1. A manufacturing firm needs to borrow $450,000 from a local bank at an interest rate of 10% over six years. What is the required equal payment to retire the loan in six years?
2. Consider the following investments:
Period Project Cash Flows
n A B C D
0 $-4,500 $-3,700 $-6,000 $-4,100
1 $0 $1,750 $3,250 $2,200
2 $0 $2,200 $1,800 $2,200
3 $6,200 $2,700 $1,100 $2,200
Compute the equivalent annual worth of each project at i=11%, and determine the acceptability of each project.
3. Jackie is considering buying a 2014 Tesla Model S costing $69,900 and finds that the retaining values of the vehicle over the next six years are as follows:
Percent of the total value retained after 36 months: 45%
Percent of the total value retained after 72 months: 29%
If her interest rate is 7% compounded annually, what is the ownership cost of the vehicle over 3 years? Six years?
4. Jones Digital just purchased a soldering machine to be used in assembly of circuit boards. This machine costs $270,000. Because of the specialized function it performs, its useful life is expected to be six years. At the end of its useful life, its salvage value is estimated to be $61,000. What is the capital cost for this investment if the firm's interest rate is 15%?