Assignment:
1-Costs for maintenance of buildings at an industrial complex are expected to be $5,000 in year three, $4,800 in year four and amounts decreasing by $200 per year thereafter through year nine. At an interest rate of 10% per year, find the present worth of the expenditures using arithmetic gradient formulas.
2. The costs of fuel for a smelting operation are expected to be $50,000 in year three, and decreasing by 5% per year thereafter through year ten. At an interest rate of 8% per year, find the equivalent annual cost between years 3 through 10
3. 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. Find the amount of those payments
4. The bond has been purchased for 15,000 dollars. It is a 25-year bond with a $20,000 face value and 8% coupon rate (with interest paid semiannually)? The bond will be kept to maturity. The effective interest rate for MARR rate is 10% per year compounded annually. Should the investor buy the bond? Why?
Problems 5 are based on the following statement:
The data for new and used machines are shown below:
|
|
Used machine
|
New machine
|
|
Initial cost($)
|
15,000
|
40,000
|
|
Annual operating cost ($/year)
|
8,000
|
2,000
|
|
Salvage value ($)
|
5,000
|
10,000
|
|
Life (years)
|
4
|
6
|
Use an interest rate of 10% per year.
5. To compare the machines on the basis of a present worth analysis, calculate the present worth of the both of machines. Which machine you will pick? Why?
6. the $10.000 investment right now will lead to rate of return (i.e, you might consider as an interest rate) 7% between years 0-3, 8% between years 3-7, and 10% between years 7-10. Calculate the future worth of the investment at the end of year 10.