||Multiple Choice Questions 1. Of the following three relations, the correct one or ones to calculate the annual worth of vendor 1 cash flow estimates is ( note : all dollar values are in thousands): Relation 1: AW1 = – 200(A/P, 6%, 10) + 70 + 25(A/F, 6%, 10) Relation 2: AW1 = [–200 – 50(P/A,6%,10) + 120(P/A,6%,10) + 25(P/F,6%,10)](A/P, 6%, 10) Relation 3: AW1 = – 200(F/P, 6%, 10) + 25 + (–50 + 120) (A/P, 6%, 10) (a) 1 and 3 (b) Only 1 (c) 1 and 2 (d) Only 3 2. The AW values for the alternatives are listed below. The vendor or vendors that should be recommended is: AW1 = $44,723 AW2 = $43,370 AW3 = $40,000 (a) 1 and 2 (b) 3 (c) 2 (d) 1 3. The capital recovery amount for vendor 3 is: (a) $40,000 per year (b) $60,000 per year (c) $43,370 per year (d) $100,000 per year 4. If a revenue alternative has a negative AW value and it was correctly calculated, it means the following: (a) The equivalent annual worth of revenues does not exceed that of the costs. (b) The estimates are wrong somewhere. (c) A minus or plus sign of a cash flow was entered incorrectly into the PMT spreadsheet function. (d) The alternative should have a longer life so revenues will exceed costs. 5. All the following statements about the capital recovery amount for an alternative are false except: (a) Annual revenue can be no more than this amount, if the alternative is selected. (b) A monetary estimate of new capital funds required each year for the life of the alternative. (c) An amount of revenue required to recover the first cost plus a stated return over the life of the alternative. (d) Does not consider the , since it is returned at the end of the alternative’s life.