CM 2113 EXAM 1 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026

CM 2113 EXAM 1 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026 what is the largest single equipment cost? - Answers repair 37% Purchase price-salvage+overhead= - Answers ownership expense Regardless of how much a machine is used, the owner must pay owning cost. true or false - Answers true bulldozer new= 260,00 4 yr later= 120,000 ownership expense=? - Answers 140,000 Machine owning cost includes which of the expenses listed? $ Repairs $ Insurance $ Fuel $ Taxes - Answers insurance, taxes operating cost includes what - Answers -consumables(fuel, oil, grease) -repair -Maintenance -tires or tracks -high wear items Machine operating cost includes which of the expenses listed? $ Repairs $ Interest $ Tires $ Taxes - Answers repairs, tires A series of payments or receipts that occurs at the end of each period for n periods (not at the beginning of each period). - Answers a uniform series of payments is used to determine the future worth of a series of equal payments or receipts. *[(1+i)n-1]/i *(F/A,i,n) - Answers Uniform Series Compound Amount Factor used to determine the present worth of a series of equal payments or receipts. *[(1+i)n-1]/[i(1+i)n] *(P/A,i,n) - Answers Uniform Series Present Worth Factor is to determine a series of equal payments or receipts that is equivalent to a stated or required future sum. *i/[(1+i)n-1] *(A/F,i,n) - Answers Uniform Series Sinking Fund Factor is used to a series of equal payments or receipts that is equivalent to a given present worth sum. *[i(1+i)n-1]/[(1+i)n] *(A/P,i,n) - Answers Uniform Series Capital Recovery Factor A contractor is investing $5,000 per year in savings certificates at an interest rate of 6% and plans to continue the investment program for 6 years. He is doing this so he will have a down payment for some new construction equipment. What will the value of the contractor's investment be at the end of 6 years? - Answers $34,875 A contractor has purchased a new truck for $125,000 and plans to use the truck for 6 years. After 6 years of use, the estimated salvage value for the truck will be $30,000. What is the contractor's annual cost (annual uniform series) for the truck at an interest rate of 10%? - Answers $24,850 A contractor purchased a small used tractor for $20,000 that she intends to use for landscaping around newly constructed houses. Maintenance costs for the tractor are estimated to be $1,000 per year. The contractor plans to dispose of the tractor after 5 years and realize a salvage value of $7,000. Annual income generated by the tractor is estimated to be $5,000 per year. Draw the cash flow diagram. - Answers A contractor is considering purchasing a used tractor for $180,000 that she could use for 10 years and then sell for an estimated salvage value of $10,000. Annual maintenance and repair costs for the used tractor are estimated to be $15,000 per year. As an alternative, the contractor could lease a similar tractor for $4,000 per month. Should the contractor purchase the used tractor or lease the tractor from an equipment dealer? Annual operating cost are approximately the same for both alternatives. Use a minimum attractive rate of return of 12%. - Answers To Rent: A=12months x $4,000 per month A=$48,000 To Own: A= $180,000 (A/P,12%,10) or (.177) +$15,000 yearly - $10,000 (A/F,12%,10) or (.057) =$46,290 A contractor is considering making a $300,000 investment in used construction equipment. He estimates that his annual maintenance and repair costs for the equipment will be $60,000 and that his annual income from the equipment will be $115,000. He estimates that he can get 8 years of use out of the equipment, but that there will be no salvage value at the end of the 8 years. What would be the contractor's prospective rate of return from this investment? - Answers For A where i is unknown -$115,000 = $60,000 + $300,000 (A/P,i,8) -$115,000 - $60,000 / $300,000 = (A/P,i,8) -. 183 =(A/P,i,8) -9%=.181 and 10% = .187 -i=9 + .183-.181 / .187-.181 -i=9.3 A contractor is considering the purchase of a new dump truck at a cost of $85,000. Annual maintenance and repair costs are estimated to be $4,000 per year. The truck would be used for 8 years and then sold for an estimated salvage value of $10,000. The contractor estimates that the annual income generated by the truck will be $16,000 per year. What is the prospective rate of return for this investment? - Answers For P where i is unknown $85,000 + $4,000 (P/A,i,8) = $16,000(P/A,i,8) + $10,000 (P/F,i,8) Subtract $4,000 (P/A,i,8) from each side $85,000 = $12,000(P/A,i,8) + $10,000 (P/F,i,8) Trial and Error using 5% and then 4% A decrease in value ○ Market value ○ Value to the owner ○ To offset income for tax purpose - Answers Depreciation the value at the time of disposal or retirement - Answers Salvage value initial cost less the depreciation to the equipment - Answers Book value subtracted from business revenues as they occur. ■ Labor ■ Utilities ■ Materials ■ Insurance, etc. - Answers Expenses subtracted from business expenses over time as the asset is used up until the book value equals the salvage value. No further depreciation is allowed. - Answers Depreciation the period over which an asset is depreciated (=recovery period). - Answers Depreciation period purchase price less salvage value - Answers Depreciable value