1. The initial cost of a pulverized coal cyclone furnace is $800,000. If the operating cost is $90,000 in year 1, $92,700 in year 2, and amounts in- creasing by 3% each year through a 10-year amortization period, what is the equivalent annual worth of the furnace at an interest rate of 1% per month?
2. Cheryl, a recent metallurgical engineering graduate, is happy because today she received notice of a raise of $100 per month. However, in the mail to- day she received her credit card bill, which shows a balance owed of $6697.44 at an interest rate of 13% per year compounded monthly (which equals the national average of an effective 13.8% per year). Cheryl's dad always told her that the effect of time and interest rate combined is something that can either work to your financial advantage or work against you very easily. Thinking about the longer term of the next 10 years, she has posed two options of what to do with the $100 per month.
Option 1: Use all $100 each month to pay off the credit card debt starting now.
Option 2: Start now to use $50 to pay off the debt $1500. If a successful bidder paid $200,000 for a biotechnology patent, how much income must be generated each month to recover the investment in 3 years at an interest rate of 12% per year compounded semiannually?