(Solution) 1a) At A 5% Per Year Interest Rate, $600,000 Is Equivalent To How Much In 10 Years? | Snapessays.com


(Solution) 1a) At a 5% per year interest rate, $600,000 is equivalent to how much in 10 years?


1a) At a 5% per year interest rate, $600,000 is equivalent to how much in 10 years? For questions (1b) to (1d), assume an interest rate of 3%.1b) A firm borrows $10,000 for 6 years. How much must it repay in a lump sum at the end of the sixth year? 1c) In creating a sinking fund, how much should a company deposit each year in order to accumulate $100,000 at the time of the fifth annual deposit? 1d) How much should be deposited in a fund to provide for 5 annual (uniform) withdrawals of $400 each? Assume that the first withdrawal is one year after the deposit. 2) You want to buy a car, and have to decide among the following three choices: Car type Toyota Ford Mercedes Fixed cost ($/month) 330 200 400 Fuel economy (miles/gallon) 30 20 25 Maintenance ($/mile) 0.09 0.18 0.07 2a) If you drive 1000 miles/month and gasoline costs $2.10/gallon, then which is the most economical car to purchase on a total cost/month comparison? 2b) If you purchase the Mercedes, what would be your average cost per mile of travel? 2c) What would be your answer to (2a) if the price of fuel doubles? To raise money for a diesel generator that you want to establish for a local village, you ask the rural development bank for a 4-year loan of 2,000,000 dollars. How much will you have to pay back if the bank requires payment of 3% interest? 4) You are a case manager at the Small Business Development Bank. An internet startup company requests a loan for the development of a new searching algorithm in the hopes of beating Google and expects to have $9,300,000 at the end of four years to pay back any loans. How much can you give the company if bank policy requires that you receive 2% interest startup company loans? The automotive company you work for buys new CAD software for $2,000,000. Maintenance and upgrades cost nothing during the first two years, $50,000 in year 3, $100,000 in year 4, and $120,000 in the year 5. The software decreases design costs by $500,000 per year. Write a cash flow table for this story. 5b) What is the NPV of the software if the discount rate is 10%? 6) Two software project alternatives have the following cash flows (all units in $): Year Project A Project B 0 -2000 -2800 1 +800 +1100 2 +800 +1100 3 +800 +1100 Draw a cash flow diagram for each alternative. 6a) At a 5% interest rate, which alternative should be selected by NPV comparison? 6b) At a 6% interest rate, which alternative should be selected by NPV comparison? 6c) At a 7% interest rate, which alternative should be selected by NPV comparison?6d) Now perform the same comparison, looking at net future value (NFV) at the end of year 3. Does a NFV comparison change any of your decisions from 6a, 6b, or 6c? 7) Machine X has an initial cost of $10,000, annual maintenance of $500/year and no salvage value at the end of its four-year useful life. Machine Y costs $20,000. The first year there is no maintenance cost. The second year, maintenance is $100 and increases $100/year in subsequent years. The machine has an anticipated $5000 salvage value at the end of its 12 year life. Both machines yield annual revenues of $5000/year. If interest is 8%, which machine should be selected?

 


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This question was answered on: May 23, 2022

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