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the following factors from the

interest tables.

1. (F/P,8%,25)

2. (P/A,3%,8)

3. (P/G,9%,20)

4. (F/A,15%,18)

5. (A/P,30%,15)

Chapter 2, Solution 1.

1. (F/P,8%25) = 6.8485

2. (P/A,3%,8) = 7.0197

3. (P/G,9%,20) = 61.7770

4. (F/A,15%,18) = 75.8364

5. (A/P,30%,15) = 0.30598

Chapter2,Problem3.

high-accuracy liquid-level transducers. It

is investigating whether it should update

certain equipment now or wait to do it

later. If the cost now is $200,000, what

will the equivalent amount be 3 years

from now at an interest rate of 10% per

year?

Chapter 2, Solution 3.

F = 200,000(F/P,10%,3)

= 200,000(1.3310)

= $266,200

Chapter 2, Problem 6.

Thompson Mechanical Products is planning

to set aside $150,000 now for possibly

replacing its large synchronous refiner motors

whenever it becomes necessary. If the

replacement isnt needed for 7 years, how

much will the company have in its investment

set-aside account if it achieves a rate of return

of 18% per year?

Chapter 2, Solution 6.

F = 150,000(F/P,18%,7)

= 150,000(3.1855)

= $477,825

Chapter2,Problem10.

future cost of $162,000 to

Corning, Inc., 6 years from now

at an interest rate of 12% per

year?

P = 162,000(P/F,12%,6)

= 162,000(0.5066)

= $82,069

The current cost of liability

insurance for a certain consulting

firm is $65,000. If the insurance cost

is expected to increase by 4% each

year, what will be the cost 5 years

from now?

F = 65,000(F/P,4%,5)

= 65,000(1.2167)

= $79,086

How much money could RTT Environmental

Services borrow to finance a site reclamation

project if it expects revenues of $280,000 per

year over a 5-year cleanup period? Expenses

associated with the project are expected to be

$90,000 per year. Assume the interest rate is

10% per year.

P = (280,000-90,000)

(P/A,10%,5)

= 190,000(3.7908)

= $720,252

following factors by (a) interpolation and

(b) using the appropriate formula.

1. (P/F,18%,33)

2. (A/G,12%,54)

(a) 1. Interpolate between n = 32 and n = 34:

1/2 = x/0.0014

x = 0.0007

(P/F,18%,33) = 0.0050 0.0007 = 0.0043

2. Interpolate between n = 50 and n = 55:

4/5 = x/0.0654

x = 0.05232

$3000 and decreases by $200 each year

through year 10. (a) Determine the value

of the gradient G; (b) determine the

amount of cash flow in year 8; and (c)

determine the value of n for the gradient.

Chapter 2, Solution 27

(c) n = 10

A start-up direct marketer of car parts expects

to spend $1 million the first year for

advertising, with amounts decreasing by

$100,000 each year. Income is expected to be

$4 million the first year, increasing by

$500,000 each year. Determine the equivalent

annual worth in years 1 through 5 of the

companys net cash flow at an interest rate of

16% per year.

A = [4 + 0.5(A/G,16%,5)] [1

0.1(A/G,16%,5)

= [4 + 0.5(1.7060)] [1 0.1(1.7060)]

= $4,023,600

or; find the PW of inflows and Outflows then

calculate corresponding A as I demonstrated this

solution method in class

A chemical engineer planning for her

retirement will deposit 10% of her salary each

year into a high-technology stock fund. If her

salary this year is $60,000 (i.e., end of year 1)

and she expects her salary to increase by 4%

each year, what will be the present worth of

the fund after 15 years if it earns 4% per year?

For

g = i,

P = 60,000(0.1)[15/(1 + 0.04)]

= $86,538

Chapter2,Problem47.

start saving money for replacement of

network servers. If the company invests

$3000 at the end of year 1 and increases the

amount invested by 5% each year, how much

will be in the account 4 years from now if it

earns interest at a rate of 8% per year?

Find P and then convert to F.

