Problem 1: A PC company made an investment 5 years ago that is now worth $2M. How much was the initial investment at an interest rate of 20% per year (a) simple interest and (b) compound interest?
Problem 2: Amazon is considering purchasing a sophisticated consumer system to "cube" a book's dimensions - measure its height, length, and width so that the proper box size will be used for shipment. This will save packing material, cardboard, and labor. If the saving will be $150,000 the first year, $160,000 the second year, and amounts increasing by $10,000 each year for 8 years, what is the present worth of the system at an interest rate of 15% per year.
Problem 3: Calculate the future worth (in year 11) of the following income and expenses, if the interest rate is 8% per year.
|
Year
|
Income $
|
Expense, $
|
|
0
|
12,000
|
3000
|
|
1 - 6
|
800
|
200
|
|
7 - 11
|
900
|
300
|
Problem 4: A college student in her senior year is considering purchasing a new car. The price of the car is $18,500, the sales tax is 8%, and the title, license, and registration fee is $450. The dealer has an innovative financing programs for new college graduates that starts with a small monthly payment and the payments will gradually increase. The dealer offered to finance 90% of the price of the car for 4 months at a nominal interest rate of 9% per year, compounded monthly. The first payments is $200 and each successive payments will increase by a constant dollar amount 'x'
a. How much is the constant amount "x"?
b. How much is the 48th payment?
Problem 5: The new copier your company has recently bought is expected to incur the following repair costs:
|
Year
|
Repair Cost
|
|
1
|
$0
|
|
2
|
500
|
|
3
|
500
|
|
4
|
1500
|
|
5
|
2000
|
The dealer has offered you a 5-year maintenance contract for $800 per year payable at the end of each year. Your company's MARR is 6% per year. Is this a good deal?