Q1.Allied Electrons must purchase a new automatic soldering machine to meet increased demand for its electronic goods. Of all the machines considered, management has narrowed the choices to the following three mutually exclusive machines. Allied uses a planning horizon of four years (all three can last this long) and a MARR of 10%. The initial cost is in Year 0 and the payments are in years 1-4. Determine the present worth, future worth, and annual worth for when a) the salvage value is in year 4, and b) the salvage value is in year 5.
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Machine 1
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Machine 2
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Machine3
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Initial Cost(in Year 0)
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$700,000
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$650,000
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$550,000
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Annual Operating Cost
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$50,000
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$90,000
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$105,000
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Salvage Value (in Year 4
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$40,000
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$32,500
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$28,750
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Salvage Value (in year 5
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$40,000
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$32,500
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$28,750
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Q2. Reputable Payday Loans (RPL) quoted Joe three loan arrangements for a $1,000 loan. The first is to pay back the loan in equal weekly payments 0.5% interest per week. A second is to pay it back in equal semi-monthly payments (on the 15th and 30th) at 1% semi-monthly interest. A third option is to pay it back in equal monthly payments at 2% monthly interest. Compounding of interest is weekly, semi-monthly and monthly respectively for each arrangement. What is the effective annual rate for each alternative? What is the annual percentage rate for each arrangement?