Scribd Logo
Upload

Welcome to Scribd!

  • 12 views

    Exer-6

    Uploaded by

    Reymart Lunario

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Exer-6

    Uploaded by

    Reymart Lunario
    12 views2 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    12 views2 pages

    Exer-6

    Uploaded by

    Reymart Lunario

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 2

    NAME: _______________________________________ SCORE: ________________

    COURSE/YEAR: _______________________________ DATE: _________________

    EXERCISE 6

    Analyze and solve the following problems.

    1. The maintenance on a machine is expected to be Php15,500 at the end of


    the first year and it is expected to increase by Php3,500 each year for the
    following 7 years. What sum of money should be set aside now to pay the
    maintenance for the eight year period? Assume 6% interest.
     SOLUTION:

    2. A firm considering the installation of an automatic data processing unit to


    handle some of its accounting operations. Machines for that purpose may
    be purchased for Php200,000 or maybe leased for Php80,000 for the first
    year and Php10,000 less every year now and then until the end of the 4th
    year. If money is worth 15%, is it advisable to rent or buy the machine?

     SOLUTION:
    32 | Chapter 3 – The Time Value of Money

    NAME: _______________________________________ SCORE: ________________

    COURSE/YEAR: _______________________________ DATE: _________________

    3. An electronic device is available that will reduce this year’s labor costs by
    Php10,000. The equipment is expected to last for eight years. If labor costs
    increase at an average rate of 7% per year and the interest rate is 12% per
    year.
    a. What is the maximum amount that we could justify spending for the
    device?
    b. What is the uniform annual equivalent value of labor costs over the
    eight-year period?

     SOLUTION:

    4. A small company heats its building and spends Php80,000 per year on
    natural gas for this purpose. Cost increases of natural gas for this purpose.
    Cost increases of natural gas are expected to be 10% per year starting one
    year from now. Their maintenance on the gas furnace is Php3,450 per year,
    and this expense is expected to increase by 15% per year starting one year
    from now. If the planning horizon is 15 years, what is the total annual
    equivalent expense for operating and maintaining the furnace? The interest
    rate is 18% per year.

     SOLUTION:

    You might also like