THE UNIVERSITY OF HONG KONG

DEPARTMENT OF INDUSTRIAL AND MANUFACTURING SYSTEMS

ENGINEERING

Test for IMSE 7015

Time allowed: XX minutes

Your name:

Your University Number (e.g., 30354XXXXX)

XX questions, each question carries the same marks.

1) For each question, select the best answer and put that answer (A, B, C,
or D; True or False) into the box provided.

Using T/F to represent True/False is acceptable.

2) Enter only one answer into the box.

Use non-erasable ball pen to enter your answers. Do not use pencil.

3) For rough work, use the empty spaces in the question paper.

Do not use your own paper for rough work in the test.

4) Calculators are allowed.

5) Equations and tables are given at the back of this paper.

Important:

Discussion and cooperation are not allowed.

(page 1 of 6)
Q1. XXXXXX
True False Q1

Q2. For the stream of cash inflows in the diagram below, its future value at the end of year 6 is
which of the following? MARR is 12% per year. (Tables at the back and the solution is on the
next page)

$100 $150 $3000 $3000 $3000 $3000

Time Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

0 end end end end end end

A. $12,250
B. $13,840 Q2
C. $14,750
D. $15,300

Q3. Which of the following is/are true about a company limited by shares (CLS)?
i. A CLS can issue shares to shareholders in exchange for cash.
ii. A CLS is so called because in any one particular issue of shares, there is a limit on the
number of shares the company can issue.
iii. The shareholders of a CLS run the company’s daily operations.

A) Only i)
B) Only i) and ii)
C) Only i) and iii)
D) Only ii) and iii)
Q3

(page 2 of 6)
Solution to Q2

(Q2 is taken from Lecture Two and the solution below is basically a reproduction.)

First, we handle the stream consisting of 4 consecutive inflows of $3,000 each.

This stream is an annuity starting from the end of Year 2, with 4 yearly intervals.

The annuity’s future value at the end of year 6

= $3,000*(F/A, 12%, 4) = $3,000*4.77933 = $14,338.0

When we include the future values of the other two cash inflows, the total future value

= $100*(F/P, 12%, 5) + $150*(F/P, 12%, 4) + $14,338.0

= $100*1.76234 + $150*1.57352 + $14,338.0

= $14,750.3

The answer is C.

Solution to Q3

(Q3 is taken from L1 and the solution below is a reproduction.)

Only i. is correct. The answer is A.

ii. is not correct. The name actually reflects that for such a company, a shareholder’s liability is
limited by the amount promised on the shares purchased by the shareholder.

iii. is not correct. A CLS’s shareholders appoint directors to form the board of directors. The
board of directors determines the CLS’s strategies and policies and ensures the management
team runs the daily operations smoothly according to these strategies and policies.

(page 3 of 6)
Equations

Value under different i and N

(F/P, i%, N) (1+i)^N

(P/F, i%, N) 1/[(1+i)^N]

(F/A, i%, N) [(1 + i)^N − 1]

i

(A/F, i%, N) i
[(1 + i)^N − 1]

(P/A, i%, N) [(1 + i)^N − 1]

[i*(1 + i)^N]

(A/P, i%, N) [i*(1 + i)^N]

[(1 + i)^N − 1]

(page 4 of 6)
Present Value of $1
(P/F, i%, n)
Interest rate i
Periods (n) 10% 12% 14% 16% 18% 20%
1 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333
2 0.82645 0.79719 0.76947 0.74316 0.71818 0.69444
3 0.75131 0.71178 0.67497 0.64066 0.60863 0.57870
4 0.68301 0.63552 0.59208 0.55229 0.51579 0.48225
5 0.62092 0.56743 0.51937 0.47611 0.43711 0.40188
6 0.56447 0.50663 0.45559 0.41044 0.37043 0.33490
7 0.51316 0.45235 0.39964 0.35383 0.31393 0.27908
8 0.46651 0.40388 0.35056 0.30503 0.26604 0.23257
9 0.42410 0.36061 0.30751 0.26295 0.22546 0.19381
10 0.38554 0.32197 0.26974 0.22668 0.19106 0.16151
11 0.35049 0.28748 0.23662 0.19542 0.16192 0.13459
12 0.31863 0.25668 0.20756 0.16846 0.13722 0.11216

Future value of $1
(F/P, i%, n)
Interest rate i
Periods (n) 10% 12% 14% 16% 18% 20%
1 1.10000 1.12000 1.14000 1.16000 1.18000 1.20000
2 1.21000 1.25440 1.29960 1.34560 1.39240 1.44000
3 1.33100 1.40493 1.48154 1.56090 1.64303 1.72800
4 1.46410 1.57352 1.68896 1.81064 1.93878 2.07360
5 1.61051 1.76234 1.92541 2.10034 2.28776 2.48832
6 1.77156 1.97382 2.19497 2.43640 2.69955 2.98598
7 1.94872 2.21068 2.50227 2.82622 3.18547 3.58318
8 2.14359 2.47596 2.85259 3.27841 3.75886 4.29982
9 2.35795 2.77308 3.25195 3.80296 4.43545 5.15978
10 2.59374 3.10585 3.70722 4.41144 5.23384 6.19174
11 2.85312 3.47855 4.22623 5.11726 6.17593 7.43008
12 3.13843 3.89598 4.81790 5.93603 7.28759 8.91610

