Q&A Hero

Q: What are the different types of depreciation? What are the advantages and disadvantages of each?

Q: Describe the basic techniques of financial analysis.

Q: The term ________ is often used to describe the common U.S. business practice of focusing on short-term results from low-risk projects via analysis by NPV or IRR calculations.

Q: The ________ is used to evaluate projects by calculating the amount of time that will elapse before the total of after-tax cash flows will equal the initial investment.

Q: The ________ is the discount rate that makes the NPV of a project zero.

Q: The ________ is the interest rate that is the lowest desired return on an investment.

Q: The cash flow from the sale or disposal of plant and equipment at the end of a project's life is its ________.

Q: Since 1986, the only acceptable accelerated depreciation method is the ________.

Q: The ________ method of calculating annual depreciation is the simplest, and usually is adequate for internal planning purposes.

Q: ________ is an allowance for the consumption of capital.

Q: ________ are the amounts of cash that flow into and out of the organization solely because of the project.

Q: ________ is the cash that will flow into and out of the organization.

Q: The NCX10 now features a coffee brewing subassembly, so Alex budgets the following cash outlays and incomes for the next five years. If the interest rate is 8%, what is the present value of this investment after the second year? Period Inflow Outflow 0 $5,000 $20,000 1 7,000 1,000 2 8,000 1,500 3 7,000 2,000 4 6,000 3,000 5 5,000 5,000 A) $3,264 B) $5,572 C) -$3,871 D) -$9,444

Q: The NCX10 now features a coffee brewing subassembly, so Alex budgets the following cash outlays and incomes for the next three years. If the interest rate is 25%, what is the present value of this investment? Period Inflow Outflow 0 $5,000 $20,000 1 7,000 1,000 2 8,000 1,500 3 7,000 2,000 A) -$3,264 B) -$3,397 C) -$3,422 D) -$3,480

Q: Lisa is pondering the construction and operation of a home-based cattery. She expects it will cost $25,000 to construct and will have a lifespan of four years before it collapses due to faulty construction and ammonia rot. Cash flows during those four glorious years are estimated as follows: Year Inflow Outflow 1 10,000 3,000 2 12,000 4,000 3 13,000 5,000 4 10,000 6,000 If the interest rate is 5%, what is the present value of the cattery project? A) 8,522 B) 8,823 C) 9,124 D) 9,625

Q: Lisa is pondering the construction and operation of a home-based cattery. She expects it will cost $15,000 to construct and will have a lifespan of four years before it collapses due to faulty construction and ammonia rot. Cash flows during those four glorious years are estimated as follows: Year Inflow Outflow 1 7,000 3,000 2 8,000 3,300 3 9,000 3,600 4 10,000 3,900 If the interest rate is 5%, what is the present value of the cattery project? A) 2,756 B) 3,124 C) 2,983 D) 3,277

Q: Lisa is pondering the construction and operation of a home-based cattery. She expects it will cost $35,000 to construct and will have a lifespan of four years before it collapses due to faulty construction and ammonia rot. Cash flows during those four glorious years are estimated as follows: Year Inflow Outflow 1 6,000 3,000 2 7,000 3,300 3 8,000 3,600 4 9,000 3,900 If the interest rate is 5%, what is the present value of the cattery project? A) -18,800 B) -20,790 C) -26,378 D) -47,168

Q: Which of the following is an accelerated depreciation method? A) straight-line depreciation B) MACRS C) net present value D) after-tax cash flow

Q: A poultry farmer is interested in purchasing an industrial egg tester that can measure weight, albumin height, yolk color, and Haugh units all at the touch of a button. The unit will cost $6900 and is expected to last 10 years at which point it can be sold for $1,000 to a farmer in a less stringently controlled egg market. What is the annual depreciation for year 4 under the MACRS method? A copy of Table F.3 is appended to your exam. A) $862 B) $795 C) $737 D) $680

Q: A poultry farmer is interested in purchasing an egg tester that can measure weight, albumin height, yolk color, and Haugh units all at the touch of a button. The unit will cost $6,900 and is expected to last 10 years at which point it can be sold for $500 to a farmer in a less stringently controlled egg market. What is the annual depreciation under the straight line method? A) $640 B) $690 C) $50 D) $740

Q: Which method of analysis does not consider the time value of money? A) net present value (NPV) B) internal rate of return (IRR) C) payback D) future value of an investment (FVI)

Q: Depreciation: A) is not an allowance for the consumption of capital. B) is not a legitimate cash flow. C) does not act as a tax shield. D) does not consider the salvage value of an item.

Q: The net present value (NPV) method evaluates an investment by calculating the present values of all after-tax total cash flows and then subtracting the original investment amount from their total.

Q: To calculate straight-line depreciation, you divide the purchase price of the investment by the asset's expected economic life.

Q: Straight-line depreciation is the simplest way to calculate depreciation and usually is adequate for internal planning purposes.

