- Consider the following flyer that you just received. “We have good news. Eric Moon! Your credit history allows us to offer you a guaranteed check of $2,009.06. That’s right—a preapproved loan
- Consider the two mutually exclusive investment projects in Table P5.42. For what range of MARR would you prefer project B? TABLE P5.42 12 0 1 2 Project's Cash
- Consider the investment projects given in Table P7.10.(a) Classify each project as either simple or nonsimple.(b) Use the quadratic equation to compute i* for project A.(c) Obtain the rate(s) of
- Federal Express (FedEx) is considering adding 18 used Boeing 757 jets by buying the twin engine planes to replace some of its oldest, least-efficient freighters. Boeing 727s. FedEx pays about $10
- The U.S. Department of Interior is planning to build a dam and construct a hydroelectric power plant. In addition to producing electric power, this project will provide flood control. irrigation, and
- A local county is considering purchasing some dump trucks for the trash pickups. Each truck will cost $55,000 and have an operating and maintenance cost that starts at $18,000 during the first year
- The City of Boston is considering adding new buses for its current mass-transit system that links from the Hartsfield International Airport to major city destinations on nonstop basis. The total
- A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The
- In September 2015. a 3.45 megawatt cooling, heating. and power (CHP) system was placed in into operation for Southeast Regional Hospital with 360 beds. The CHP system was pan of a new 20,000 sq. ft.
- Consider the following the investment project.Calculate the net future worth of this investment at 12% and determine the acceptability of the investment.
- What is the annual equivalent cost of purchasing a lift truck that has an initial cost of $65,000, an annual operating cost of $13,500, and an estimated salvage value of $23,000 after six years of
- A machine now in use was purchased four years ago at a cost of $30,000. It has a book value of $9,369. It can be sold for $12.000. hut it could be used for three more years. at the end of which time,
- On January 2, 2010. the Allen Flour Comp any purchased a new machine at a cost of $82,000. Installation costs for the machine were $3,000. The machine was expected to have a useful life of 10 years.
- You sold an automobile at a price of $14,000. The automobile was purchased three years ago for $20,000. The car had been depreciated according to a five-year MACRS property class, and the book value
- On March 17, 2013, the Wildcat Oil Company began operations at its Louisiana oil field. The oil field had been acquired several years earlier at a cost of $32.5 million. The field is estimated to
- Compute the double-declining-balance (DDB) depreciation schedule for the following asset: Cost of the asset, I Useful life, N Salvage value, S $200,000 8 years $ 32,000
- Compute the DDB depreciation schedule for the following asset:(a) What is the value of a?(b) What is the amount of depreciation for the second full year of use of the asset?(c) What is the book value
- A diesel-powered generator with a cost of $68,000 is expected to have a useful operating life of 50,000 hours. The expected salvage value of this generator is $7,500. In its first operating year, the
- The Collins Metal Shop purchased a stamping machine for $257,000 on March 1, 2015. The machine is expected to have a useful life of 10 years. a salvage value of $32,000. a production of 250,000
- In 2016, you purchased a spindle machine (seven-year MACRS property) for $53,000, which you placed in service in January. Using the calendar year as your tax year. compute the depreciation allowances
- Early in 2015, the Atlantic Mining Company began operation at its West Virginia mine. The mine had been acquired at a cost of $8,900,000 in 2013, and is expected to contain 4 million tons of silver
- The Dow Ceramic Company purchased a glass molding machine in January 2010 for $180,000. The company has been depreciating the machine over an estimated useful life of 10 years. assuming no salvage
- On January 2, 2013, the Hines Food Processing Company purchased a machine that dispenses a premeasured amount of tomato juice into a can. The machine cost $85,000. and its useful life was estimated
- Sunrise, Inc., bought a machine for $80,000 on January 2, 2014. Management expects to use the machine for eight years. at the end of which time, it will have a $20000 salvage value. Consider the
- Appliance makers are gearing up to push new energy-efficient systems in the wake of an energy bill that offers tax credits to homeowners who upgrade to electricity-saving appliances. In air
- Enterprise Capital Leasing Company is in the business of leasing tractors o construction companies. The firm wants to set a three-year lease payment schedule for a tractor purchased at $53,000 from
- You are considering purchasing industrial equipment to meet the peak demand which will last only two years. The equipment costs $I00,000 and has an estimated market value of $40,000 at the end of two
- The current gasoline price is $3.50 per gallon, and it is projected to increase next year by 4% 6% the following year. and 8% the third year. What is the average inflation rate for the projected
- The following data indicate the median price of unleaded gasoline during the last 15 years for California residents:Assuming that the base period (price index = 100) is 1999, compute the average
- The following data indicate the price indexes of medical care services (base period 1982 = 100 between 2010 and 2014:(a) Assuming that the base period (price index = 100) is reset to the year 2010.