Present value of an Annuity of $1 in Arrears

(P/A, i%, n)
Interest rate i
Periods (n) 10% 12% 14% 16% 18% 20%
1 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333
2 1.73554 1.69005 1.64666 1.60523 1.56564 1.52778
3 2.48685 2.40183 2.32163 2.24589 2.17427 2.10648
4 3.16987 3.03735 2.91371 2.79818 2.69006 2.58873
5 3.79079 3.60478 3.43308 3.27429 3.12717 2.99061
6 4.35526 4.11141 3.88867 3.68474 3.49760 3.32551
7 4.86842 4.56376 4.28830 4.03857 3.81153 3.60459
8 5.33493 4.96764 4.63886 4.34359 4.07757 3.83716
9 5.75902 5.32825 4.94637 4.60654 4.30302 4.03097
10 6.14457 5.65022 5.21612 4.83323 4.49409 4.19247
11 6.49506 5.93770 5.45273 5.02864 4.65601 4.32706
12 6.81369 6.19437 5.66029 5.19711 4.79322 4.43922

(page 5 of 6)
Future value of an Annuity of $1 in Arrears
(F/A, i%, n)
Interest rate i
Periods (n) 10% 12% 14% 16% 18% 20%
1 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
2 2.10000 2.12000 2.14000 2.16000 2.18000 2.20000
3 3.31000 3.37440 3.43960 3.50560 3.57240 3.64000
4 4.64100 4.77933 4.92114 5.06650 5.21543 5.36800
5 6.10510 6.35285 6.61010 6.87714 7.15421 7.44160
6 7.71561 8.11519 8.53552 8.97748 9.44197 9.92992
7 9.48717 10.08901 10.73049 11.41387 12.14152 12.91590
8 11.43589 12.29969 13.23276 14.24009 15.32700 16.49908
9 13.57948 14.77566 16.08535 17.51851 19.08585 20.79890
10 15.93742 17.54874 19.33730 21.32147 23.52131 25.95868
11 18.53117 20.65458 23.04452 25.73290 28.75514 32.15042
12 21.38428 24.13313 27.27075 30.85017 34.93107 39.58050

The annuity that is the equivalent of a present value of $1

(A/P, i%, n)
Interest rate i
Periods (n) 10% 12% 14% 16% 18% 20%
1 1.10000 1.12000 1.14000 1.16000 1.18000 1.20000
2 0.57619 0.59170 0.60729 0.62296 0.63872 0.65455
3 0.40211 0.41635 0.43073 0.44526 0.45992 0.47473
4 0.31547 0.32923 0.34320 0.35738 0.37174 0.38629
5 0.26380 0.27741 0.29128 0.30541 0.31978 0.33438
6 0.22961 0.24323 0.25716 0.27139 0.28591 0.30071
7 0.20541 0.21912 0.23319 0.24761 0.26236 0.27742
8 0.18744 0.20130 0.21557 0.23022 0.24524 0.26061
9 0.17364 0.18768 0.20217 0.21708 0.23239 0.24808
10 0.16275 0.17698 0.19171 0.20690 0.22251 0.23852
11 0.15396 0.16842 0.18339 0.19886 0.21478 0.23110
12 0.14676 0.16144 0.17667 0.19241 0.20863 0.22526

The annuity that is the equivalent of a future value of $1

(A/F, i%, n)
Interest rate i
Periods (n) 10% 12% 14% 16% 18% 20%
1 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
2 0.47619 0.47170 0.46729 0.46296 0.45872 0.45455
3 0.30211 0.29635 0.29073 0.28526 0.27992 0.27473
4 0.21547 0.20923 0.20320 0.19738 0.19174 0.18629
5 0.16380 0.15741 0.15128 0.14541 0.13978 0.13438
6 0.12961 0.12323 0.11716 0.11139 0.10591 0.10071
7 0.10541 0.09912 0.09319 0.08761 0.08236 0.07742
8 0.08744 0.08130 0.07557 0.07022 0.06524 0.06061
9 0.07364 0.06768 0.06217 0.05708 0.05239 0.04808
10 0.06275 0.05698 0.05171 0.04690 0.04251 0.03852
11 0.05396 0.04842 0.04339 0.03886 0.03478 0.03110
12 0.04676 0.04144 0.03667 0.03241 0.02863 0.02526

— END OF PAPER —

(page 6 of 6)