Question

In: Economics

All questions are true/false a) If you multiply the G/P, P/F, and F/A factors together, you...

All questions are true/false

a) If you multiply the G/P, P/F, and F/A factors together, you will obtain the value for the A/G factor. True or False

b) A project is not economically viable when it is expected to return at least the MARR. True or False

c) For an arithmetic gradient series of monthly cash flows that begins at the end of 37th month, the A/G factor will yield an “A” value at the end of three years. True or False

d) To double an investment at an interest rate of 6% compounded annually, it will take almost 12 years. True or False

e) It makes no difference in accepting or rejecting a project whether a rate of return equation is written in terms of PW, AW, or FW. True or False

Solutions

Expert Solution

1) If you multiply the G/P, P/F, and F/A factors together, you will obtain the value for the A/G factor.

False. A/G formula is which cannot be derived multiplying the given factors.

2. Project is not economically viable when it is expected to return at least the MARR.

False. The project is only viable when it can atleast return MARR. It is like a benchmark that has to be achieved.

3. For an arithmetic gradient series of monthly cash flows that begins at the end of 37th month, the A/G factor will yield an “A” value at the end of three years.

True. Given the above formula, it will yield an “A” value at the end of three years.

4. To double an investment at an interest rate of 6% compounded annually, it will take almost 12 years.

True.To double an investment at an interest rate of 6% compounded annually, it will take 11.89 years i.e. almost 12 years. For example, if we consider present value= 1000, future value= 2000 and interest rate is 6%. Solving this we will get, n=11.89 or approximately 12.

5. It makes no difference in accepting or rejecting a project whether a rate of return equation is written in terms of PW, AW, or FW.

True. It does not matter if it is PW, AW, or FW, same rate can be used to calculate PW, AW, or FW.


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