2.

Operating Cost Decision

If raw material usage is increased by 2.0 t/d the amount added to operating costs is

2.0 t /d × $ 600 /t=$ 1200/d

The costs incurred because of less power generation due to reducing the reboiler steam by 190 t/d is
calculated

 If 190 t/d of steam is reduced from the reboiler then 200 t/d of high pressure steam is
reduced from the stream entering the system
 The amount of power lost where the Turbo-Alternator produces 1 KW for 0.16 t/d is
200 t /d
1 KW × =1250 KW
0.16 t /d
1250 KW × 24 h=30000 KWh
 The power that will need to be purchased to make up for this is
$ 0.20
30000 KW × =$ 6000/d
KWh

The total incremental costs

$ 6000+ $ 1200=$ 7200

The incremental savings is the amount of money saved by reducing 200 t/d of high pressure steam is

200 t /d × $ 10 /t=$ 2000/d

Therefore the change in operating costs is

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$ 7200−$ 2000=$ 5200

An increase in costs of $5200 will be incurred if the proposal goes ahead. It is not recommended
that these changes are made. The costs are greater than the savings.

If 80 t/d was being let down and desuperheated the same increase in raw material costs would be
acquired

2.0 t /d × $ 600 /t=$ 1200/d

The costs incurred because of less power generation due to reducing the reboiler steam by 80 t/d is
calculated

 If 80 t/d of high pressure steam is lost to the desuperheater on an energy basis 100 t/d of
low pressure steam is lost from the exit steam of the desuperheater
 The amount of power produced where the Turbo-Alternator produces 1 KW for 0.16 t/d is
100 t /d
1 KW × =625 KW
0.16 t /d
625 KW × 24 h=15000 KWh
 The power that will need to be purchased to make up for this is
$ 0.20
15000 KW × =$ 3000/d
KWh

The total incremental costs

$ 3000+$ 1200=$ 4200

The incremental savings is the amount of money saved by reducing 180 t/d of high pressure steam is

180 t /d × $ 10/t=$ 1800/d

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 Therefore the change in operating costs is

$ 4200−$ 1800=$ 2400

An increase in costs of $2400 will be incu rred if the proposal goes ahead. It is not recommended
that these changes are made. The costs are greater than the savings.

3. Financial Mathematics #1
To find the fraction of a person’s salary which needs to be invested in a superannuation fund we
need to find f where

f =amount of salary paid ¿ superannuation fund ¿

①
total salary

From the information in the question

m Fraction of salary to be invested in superannuation so final payment is ‘m’ times final salary
r Constant salary increase rate of ‘r’ per annum
n Working life of ‘n’ years
i Superannuation fund earning rate of ‘i’ per annum

Where Sf is the final salary payment

FV payout =m S f ②

Using the future value of annuity equations a relationship between salary payments to the
superannuation fund and earnings of superannuation is found where x is the salary payment in the
beginning of the first year

Time 1 2 3 … n
0 1 2 n−1
Payments (1+r ) x (1+r ) x (1+r ) x (1+r ) x
Future Value (1+i)n −1 x (1+r )(1+i)n−2 x (1+r )2 (1+i)n−3 x ( 1+r )n−1 x

n
k−1
FV =∑ ( 1+r ) (1+i)n−k x ③
k=1

n
k−1
FV payment =x ∑ ( 1+ r ) (1+i)n−k ④
k=1

FV payout =FV payment ⑤

Substituting ② & ④ into ⑤

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 n
k−1
mx S f =x ∑ ( 1+r ) (1+i)n−k ⑥
k=1

But for the final salary payment at n

(1+r )n−1 x
f= ⑦
Sf

Rearranging for Sf and substituting ⑦ into ⑥

(1+ r)n−1 x n
k−1
m =x ∑ ( 1+r ) (1+i)n−k
f k=1

Rearranging for f to find the fraction of a person’s salary to be invested gives

m(1+r )n−1
f= n

∑ ( 1+r )k−1 (1+i)n−k

k=1

Modifying this for when r =i

m(1+ r)n−1 m(1+ r)n−1 m(1+r )n−1 m

f= n
= n
= =
k−1 n−k n(1+r )n−1 n
∑ ( 1+r ) (1+r ) ∑ ( 1+r )n−1
k=1 k =1

Evaluating for when

m=6 ,n=40 years , r=5 % ,i=8 %

6(1+0.05)40−1
f= 40

∑ ( 1+0.05 )k−1 (1+0.08)40−k

k=1

Solving on graphics calculator gives

f =0.0822=8.22 %

So the fraction of a person’s salary which needs to be invested in a superannuation fund is 0.0822 or
8.22%.

