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Assignment 2 EE Arif
Assignment 2 EE Arif
1. Electrical turbine system is presently powering the 1st phase of a newly built plant. As an
alternative, their sister company is developing a solar power system that can be an alternative
to power up the plant, but it will be a few years before the solar system is available for use. It
is estimated that by switching to the solar power system, it will save $22,000 per year,
starting 3 years from now. At an interest rate of 8% per year, determine the present worth in
year 0 of the projected savings that occur in years 3 through 10 [4 Marks]
2. Innocom LTD, a small manufacturer of quartz products, borrowed $2 million to renovate one
of its testing lab. In an effort to pay off the loan quickly, the company made four payments in
years 1 through 4, with each payment being twice as large as the preceding one. At an interest
rate of 10% per year, what was the size of the first payment? [6 Marks]
3. Income from the sale of oleic acid was $300,000 in years 1 through 4 and $465,000 in years 5
through 9. Determine the equivalent annual revenue in years 1 through 9 at an interest rate of
10% per year. [5 Marks]
4. ActiveTech LLC manufactures high quality o-ring designed for robust oil and gas operations.
The company borrowed $10,000,000 with the understanding that it would make a $2,000,000
payment at the end of year 1 and then make equal annual payments in years 2 through 5 to
pay off the loan. If the interest rate on the loan was 9% per year, how much was each payment
in years 2 through 5? [6 Marks]
5. You just graduated and plan to start an annuity plan by making your first deposit now. If you
make annual deposits of a uniform amount A into the account that earns interest at a rate of
7% per year, how many years from now will it be until the value of the account is equal to 10
times the value of the single deposit? [5 Marks]
6. Afif's uncle company that manufactures air operated gun assemblies budgeted $74,000 per
year to pay for metal components over a 5-year period. If the company spent only $42,000 in
year 1, what uniform annual amount should the company expect to spend in each of the next 4
years to expend the entire budget? Use 10% per year interest. [8 Marks]
7. What is the F in year 10 of $50,000 in year 0 and amounts increasing by 15% per year
through year 10 at an interest rate of 10% per year. [7 Marks]
9. What will be the future worth in year 10 of a cash flow series that starts in year 0 at $100,000
and decreases by 12% per year. Use an interest rate of 12% per year. [7 Marks]
10. The gross earnings from the mining of mineral deposits usually decreases as the resources
becomes more difficult to extract. Determine the future worth in year 10 of a mineral lease
that yielded income of $14,000 in years 1 through 4 and then amounts that decreased by 5%
per year through year 10. Use an interest rate of 18% per year. Show (a) hand (b) spreadsheet
solutions. [10 Marks]