P = 3000{1 [(1+0.05)4/(1+0.08)4}]}/(0.08 0.05)

= 3000{3.5522}

= $10,657

F = 10,657(F/P,8%,4)

= 10,657(1.3605)

= $14,498

Chapter2,Problem49.

year is equivalent to a 12% per

year simple interest rate over a

15-year period?

Compound: Total interest = P(1-i)^15-P

Total(simp.)=Total(comp.)

P(1-i)^15-P = 1.8P

(1-i)^15=2.8

i = 7.11%

(compounding rate)

Chapter2,Problem52.

An investment of $600,000

increased to $1,000,000 over a 5year period. What was the rate of

return on the investment?

1,000,000 = 600,000(F/P,i,5)

(F/P,i,5) = 1.6667

i = 10.8% (Excel)

A new company that makes mediumvoltage soft starters spent $85,000 to

build a new website. Net income was

$30,000 the first year, increasing by

$15,000 each year. What rate of return

did the company make in its first 5

years?

85,000 = 30,000(P/A,i,5) +

15,000(P/G,i,5)

Solve for i by trial and error or

spreadsheet:

i = 50%

(Excel)

Chapter2,Problem58.

plans to retire now because she has

$2,000,000 in her ORP account. How

long will she be able to withdraw

$100,000 per year (beginning 1 year

from now) if her account earns interest at

a rate of 4% per year?

2,000,000 = 100,000(P/A,4%,n)

(P/A,4%,n) = 20.000

From 4% table, n is between 40 and

45 years; by spreadsheet, 42 > n >

41

Therefore, n = 41 years

Chapter2,Problem61.

uniform annual deposit of size A

to accumulate to 10 times the size

of a single deposit if the rate of

return is 10% per year?

Chapter2,Problem61.

10A = A(F/A,10%,n)

(F/A,10%,n) = 10.000

From 10% table, n is between 7 and

8 years; therefore, n = 8 years

160 = 235(P/F,i,5)

(P/F,i,5) =0.6809

From tables, i = 8%

Answer is (c)

Chapter2,Problem67.

jackpot worth $175 million was given the option of

taking payments of $7 million per year for 25 years,

beginning 1 year now, or taking $109.355 million

now. At what interest rate are the two options

equivalent to each other?

(a) 4%

(b) 5%

(c) 6%

(d) 7%

109.355 = 7(P/A,i,25)

(P/A,i,25) = 15.6221

From tables, i = 4%

Answer is (a)

Chapter2,Problem70.

An engineer deposits $8000 in year 1, $8500

in year 2, and amounts increasing by $500 per

year through year 10. At an interest rate of

10% per year, the present worth in year 0 is

closest to

(a) $60,600

(b) $98,300

(c) $157,200

(d) $173,400

P = 8000(P/A,10%,10) +

500(P/G,10%,10)

= 8000(6.1446) + 500(22.8913)

= $60,602.45

Answer is (a)

Chapter2,Problem77.

available in 3 years to replace a production line. The

amount of money that would have to be deposited

each year at an interest rate of 12% per year would

be closest to

(a) $22,580

(b) $23,380

(c) $29,640

(d) Over $30,000

A = 100,000(A/F,12%,3)

= 100,000(0.29635)

= $29,635

Answer is (c)

Chapter2,Problem78.

A civil engineer deposits $10,000 per year

into a retirement account that achieves a rate

of return of 12% per year. The amount of

money in the account at the end of 25 years is

closest to

(a) $670,500

(b) $902,800

(c) $1,180,900

(d) $1,333,300

A = 10,000(F/A,12%,25)

= 10,000(133.3339)

= $1,333,339

Answer is (d)

Chapter2,Problem80.

Maintenance costs for a regenerative thermal

oxidizer have been increasing uniformly for 5

years. If the cost in year 1 was $8000 and it

increased by $900 per year through year 5, the

present worth of the costs at an interest rate of

10% per year is closest to

(a) $31,670

(b) $33,520

(c) $34,140

(d) Over $36,000

P = 8,000(P/A,10%,5) +

900(P/G,10%,5)

= 8,000(3.7908) + 900(6.8618)

= $36,502

Answer is (d)

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