Assignment

Sr. No. Question

1 Write single payment compound amount formula?
Draw a life cycle of a new project?
What are the various methods available in decision making in selection of Alternative in
economic analysis of investment?

2 When a pair of dice are tossed, the results may be any whole number from 2 through 12. In
the game of craps one can win by tossing either a 7 or 11on the first roll. What is the
probability of doing this?

3 A firm is considering an investment. The most likely data values were found during the
feasibility study. Analyzing past data of similar projects shows that optimistic values for
the first cost and the annual benefit are 5% better than most likely values. Pessimistic
values are 15% worse. The firm's most experienced project analyst has estimated the
values for the useful life and salvage value.

Compute the rate of return for each estimate. If a 10% before-tax minimum attractive rate
of return is required, is the investment justified under all three estimates? If it is only
justified under some estimates, how can these results be used.

4 Compute F for the following diagram.

05 A 20-year-old student decided to set aside $100 on his 21st birthday for investment. Each
subsequent year through his 55th birthday, he plans to increase the sum for investment on a
$100 arithmetic gradient. He will not set aside additional money after his 55th birthday. If
the student can achieve a 12% rate of return, what is the future worth of the investments on
his 65th birthday?

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06 Consider three mutually exclusive alternatives:

Each alternative has a 20-year life and no salvage value. If the MARR is 6%, which
alternative should be selected?

07 A new corporate bond was initially sold by a stockbroker to an investor for $1000. The
issuing corporation promised to pay the bondholder $40 interest on the $1000 face value of
the bond every 6 months, and to repay the $1000 at the end of 10 years. After one year the
bond was sold by the original buyer for $950.
(a) What rate of return did the original buyer receive on his investment?
(b) What rate of return can the new buyer (paying$950) expect to receive if he keeps the
bond for its remaining 9-year life?

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