Homework Exercise
1.Certain certificates of deposit accumulate interest at 10% per year simple interest. If acompany invests $24,000 now in these certificates for the purchase of a new machine 3 years from now, how much will the company have at the end of 3year period!2." local #an is offerin to pay compound interest of &% per year on new savins accounts. "n e#an is offerin &.'% per year simple interest on a 'year certificate of deposit. (hich offer is more attractive to a company that wants to set aside $1,000,000 now for a plant e)pansion ' years from now!3.*mea instruments has #udeted #$300,000 per year to pay for certain ceramic parts over the ne)t ' years. If the company e)pects the cost of the parts to increase uniformly accordin to an arithmetic radient of $10,000 per year, what is it e)pectin the cost to #e in year 1, if the interest rate is 10% per year! 4." startup direct mareter of car parts e)pects to spend $1 million the first year for advertisin, with amounts decreasin #y $100,000 each year. Income is e)pected to #e $4 million the first year, increasin #y $'00,000 each year. +etermine the euivalent annual worth in years 1 throuh ' of the company-s net cash flow at an interest rate of 1% per year. '." chemical enineer plannin for her retirement will deposit 10% of her salary each year into a hihtechnoloy stoc fund. If her salary this year is $0,000 /i.e., end of year 1 and she e)pects her salary to increase #y 4% each year, what will #e the present worth of the fund after 1' years if it earns 4% per year!.+etermine how much money would #e in savin account that started with a deposit of $2,000 in year 1 with each succeedin amount increasin #y 10% per year. se an interest rate of 1'% per year and a &year period.&.he future worth in year 10 of a eometricradient series of cash flows was found to #e $0,000. If the interest rate was 1'% per year and the annual rate of increase was % per year, what was the cash flow amount in year 1! .5or an interest rate of 10% per year compounded uarterly, determine the num#er of times interest would #e compounded
aper uarter #per year cper 3 years4.4 /a 1 /# 4 /c 12.(hat effective interest rate per months is euivalent to 14% per year, compounded semiannually!10.wo methods can #e used for producin methanol. 6ethod " costs $0,000 initially and will have a $1',000 salvae value after 3 years. he operatin cost with this method will #e $30,000 per year. 6ethod 7 will have a first cost of $120,000, an operatin cost of $,000 per year, and a $40,000 salvae value after its 3year life. "t an interest rate of 12% per year8 which method should #e used on the #asis of a present worth analysis!11." company that manufactures amplified pressure transducers is tryin to decide #etween the machines shown #elow. Compare on the #asis of their present worth values, usin an interest rate of 1'% per year.9aria#le :peed+ual :peed5irst cost, $2'0,000224,000"nnual operatin cost, $;year231,00023',000*verhaul in year 3, $<2,000*verhaul in year 4, $140,000< :alvae value, $'0,00010,000=ife, years12.>":" is considerin two materials for use in a space vehicle. he costs are shown #elow. (hich should #e selected on the #asis of a present worth comparison at an interest rate of 10% per year!
6aterial ?@6aterial AB5irst cost, $20',00023',0006aintenance cost, $;year2,0002&,000:alvae value, $2,00020,000=ife, years2413.he cost of paintin the enan 7ride is $400,000. If the #ride is painted now and every 2 years hereafter, what is the capitaliDed cost of paintin at an interest rate of % per year!14.wo processes can #e used for producin a polymer that reduces friction loss in enines. rocess A will have a first cost of $10,000, an operatin cost of $&000 per month, and a salvae value of $40,000 after its 2year life. rocess = will have a first cost of $210,000, an operatin cost of $',000 per month, and a $2,000 salvae value after its 4year life. (hich process should #e selected on the #asis of an annual worth analysis at an interest rate of 12% per year, compounded monthly!1'.wo mutually e)clusive proEects have the estimated cash flows shown #elow. se an annual worth analysis to determine which should #e selected at an interest rate of 10 % per year. roEect "roEect 75irst cost, $42,0000,000"nnual cost, $;year,000&,000 year 1, increasin #y$1,000 per year :alvae value, $04,000=ife, years241.7arron Chemical uses a thermoplastic polymer to enhance the appearance of certain F9 panels. he initial cost of one process was $130,000 with annual costs of $4,000 and revenues of $&,000 in year 1, increasin #y $1,000 per year. " salvae value of $23,000 was realiDed when the process was discontinued after years. (hat rate of return did the company mae on the process!/&.