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10/7/2020 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit-Cost: F20 CE167 Engineering Project Management https://bcourses.berkeley.edu/courses/1493717/quizzes/2328154 1/18 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit- Cost Due Oct 13 at 11:10am Points 20 Questions 24 Available Sep 29 at 12:30pm - Oct 15 at 11:10am 16 days Time Limit None Allowed Attempts 3 Instruc±ons A±empt History Attempt Time Score KEPT Attempt 2 10 minutes 20 out of 20 LATEST Attempt 2 10 minutes 20 out of 20 Attempt 1 11,120 minutes 19.25 out of 20  Correct answers are hidden. Score for this attempt: 20 out of 20 Submitted Oct 7 at 8:52pm This attempt took 10 minutes. Dear Students: This is your Homework Quiz 4. Like previous Homework Quizzes it will be graded on a pass-fail basis and we have set it up so that all questions will be graded automatically. Accordingly you will get your grade right after you submit your work. NOTE that you will see the correct/incorrect answers at that time, but you will see these only ONCE so take a screenshot for later review. You can then assess whether or not to take the test again. Again you will have to draw cash flow diagrams etc. and upload them. If you have any doubts at any specific point in time, state your assumptions. Please see the instructions for where your should upload your file. 15 out of a total of 20 points on the auto-graded part + this file upload (both are needed!) will earn you a "pass." A pass will earn you 5 points out of a maximum of 55 points for assignments, team exercises, etc. You may repeat taking this test up to three times before the final due date to earn a "pass." Best wishes, Prof. T Take the Quiz Again

10/7/2020 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit-Cost: F20 CE167 Engineering Project Management https://bcourses.berkeley.edu/courses/1493717/quizzes/2328154 2/18 NOTE - In several questions of this homework quiz, we ask you to draw a cash flow diagram, write a formula, or the like. Please do so on paper or on your computer. Keep all such work together in one file. You will be asked to upload that single file as part of the last question in this homework. If you choose to redo this homework, which you can do up to 3 times, you will be able to upload a new file each time. 1.1 Use of IRR to Select Investment Alterna±ves A company plans to install new equipment as part of a production improvement program. It has identified three alternatives, all with the same useful life of 10 years. The company's minimum attractive rate of return is 10%. A B C Installation Cost $1,000 $800 $500 Uniform Annual Benefit $122 $120 $100 Salvage Value $750 $300 -$200 Use the incremental IRR method to conduct your analysis and answer questions 1.3 and 1.4. On a sheet of paper or on your computer, draw a cash flow diagram for each alternative. 1 / 1 pts Question 1 1.2 Use of IRR to Select Investment Alterna±ves Match the steps for the incremental IRR method. If you can't read all the words, please zoom out .

10/7/2020 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit-Cost: F20 CE167 Engineering Project Management https://bcourses.berkeley.edu/courses/1493717/quizzes/2328154 3/18 Step 1a Calculate the IRR for the Step 1b If the alterna±ves are ba Step 2 Compare the IRR with t Step 3a If the IRR is less than th Step 3b For an acceptable altern Step 4 Compare the IRR for the Step 5 If no higher level of inve Step 6 The acceptable alterna± 0.25 / 0.25 pts Question 2 1.3.a Use of IRR to Select Investment Alterna±ves Which alternative is the defender? A B C

10/7/2020 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit-Cost: F20 CE167 Engineering Project Management https://bcourses.berkeley.edu/courses/1493717/quizzes/2328154 4/18 1 / 1 pts Question 3 1.3.b Use of IRR to Select Investment Alterna±ves What is the IRR of the defender? ( round your answer to two decimal places, no need to include the % sign ). 12.04 0.25 / 0.25 pts Question 4 1.3.c Use of IRR to Select Investment Alterna±ves Is it true that the defender is a viable alternative? True False 0.25 / 0.25 pts Question 5 1.4.a Use of IRR to Select Investment Alterna±ves Which alternative is the challenger? A B C

10/7/2020 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit-Cost: F20 CE167 Engineering Project Management https://bcourses.berkeley.edu/courses/1493717/quizzes/2328154 5/18 1 / 1 pts Question 6 1.4.b Use of IRR to Select Investment Alterna±ves What is the IRR of the relevant cash flow to see if the challenger is better than the defender? ( round your answer to two decimal places, no need to include the % sign ). 10.71 0.25 / 0.25 pts Question 7 1.4.c Use of IRR to Select Investment Alterna±ves Is it true that the challenger is a better alternative than the defender? True False 2.5 / 2.5 pts Question 8 2.1 Taxes A laboratory workbench costs $100,000. It is expected to produce gross earnings of $20,000 each year and based on the use you have for it, you expect it will have a useful life of 8 years. The IRS describes it as a 5-year asset for tax purposes. Use the straight-line method with half-year convention to calculate each year’s depreciation charge. Fill out the table below with the results ( no need to include the $ sign ). NOTE - this table provides a few extra cells towards the bottom; if you do not need them, put a 0 in them.

10/7/2020 HW04 Engineering Economics - IRR, Taxes, Bonds, Benefit-Cost: F20 CE167 Engineering Project Management https://bcourses.berkeley.edu/courses/1493717/quizzes/2328154 6/18 Answer 1: Answer 2: Answer 3: Answer 4: Answer 5: Year Depreciation Charge Book Value 0 $ 0 $ 100,000 1 $ 10,000 $ 90,000 2 $ 20,000 $ 70,000 3 $ 20,000 $ 50,000 4 $ 20,000 $ 30,000 5 $ 20,000 $ 10,000 6 $ 10,000 $ 0 7 $ 0 $ 0 8 $ 0 $ 0 9 $ 0 $ 0 10 $ 0 $ 0 0 100,000 10,000 90,000

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