Sample FE Exam Problems

How to use this section: This section includes questions and problems like those on a typical FE exam. For organization purposes only, they are presented in chapter order of the text Engineering Economy, 5^th edition, by Blank and Tarquin.

It is recommended that you read through each question carefully.

Problems 1 through 3 are based on the following statement:

A small manufacturing company is considering purchasing a maintenance contract for its air conditioning systems. Since all of its systems are new, the company plans to begin the contract in year four and continue through year ten. The cost of the contract is $3,200 per year and the company's minimum attractive rate of return is 12% per year.

1		The present worth of the contract is nearest to:
			A)	$6,605
			B)	$10,395
			C)	$14,604
			D)	$18,081
2		If the company wishes to pre-pay the contract with uniform payments in years one, two and three only, the amount of each payment will be nearest to:
			A)	$2,750
			B)	$4,327
			C)	$5,491
			D)	$6,080
3		The equivalent uniform annual amount of the contract in years one through ten is nearest to:
			A)	$1,840
			B)	$2,750
			C)	$3,529
			D)	$4,327

Problems 4 and 5 are based on the following statement:

A company plans to start a sinking fund so that it will have money to purchase a new 18-wheeler ten years from now. The cost of the truck is expected to be $200,000 and the company uses an interest rate of 10% per year.

4		If the company makes the first deposit three years from now, how much must each one be in order to have the money at the end of year ten?
			A)	$12,540
			B)	$15,390
			C)	$17,480
			D)	$32,540
5		If the company makes the first deposit one year from now, how much should each deposit be?
			A)	$12,540
			B)	$15,390
			C)	$17,480
			D)	$32,540

Problems 6 through 9 are based on the following statement:

A start-up internet service provider expects to lose money in each of the first four years. Losses are projected to be $50 million in year one, $40 million in year two, $30 million in year three and $5 million in year four. An interest rate of 10% per year is used.

6		The present worth of the losses for the first three years is nearest to:
			A)	$90,124,000
			B)	$101,054,000
			C)	$124,345,000
			D)	$147,636,000
7		The present worth of the losses for all four years is nearest to:
			A)	$101,054,000
			B)	$104,244,000
			C)	$110,395,000
			D)	$124,345,000
8		The equivalent uniform annual worth of the losses through year four is nearest to:
			A)	$29,533,000
			B)	$30,621,000
			C)	$31,882,000
			D)	$32,889,000
9		In order to recover the losses by the end of year nine, the company's equivalent uniform annual profit in years five through nine must be nearest to:
			A)	$25,631,000
			B)	$36,922,000
			C)	$44,288,000
			D)	$51,369,000
10		Expenditures for maintenance of a certain machine are expected to be $900 in year two, $1,400 in year five, and a uniform amount of $2,000 in years six through nine. At an interest rate of 10% per year, the present worth of the expenditures is nearest to:
			A)	$4,521
			B)	$4,973
			C)	$5,192
			D)	$5,549
11		Income from a real estate investment is expected to be $2,000 in year two, $3,000 in year three, $1,000 in year four and $5,000 in year five. At an interest rate of 10% per year, the present worth of the cash flow is nearest to:
			A)	$7,694
			B)	$8,267
			C)	$9,315
			D)	$11,210
12		Costs for maintenance of buildings at an industrial complex are expected to be $1,000 in year three, $1,200 in year four and amounts increasing by $200 per year thereafter through year nine. At an interest rate of 10% per year, the present worth of the expenditures is nearest to:
			A)	$5,163
			B)	$5,575
			C)	$6,133
			D)	$7,421
13		The costs of fuel for a smelting operation are expected to be $50,000 in year three, $52,500 in year four and amounts increasing by 5% per year thereafter through year ten. At an interest rate of 8% per year, the present worth of the fuel cost is nearest to:
			A)	$190,400
			B)	$204,600
			C)	$277,900
			D)	$336,300
14		An investment of $1,000 per year in years four through ten is equivalent to a single investment in year eleven at an interest rate of 10% per year that is nearest to:
			A)	$7,716
			B)	$8,488
			C)	$9,133
			D)	$10,436
15		Payments of $1,000 in year two and $4,000 in year five are equivalent to uniform payments in years three through seven at an interest rate of 10% per year nearest to:
			A)	$899
			B)	$985
			C)	$1,177
			D)	$3,732
16		At an interest rate of 10% per year, the length of time required from time zero to recover an initial investment of $10,000 by receipts of $1,000 per year beginning in year three is nearest to:
			A)	10 years
			B)	20 years
			C)	100 years
			D)	never
17		At an interest rate of 10% per year, expenditures of $1,000 in years zero, three and six could be replaced by a single investment in year eight nearest to:
			A)	$3,621
			B)	$3,964
			C)	$4,964
			D)	$5,721
18		The number of years from now that an initial investment of $1,000,000 would be recovered from uniform receipts of $131,000 per year beginning three years from now at an interest rate of 10% per year is nearest to:
			A)	24
			B)	29
			C)	35
			D)	40