Solving 6 problems
1. AT AN INTEREST RATE OF 6%, HOW MUCH WILL BE ACCUMULATED IN EIGHT YEARS IF FIVE PAYMENTS OF $10,000 EACH ARE DEPOSITED EVERY OTHER YEAR WITH THE FIRST DEPOSIT
MADE NOW?
2. JOE THE PLUMBER INVESTS $10,000 THE FIRST YEAR AND INCREASES THE INVESTMENT BY $5000 IN EACH OF THE FOLLOWING YEARS. IF THE INTEREST RATE IS 4.5%/YEAR:
2A. WHAT IS THE PAYMENT PERIOD?
2B. WHAT IS THE INVESTMENT WORTH AT THE END OF 10 YEARS?
3. A INVESTIMENT OF $1000 NOW AT A SIMPLE INTEREST RATE OF 4% FOR 4 YEARS IS EQUIVALENT TO HOW MUCH MONEY INVESTED NOW AT A COMPOUND RATE OF 4%/YEAR.
4. A NEW MACHINE WILL COST $17,000 AND WILL HAVE A RESALE VALUE OF $14,000 AFTER FIVE YEARS. SPECIAL TOOLING WILL COST $5,000 THE START OPERATING THE MACHINE.
THE TOOLING WILL HAVE A RESALE VALUE OF $2,500 AFTER FIVE YEARS. MAINTENANCE WILL BE $2,000 PER YEAR. THE ANNUAL INTEREST RATE IS 6%.
4A. CONSTRUCT THE COMPLETE CASH FLOW DIAGRAM.
4B. WHAT WILL BE THE AVERAGE ANNUAL COST OF OWNERSHIP DURING THE NEXT FIVE
YEARS?
5. EQUIPMENT THAT IS PURCHASED FOR $12,000 NOW IS EXPECTED TO BE SOLD AFTER TEN YEARS FOR $2,000. THE ESTIMATED MAINTENANCE IS $1,000 FOR THE FIRST YEAR, BUT IS
EXPECTED TO INCREASE $200 EACH YEAR THEREAFTER. THE ANNUAL INTEREST RATE IS 10%. WHAT IS:
6A. THE PRESENT WORTH OF THE EQUIPMENT?
6B. THE ANNUAL COST OF THE OPERATION?
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