Question 1: A machine is under consideration for a new manufacturing process. The interest rate is 10% computed semiannually. Compute the future worth of this alternative:
First cost = $70,000
Semiannual cost = $6,000
Semiannual income = $18,000
Salvage value = $9,000
Life in years = 5
Question 2: You deposit $5,000 in a savings certificate. The bank pays compound interest at an annual rate of 12%, compounded quarterly. At the end of 4 years, how much money have you earned in the savings certificate?
Question 3: Consider the following sets of investments projects in table. All projects have a 5 year investment life, with and interest rate of 10%.
Project Cash Flow ($)
N A B
0 -$17,000 -$18,000
1 4100 3300
2 4200 3500
3 4300 3700
4 4400 3900
5 4500 4100
5 (Salvage Value) 5000 5500
Compute the present worth of project A, in Table.
Question 4: How much do you have to pay for a bond rate that pays 6% dividend compounded semiannually, with a face value of $5,000 that is going to be paid (maturity) in 5 years. The buyer wants to have an interest rate profit of 8% compounded semiannually.