- An annuity provides for 10 consecutive endo f-year payments of $72.000. The average general inflation rate is estimated to be 4% annually, and the market interest rate is 8’4 annually. What is the
- A company is considering buying a CNC machine. In today’s dollars, it is estimated that the maintenance costs for the machine (paid a the end of each year) will be $25,000, $26,000, $28,000,
- The following cash flows are in actual dollars:Convert to an equivalent cash flow in constant dollars if the base year is time 0. Keep cash flows at the same point in time—that is. years 0, 4, 5,
- If the inflation rate is 6% per year and the market interest rate is known to be 11% per year. what is the implied real interest (inflation-free) rate in this inflationary economy?
- A man is planning to retire in 20 years. Money can be deposited at 6% interest compounded monthly. and it is also estimated that the future general inflation (Ƒ̅) rate will be 4% compounded
- Green Management Company is considering the acquisition of a new eighteen-wheeler.• The truck’s base price is $80,000. and it will cost another $20,000 to modify it for special use by the
- The Wellington Construction Company is considering acquiring a new earthmover. The mover’s basic price is $90000. and it will cost another $18,000 to modify it for special use by the company. This
- A firm is considering whether to market a new type of computer game during the upcoming Christmas season. The profit contribution of this computer game will depend on the extent of the demand θ.
- A company is currently paying a sales representative $0.60 per mile to drive her car for company business. The company is considering supplying the representative with a car, which would involve the
- Two alternative machines are being considered for a cost-reduction project. Machine A has a first cost of $60,000 and a salvage value (after tax) of $22.000 at the end of six years of service life.
- Jay Olsen. a writer of novels, just has completed a new thriller novel. A movie company and a TV network both want exclusive rights to market his new title, if he signs with the network, he will
- A machine shop specializing in industrial pumps is experiencing a substantial backlog, and the shop’s management is considering three courses of action:• Arrange for subcontracting (A)•
- An acquisition editor is trying to decide whether or not to publish a highly technical manuscript he has received. In making a decision he feels that it is sufficient to imagine that there are just
- What would be the price of a six-month European call option on a non-dividend-paying stock when the stock price is $120, the strike price is $150. and the risk-free interest rate is 6% per year?
- A Silicon Valley start-up company faces an opportunity to invest in an R&D project that will revolutionize the way consumers use telephones. intern et and TV. Suppose a project has two phases.
- What would be the price of a two-month European put option on a non-dividend-paying stock when the stock price is $68,50. the strike price is $70. and the risk-free interest rate is 5% per
- You are given the following information. A call option’s premium is currently $4, the exercise price equals $52, the risk free rate is 5%, volatility is 40%, and the time to expiration is nine
- A put-option premium is currently $4, with S0 $30, K = $32, and T = 6 months. Calculate the intrinsic value and time premium for (his put option. In addition, explain why the time to Contract
- An investor has $10,000 that she wants to invest in Apple Corporation. She can either go long in Apple’s stock at a spot price of $100 per share on September 17, 2015 or purchase option contracts
- A firm has decided to hedge itself through the use of strategic options. It has the option to choose among three strategies:• It has the option to contract 10% of its current operations at any time
- Given the following the data:(a) Determine the economic service life of the asset if i = 12%.(b) Determine the economic service life of the asset if i = 20%.(c) Assume that i = 0 and determine the
- Calculate the after-tax cost of debt under each of the following conditions:(a) Interest rate, 12%; tax rate. 25%(b) Interest rate, 14%; tax rate, 34%(c) Interest rate, 15%; tax rate, 40%
- The Callaway Company’s cost of equity is 22%. Its before-tax cost of debt is 13%. and its marginal tax rate is 40%. The firm’s capital structure calls for a debt-to-equity ratio of 45%. Calculate
- Consider the two mutually exclusive machines given in Table P 15.13.The initial investment will be financed with 70% equity and 30% debt. The before-tax debt interest rate, which combines both
- A mining firm has the opportunity to purchase a license on a plot of land to mine for gold. Consider the following financial information:• The investment cost to mine is $140M.• It costs $1,115
- You are considering an investment in a Christmas tree farm over three years. The farm already has trees planted a year ago. and these trees grow each year by the following factors.The price of the
- Matsushita Machining (MPM) is considering acquiring a new precision cutting machine at a cost of $120,000. The need for this particular machine is expected to last only five years. after which the
- Consider the following investment projects and their interdependencies:• Projects A and F are mutually exclusive.• Projects C and D are independent projects.• Project B is contingent on Project
- Consider four investments with the sequences of cash flows given in Table P7.8.(a) Identify all the simple investments.(b) Identify all the nonsimple Investments.(c) Compute i for each investment.
- What is the effective annual yield of 8.7% compounded continuously?
- Suppose you deposit $500 at the end of each quarter for five years at an interest rate of 8% compounded monthly. What equal end-of-year deposit over the five years would accumulate the same amount at
- Consider the cash flows from an investment project.(a) Compute the net present worth of the project at i = 10%.(b) Plot the present worth as a function of the interest rate (from 0% to 30%).
- A newly constructed bridge costs S 15,000,000. The same bridge is estimated to need renovation every 15 years at a cost of $3,000,000. Annual repairs and maintenance are estimated to be $ 1,000,000
- Calculate the equivalent annual worth of the following scheduled payments at an interest rate of 15%. $100 $150 $150 012 3 Figure P6.3 یرا $200 $200 $200 4 5 6 $100 $150 $150 $200 $200 $200 7 8 9
- Consider the accompanying cash flow diagram. Compute the equivalent annual worth at i = 10%. $3,000 2 Figure P6.4 $3,000 3 $4,000 4 $5,000 $6,000 5 Years 6
- Consider the accompanying cash flow diagram. Compute the equivalent annual worth at i = 12%. 0 $2,000 $4,500 1 $1,500 Figure P6.5 2 $1,000 3 Years 4 $2,000 $1,500 5 6
- Consider the cash flows in Table P6.7 for the following investment projects (MARR = 15%).Determine the annual equivalent worth for each project at i = 15% and determine the acceptability of each
- A manufacturing firm is considering the mutually exclusive alternatives given in Table P7.39. Determine which project is a better choice at a MARR = 15% based on the IRR criterion. TABLE
- Consider the Iwo mutually exclusive investment alternatives given in Table P7.41.(a) Which project would be selected based on the rate of return decision criterion? (Assume that MARR = 10%.)(b)
- Consider the two mutually exclusive alternatives given in Table P7.40.(a) Determine the IRR on the incremental investment in the amount of $2,000.(b) If the firm’s MARR is 10%, which alternative is
- Yuma, Arizona resident Rosalind Setchfield won $I.3 million in an Arizona lottery drawing, to be paid in 20 annual installments of S65,277. However, her husband, a construction worker, suffered
- What value of A makes the two annual cash flows equivalent at 15% interest compounded annually? 0 L 0 $100 $100 1 A 1 Figure P3.52 2 A 2 $120 $120 Years 3 A Years 3 4 A 4 $120 5 A 5
- Consider the following cash flow. in computing F at the end of year 5 at an interest rate of 12 %, which of the following equations is incorrect? a. F= $1,000 (F/A, 12 %,5) - $ 500 (F/P, 12
- From the following list. identify all the correct equations used in computing either the equivalent present worth (P) or future worth (F) for the cash flow shown at i = 10%.(a) P = R(P/A, 10%, 6)(b)
- Anita Wu. an engineering junior, received two guaranteed line-of-credit applications from two different banks. Each bank offered a different annual fee and finance charge.Anita expects her average
- You received a bill consolidation loan offer in the mail. Dear Larry Montgomery I’m delighted to inform you that you have been approved for a Homeowner Bill Consolidation Loan of up to
- Suppose you have received a credit card offer from a bank that charges interest at 1.3% per month. compounded monthly. What is the nominal interest (annual percentage) rate for this credit card? What
- If your credit card calculates interest based on 17.85% APR. compounded monthly: (a) What are your monthly interest rate and annual effective interest rate?(b) If your current outstanding
- Student Emergency Financial Services. Inc.. which makes small loans to college students, offers to lend $550. The borrower is required to pay $42 at the end of each week for 16 weeks. Find the
- If a bank advertises a savings account that pays a 6% nominal interest rate compounded continuously. what is the effective annual percentage rate?
