ECE 192, Spring 2023

Tutorial 3

1) A microgrid based on photovoltaic generation combined with a battery energy storage

system, is planned to supply the electricity needs of a remote community for 20 years. The
total cost of this microgrid is (CAD) 280,000, 75% of which will be financed by a donation,
while the rest must be paid by the community served. It is estimated that the daily energy
demand of the microgrid will be 85 kWh. Find the tariff (c/kWh) that must be applied by
the customers if a discount rate of 8.5 %/year compounded monthly is used for this project.

2) Gail has won a lottery that pays her $100,000 at the end of this year, $110,000 at the end of
the next year, $120,000 the following year, and so on, for 30 years. Leon has offered Gail
$2,500,000 today in exchange for all the money she will receive. If Gail can get 8 percent
interest on her savings, is this a good deal?

3) David’s small business has been growing slowly. He has noticed that his monthly profit
increases by 1 percent every two months. Suppose that the profit at the end of this month is
$10,000. What is the present value of all his profit over the next two years? Annual nominal
interest is 18 percent, compounded monthly.

4) A bond with a face value of $5,000 pays quarterly interest of 1.5 percent each period.
Twenty-six interest payments remain before the bond matures. How much would you be
willing to pay for this bond today if the next interest payment is due now and you want to
earn 8 percent compounded quarterly on your money?

5) A grad student is conducting a biochemical experiment for the next 12 months. In the first
month, the expenses are estimated to be $15,000. As the experiment progresses, the
expenses are expected to increase by 5 percent each month. The student plans to pay for the
experiment with a government grant, which is received in six monthly installments, starting
a month after the experiment completion date. Determine the amount of the monthly
installment so that the total of the six installments pays for all expenses incurred during the
experiment. Annual nominal interest is 12 percent, compounded monthly.

6) The city of Sault Ste. Marie is installing a new swimming pool in the municipal recreation
center. One design being considered is a reinforced concrete pool, which will cost
$1,500,000 to install. Thereafter, the pool’s inner surface will need to be refinished and
painted every 10 years at a cost of $200,000 per refinishing. If the pool will have essentially
an infinite life, what is the present worth of the costs associated with this design? The city
uses a 5 percent interest rate.