Question: 3. GemCo has found two machines that it can used at its mines but it can only purse one of them. Each machine is identified

3. GemCo has found two machines that it can used at its mines but it can only purse one of them. Each machine is identified by number POOJO01 and POOJO02. The data for each machine are given in the table below. First Cost Project Life Annual Income Annual Operating Cost Salvage Value POOJO01 $15,000 12 years $4200 $1200 $2250 POOJOO2 $36,000 12 years $10,800 $3520 $5000 (a) Draw a cash flow diagram of each machine. (3 marks) (b) If the interest rate is 3% nominal annual compounded monthly find the present worth of each project and select a project based on the present worth. (4 marks) 4. A bond with a face value of $40,000 pays annual interest of 3.5% at the end of each year for 10 years. Eight payments are left until the bond matures with the first payment being today. (a) Draw a cash flow diagram of the bond and draw a vertical line that represents today on the cash flow diagram. (3 marks) (b) How much would you pay for the bond today if you wanted to earn 4% annual interest compounded annually?

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