Assignment #4 (Due 13/7/2005)
Tom and Dale purchase a boat for $150,000; the down payment is $15,000; the balance is financed over a 10-year period. Equal monthly payments are made. Determine the amount of interest paid in the fifth month if the monthly interest rate is 1%.
Tulsa Precision, Inc. borrows $100,000 to purchase a new numerically controlled milling machine and pays the loan back over a 4-year period with equal payments. Interest on the loan is 15% compounded annually. The machine is estimated to have annual operating and maintenance costs of $24 and have a life of 10 years. Salvage value is estimated to be $25,000. The firm has a MARR of 12%. Determine for this investment the following:
a. Present worth.
b. Annual worth.
c. Future worth.
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A consulting engineering firm is trying to decide whether it should purchase Ford Explorers or Toyota 4Runners for company principals. The models under consideration would cost $29,000 for the Ford and $32,000 for the Toyota. The annual operating expenses of the Explorer are expected to be $200 per year greater than that of the 4Runner. The trade-in values after 3 years are estimated to be 50% of first cost for the Explorer and 60% for the Toyota.
(a) What is the rate of return
relative to that of Ford, if Toyota is selected?
(b) If the firm’s MARR is 18% per year, which make of vehicle should it buy?
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An engineer at Anode Metals is considering the projects below, all of which can be considered to last indefinitely. If the company’s MARR is 13% per year, determine which should be selected (a) if they are independent and (b) if they are mutually exclusive. (c) Assume the projects are mutually exclusive and that the incorrect decision rule to select the one project that invests the most money and has a ROR that exceeds the MARR has been applied. What project was selected? Why is this an incorrect choice?
|
|
A |
B |
C |
D |
E |
|
Initial Cost |
-20,000 |
-10,000 |
-15,000 |
-70,000 |
-50,000 |
|
Annual Income |
4,000 |
2,000 |
2,900 |
10,000 |
6,000 |
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Consider the following mutually exclusive investment alternatives (MARR = 10%):
|
|
Alternative |
||
|
|
A |
B |
C |
|
Initial Investment |
-200 |
-4,000 |
-5,500 |
|
Annual Return |
22 |
600 |
750 |
|
Useful Life |
5 |
4 |
6 |
|
Salvage Value |
200 |
2,500 |
4,500 |
Compare the three alternatives and choose the best.
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Kristin buys a $2000 bond for $2100. The bond has a bond rate of 12% with bond premiums paid annually. If the bond is kept for 8 years and sold for par value, determine the equivalent annual yield rate (rate of return) for Kristin’s bond investment.
Assignment #3 (Due 10/7/2005)
Read the case study on pages 156-158 of Blank and Tarquim (2002) and answer all related questions (a total of 6).
Remarks:
Assignment #2 (Due 27/6/2005)
Solve the following problems out of Chapter 2 of the textbook (pp. 72-82):
6, 10, 14, 32, 42, 56, 70, 74.
Remarks:
Assignment #1 (Due 22/6/2005)
You plan to buy a new car of your choice in the near future. Assume that you only have 25%-45% of the cash price of the car and the you must finance the balance. Explore two alternatives and choose the best:
Be sure to include all relevant cash flows in your analysis, including fees. In your short report (about 2 pages), you should include all ads and details, your analysis, and your decision.
You may replace any of the alternatives above with one of your choice. Also, list at least four other non-economical considerations for your decision.
Remarks: