ECON 209 Engineering Economics W25 Quiz 4 Solutions

ECON/ENG 209 Quiz 4 Winter 2025 ECON/ENGG 209 Quiz 4 Marks /10 Mar. 24, 2025 SOLUTIONS Instructions: · You have a total of 20 minutes to complete your quiz · You may not leave the quiz early. Plea ...

ECON/ENG 209 Quiz 4 Winter 2025 ECON/ENGG 209 Quiz 4 Marks /10 Mar. 24, 2025 SOLUTIONS Instructions: · You have a total of 20 minutes to complete your quiz · You may not leave the quiz early. Please remain seated until the end of the exam. · Only non-communicating calculators are allowed · Ensure you name and student number are on your bubble sheet · Only answers in the bubble sheet will be marked · Only choose one answer per question ECON/ENG 209 Quiz 4 Winter 2025 1. You are trying to determine whether to rent or to buy a new security system. You plan to use this model for three years and use an annual rate of 6% based on monthly compounding for your calculations. If you rent, you will be charged $50 per month, at the beginning of each month, starting TODAY but if you buy, you will have to pay $1,650 for the system today. What should you do? A. You should rent because it costs less ($1,644) than buying today B. You should buy today because it costs less than renting ($1,652) C. You should buy today because it costs less than renting ($1,700) D. Renting and buying cost the same so you will be indifferent E. None of the answers above are true Answer: B 2. Compute the present value of a series of cash flows starting at $45 at the end of the year and growing each year by another $20 for 5 years total. Assume an interest rate of 12% A. $127.94 B. $162.21 C. $290.16 D. $425.00 E. None of the above Answer: C 3. What is the present worth now of $750 in Year 1 that increases at 8% per year for 10 years at an interest rate of 8% per year? A. $4251.60 B. $4761.90 C. $6,944.44 D. $7,500.00 E. $8,100.00 Answer: C 4. Your firm wants to save $250,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each year starting today. The firm can earn a 4.7% rate of return. How much does the firm have to save each year to achieve their goal? A. $75,966.14 B. $76,896.16 C. $78,004.67 D. $81.414.14 E. $83,333.33 Answer: A