The superannuation guarantee rate, as found on the website for the Australian Taxation Office
(2014), is 9.5% for the period 1 July 2014 to 30 June 2015. The rate calculated is less than the
minimum required.

Reference
Australian Government, Australian Taxation Office 2015, Super Guarantee Percentage, viewed 21st
April 2015, <https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=23>.

Reem Obeid a1646120

4. Financial Mathematics #2
To calculate the interest over five years

Interest=P × i×time=20000× 0.055 ×5=$ 5500

Total Repayment= Loan+ Interest =20000+5500=$ 25500

25500
Monthly Repayment = =$ 425
5 × 12

Compound Interest Rate Calculations

Pi
R= −n
1− (1+i )

Where R=repayment=$ 425

P=value of theloan=$ 20000
n=no . of payments=5 ×12=60
i=interest paid per month

R
i= (1−( 1+i )−n)
P

Can solve for i by iteration

Initial guess i=0.0100

i=0.0100 → 0.00955

i=0.00950 → 0.00920

i=0.00900 → 0.00884

i=0.00850 → 0.00846

i=0.00845 → 0.00842

i=0.00840 → 0.00839

i=0.00835 → 0.00835

Solution is i=0.00835
12 12
Equivalent annual rate=( 1+i ) −1=( 1+0.00835 ) −1=0.105=10.5 %

The compound interest rate is 10.5%.

5. Financial Mathematics #3
FV
PV =
(1+i)n

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 200 000
PV payout = 10
=$ 97,038.79
(1+0.075)

Year 0 1 2 … 8 9 10
Payment ¿ ¿ ¿ ¿ ¿ $200,000
Present ¿¿ ¿¿ ¿¿ ¿¿ ¿¿
Value

Payment=¿
9
PV payment =∑ ¿¿ ¿
n=0

Find x , the value of the initial cash deposited from

PV payout =PV payment

9
97038.79=x ∑ ¿ ¿ ¿
n=0

x=$ 10,763.17

Investment account transaction records created on Microsoft Excel

Year Opening Cash Balance with Interest Closing

Balance Deposited Deposit Balance
0 $10,763.1 $ $
$ 10,763.17
7 - 10,763.17
1 $11,301.3 $ $
$10,763.17 $ 22,064.50
3 807.24 22,871.74
2 $11,866.3 $ $
$22,871.74 $ 34,738.13
9 1,715.38 36,453.51
3 $ $12,459.7 $ $
$ 48,913.23
36,453.51 1 2,734.01 51,647.24
4 $ $13,082.7 $ $
$ 64,729.94
51,647.24 0 3,873.54 68,603.48
5 $ $13,736.8 $ $
$ 82,340.32
68,603.48 4 5,145.26 87,485.58
6 $ $14,423.6 $ $108,470.7
$101,909.30
87,485.58 8 6,561.42 0
7 $108,470.7 $15,144.8 $ $131,750.8
$123,615.50
0 6 8,135.30 0
8 $131,750.8 $15,902.1 $ $157,534.3
$147,652.90
0 0 9,881.31 0
9 $157,534.3 $16,697.2 $11,815.0 $186,046.5
$174,231.50
0 1 7 0
10 $186,046.5 $ $13,953.4 $200,000.0
$186,046.50
0 - 9 0

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Where

Cash Deposited=1.05 × Cash Deposited the year before

Opening Balance=Cash Deposited+ Closing Balance of the year before

Interest=0.075× Closing Balance of the year before

Closing Balance=Opening Balance+ Interest

The total interest earned over ten years is $13, 953.50.

The total cash deposited over ten years is $186, 046.50.

Reem Obeid a1646120