Q: Straight-line depreciation is an accelerated depreciation method.

Q: Depreciation is not a legitimate cash flow.

Q: What is the future value of an investment of $10,000 at 8% interest after 10 years?

Q: Explain the time-value-of-money concept.

Q: Cash flows should be converted to ________ amounts before applying the net present value, payback, or internal rate of return method to them.

Q: The present value factors found in Table F.1 were calculated by changing the values of ________ and ________.

Q: A(n) ________ is a series of payments of a fixed amount for a specified number of years.

Q: In the formula P = the term r is ________.

Q: The reduction of the value of money received in the future when the interest rate is known is called ________.

Q: The amount that must be invested now to accumulate to a certain amount in the future at a specified interest rate is called the ________.

Q: The process by which interest on an investment accumulates and then earns interest itself for the remainder of the investment period is called ________.

Q: The ________ is the concept that a dollar in hand today is worth more than a dollar to be received in the future.

Q: Conhugeco's CEO is ready to step down and wants to sock away enough money in his offshore Caribbean accounts to generate $150,000 per year for the next ten years. If he can secure a 4% interest rate from the bank, how much does he need to earmark today? A) about $1.1 million B) about $1.2 million C) about $1.5 million D) about $1.4 million

Q: Conhugeco is eyeing a new Plotzer 3,000, which has a list price of $12,000,000. How much should they set aside today if they want to make their purchase one year from now and their interest-bearing checking account pays 3% annually? A) about $11.6 million B) about $11.2 million C) about $12.3 million D) about $12.8 million

Q: It is estimated that the cost for the first year of college at Massive University, the state school with the best operations management program, will be $60,000 by the time your son is ready to enroll as a student. If prevailing interest rates will average 5 percent, what amount should you invest now to pay his first year's tuition eight years from now? A) less than $35,000 B) between $35,000 and $38,000 C) between $38,000 and $41,000 D) more than $41,000

Q: An investor puts $10,000 in an account earning 4 percent compounded interest. At the end of three years, the account will have a value of: A) less than $11,000. B) between $11,000 and $11,200. C) between $11,200 and $11,400. D) more than $11,400.

Q: The amount to be invested now to accumulate to a certain amount in the future at a specified interest rate is called the: A) time value of money. B) present value of an investment. C) future value of an investment. D) None of the above.

Q: The value of an investment at the end of the period over which interest is compounded is called the: A) time value of money. B) present value of an investment. C) future value of an investment. D) None of the above.

Q: The interest rate is also called the discount rate.

Q: The present value of an investment is the amount that must be invested now to accumulate to a certain amount in the future at a specific interest rate.

Q: The value of an investment at the end of the period over which interest is compounded is called the future value of the investment.

Q: Discounting is the process by which interest on an investment accumulates, and then earns interest itself for the remainder of the investment period.

Q: If an invested amount and its accumulated interest is continually reinvested, its future value is the principle multiplied by one plus the interest rate raised to the number of periods the investment continues.

Q: The time value of money implies that a dollar in hand today is worth more than a dollar to be received in the future.

Q: Big Bills McGee does not carry any paper money in his wallet that has a denomination less than $10, preferring to have a ready supply of $10, $20, $50, and $100 denominations at all times. He is concerned about pickpockets and has an amusing anecdote about thwarting a pickpocket on the Athens subway he likes to tell. His business associate conducts a Monte Carlo simulation for Big Bills using POM for

Q: A patient's interminable wait for the first available physician is modeled in SimQuick using a(n): A) entrance block. B) buffer block. C) workstation block. D) decision point.

Q: The arrival of customers at a lemonade stand is modeled in SimQuick using a(n): A) entrance block. B) buffer block. C) workstation block. D) decision point.

Q: Scenario E.1 SimQuick is being used to simulate the following bank process: Customer arrivals at the Entrance Door of the bank with an average time between arrivals of 2.5 minutes. The Line Buffer holds 6 customers. If a customer arrives and the buffer line is filled, the customer leaves. The Work Station Teller's processing time per customer is normally distributed, with a mean of 3.0 minutes and a standard deviation of 0.5 minutes. The Served Customer Buffer in the flow chart is used to count the number of customers processed during the period simulated. A 2-hour period was simulated. The SimQuick simulation is run, and the results are as follows: Element Types Element Names Statistics Overall Means Entrance Door Objects entering process 41.80 Objects unable to enter 6.23 Service level 0.87 Buffer Line Objects leaving 37.83 Final inventory 3.98 Minimum inventory 0.00 Maximum inventory 5.85 Mean inventory 3.08 Mean time in buffer 9.75 Work Station Teller Work cycles started 37.83 Fraction time working 0.94 Buffer Served Customers Final inventory 36.85 Use the information in Scenario E.1. On average, approximately how many customers were waiting in line during the 2-hour simulation period? A) 5 B) 4 C) 3 D) 2

Q: SimQuick can be used to simulate all of the following except: A) a call center with completely random call arrivals and processing times. B) a hospital emergency room with arrivals that vary during different time periods throughout the day. C) a manufacturing process with a constant arrival rate (e.g., every 2 minutes) at one of the process steps. D) the hiring of production workers, based on skill requirements throughout the year.

