 000 is deposited in an account earning interest at the rate of 9% (1 + 0.08)n – 1

compounded quarterly, what will it become at the end of 8 years?

n = ln 1.08

= 7.64

SOLUTION: n = 8 years

P = 12, 000 100. Determine the ordinary simple interest on $10, 000 for 9 months and 10 days if the rate of

i = 9% / 4 = 2.25% interest is 12%.

n = 8 (4) = 32 SOLUTION

9 months and 10 days = 9 (30) + 10 = 280 days

F = P(1+i)n P = $10, 000

= 12, 000 (1 + 0.0225)32 I = Pi (d/360)

Unit Operations Economics

I = 10, 000 (0.12) (280/360)

I = $933.33

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