- You have three choices in placing your money in a bank account.(a) Bank A pays 6.12% compounded annually.(b) Bank B pays 6.00% compounded quarterly.(c) Bank C pays 5.90% compounded continuously.Which
- The APR is stated as 6% compounded monthly. What is the continuously compounded rate? (In other words, what APR at continuous compounding has the same effect?)
- Bank A offers a nominal annual interest rate of 5% compounded daily, while Bank B offers continuous compounding at a 4.6% nominal annual rate. If you deposit $3,000 with each bank, what will be the
- How much will $5,000 be worth in 10 years with 6% interest compounded continuously?
- How much money must you deposit now to have $5,000 in five years at 6% compounded continuously?
- How much money will you have in five years if you deposit $5,000 in the bank at 9% interest compounded continuously?
- How long will it take money to double with continuous compounding at 6% interest?
- Republic Finance offers money at 2.32% per month compounded monthly.(a) What is the nominal interest rate?(b) What is the effective annual interest rate’?(c) How many years will it take an
- Suppose your savings account pays 8% interest y compounded quarterly. If you deposit $15,000 for two years, how much will you have?
- What will be the amount accumulated by each of these present investments?(a) $9,545 in 12 years at 8.2% compounded semiannually.(b) $6,500 in 10 years at 6% compounded quarterly.(c) $42,800 in 8
- How many years will it take an investment to triple if the interest rate is 9% compounded at the given intervals?(a) Quarterly(b) Monthly(c) Continuously
- A series of equal quarterly payments of $10.000 for 15 years is equivalent to what future worth amount at an interest rate of 6% compounded at the given intervals?(a) Quarterly(b) Monthly(c)
- What is the future worth of an equal payment series of $7,500 at the end of each month for five years if the interest rate is 8% compounded continuously?
- If the interest rate is 8.6% compounded continuously. what is the required quarterly payment to repay a loan of $10,000 in five years?
- What will be the required monthly payment to repay a loan of $48,000 in five years if the interest rate is 9.75% compounded continuously?
- An automobile loan of $20,000 at a nominal rate of 6% compounded monthly for 36 months requires equal end-of-month payments of $608,44. Complete Table P4.60 for the first six payments. as you would
- A series of equal quarterly payments of $2,500 extends over a period of five years. What is the present worth of this quarterly payment series at 6.88% interest compounded continuously?
- What is the future worth of the following series of payments?(a) $20,000 at the end of each six-month period for five years at 8% compounded semiannually.(b) $60,000 at the end of each quarter for 10
- You have $15,345.36 in your savings account that has been paying at 6% compounded continuously. If you opened the account 10 years ago and made no deposits during any other years. how much was your
- What is the present worth of the following series of payments?(a) $5,000 at the end of each six-month period for 12 years at 9% compounded semiannually.(b) $7,000 at the end of each quarter for 10