Q: Which of the following statements about SimQuick is true? A) SimQuick requires some knowledge of programming languages, such as VISUAL BASIC or C++. B) SimQuick can be used to simulate the flow of materials, but cannot be used to study the process flows that involve people or information. C) SimQuick is an easy-to-use package that is simply an Excel spreadsheet with some macros. D) The primary disadvantage of SimQuick is that it is more costly and more difficult to set up when compared to other models, such as SIMPROCESS and ProModel.

Q: Describe a general procedure for generating normally distributed random numbers with a mean of 450 and standard deviation of 50 using Excel functions.

Q: What is steady state in a simulation model? Why is it important to achieve steady state?

Q: ________ occurs when the simulation is repeated over enough time that the average results for performance measures remain constant.

Q: In Excel, typing the function ________ will generate random numbers within the interval 0 to 1.

Q: One hundred monkeys are typing in Excel spreadsheets when one of them enters =NORM.S.INV(RAND()) What is the result of this monkey's function? A) the number zero B) random numbers evenly distributed from 0 to 1 inclusive C) probabilities of the normal distribution function D) z-scores from the standard normal distribution

Q: A simulation model is used to test the impact of the number of sample customers at a supermarket. As the model is run, the decision maker watches the average number of customers in the store rapidly increase from zero until it levels off and holds a constant value. The simulation model is: A) not valid due to the lack of change. B) in steady state. C) not valid due to the fluctuation in the statistics. D) a random variable.

Q: Steady state occurs when the simulation is repeated over enough time that the average results for performance measures remain constant.

Q: In Excel, the RAND() function generates either a 0 or a 1, purely at random.

Q: How can random numbers be generated?

Q: Why would data need to be collected prior to conducting a simulation?

Q: If the difference in results between different simulation runs results in a mathematical difference in system performance, the difference is said to be ________.

Q: ________ are random events that the decision maker cannot control.

Q: A variable that is controlled by the decision-maker and will change from one run to the next as different events are simulated is a(n) ________.

Q: A number that has the same probability of being selected as any other number is a(n) ________.

Q: If the data needed to set up a simulation are available in company records, the technique used to obtain them is called ________.

Q: ________ uses random numbers to generate simulation events.

Q: This table shows the distribution of grades in an operations management class. Probability Grade Lower Range .32 F 0 .20 D 0.32 .25 C 0.52 .18 B 0.77 .05 A 0.82 Add a column to the table that shows the cumulative probability and indicate what letter grade is obtained when the RAND() function is equal to 0.7406. A) A B) B C) C D) D

Q: This table shows the distribution of grades in an operations management class. Probability Grade .32 F .20 D .25 C .18 B .05 A Add a column to the table that shows the cumulative probability and indicate what letter grade is obtained when the RAND() function is equal to 0.982245. A) A B) B C) C D) F

Q: This table shows the distribution of grades in an operations management class. Probability Grade .32 F .20 D .25 C .18 B .05 A Add a column to the table that shows the cumulative probability and indicate what letter grade is obtained when the RAND() function is equal to 0.5548. A) A B) B C) C D) D

Q: When using Excel for simulation, it is important to freeze the random numbers used in order to compare the effectiveness of different policies. To do this, you must select the cells holding the random numbers with the mouse, click Edit/Copy at the top of the spreadsheet, and: A) click Edit/Paste Special and select the Values option. B) click Edit/Paste to freeze the cells. C) click Edit/Paste Special and select the Formulas option. D) move to a different section of the spreadsheet, then click Edit/Paste to freeze the cells.

Q: A) C2:G13. B) C2:J11. C) C2:F20. D) C2:D40.

Q: A) A1:E5. B) A1:H12. C) A1:J10. D) A1:E22.

Q: Which one of the following statements regarding simulation analysis is false? A) Simulation analysis is a form of hypothesis testing. B) In simulation, dependent variables reflect the values of both the decision variables and the uncontrollable variables. C) Statistical methods require the replication of simulation runs. D) Each time a simulation model is run for a given set of decision variables, the same random numbers must be used.

Q: The manager of a branch bank wants to build a simulation model of the lobby operation to reduce the waiting time of her customers. The number of customers waiting in line at any point of time is an example of a(n): A) decision variable. B) dependent variable. C) uncontrollable variable. D) time-compressed variable.

Q: The manager of a branch bank wants to build a simulation model of the lobby operation to reduce the waiting time of her customers. The number of customers arriving at any point of time is an example of a(n): A) decision variable. B) uncontrollable variable. C) time-compressed variable. D) dependent variable.