GSOE 9830 T3
GSOE9830
TUTORIAL PROBLEMS
WEEK 3
1. Elin purchased a used car for $10,000. She wrote a check for $2,000 as a down payment for the car and financed the $8,000 balance. The annual percentage rate (APR) is 9% compounded monthly, and the loan is to be repaid in equal monthly installments over the next four years. Elin’s monthly car payment is most nearly which of the following?
(a) $167
(b) $172
(c) $188
(d) $200
(e) $218
2. A specialized automatic machine costs $300,000 and is expected to save $111,837.50 per year while in operation. Using a 12% interest rate, what is the discounted payback period?
(a) 4 (b) 5 (c) 6 (d) 7 (e) 8
3. With interest at 8% compounded annually, how much money is required today to provide a perpetual income of $14,316 per year?
(a) $178,950 (b) $96,061 (c) $175,134 (d) $171,887
4. What is the internal rate of return in the following cash flow?
Year End 0 1 2 3 4 Cash Flow($) -3,345 1,100 1,100 1,100 1,100
(a) 12.95% (b) 11.95% (c) 9.05% (d) 10.05% (e) 11.05%
5. If you invest $5,123 in a venture, you will receive $1,110 per year for the next 20 years. Assuming 10% interest, what is the discounted payback period for your investment?
(a) 7 (b) 8 (c) 5 (d) 9 (e) 6
6. What is the equivalent annual worth of a two-year contract that pays $5,000 at the beginning of the first month and increases by $500 for each month thereafter? MARR = 12% compounded monthly.
(a) $10,616 (b) $121,982 (c) $5,511 (d) $5,235 (e) $134,649
7. A new machine was bought for $9,000 with a life of six years and no salvage value. Its annual operating costs were as follows:
$7,000, $7,350, $7,717.499, …. , $8,933.968. If the MARR = 12%, what was the annual equivalent cost of the machine?
(a) $7,809 (b) $41,106 (c) $9,998 (d) $2,190 (e) $9,895
8. A bank offers a loan at a nominal interest rate of 6% per year to be paid back in five equal annual installments. The bank also charges an application fee equal to 13.67%
TUTORIAL PROBLEMS
WEEK 3
1. Elin purchased a used car for $10,000. She wrote a check for $2,000 as a down payment for the car and financed the $8,000 balance. The annual percentage rate (APR) is 9% compounded monthly, and the loan is to be repaid in equal monthly installments over the next four years. Elin’s monthly car payment is most nearly which of the following?
(a) $167
(b) $172
(c) $188
(d) $200
(e) $218
2. A specialized automatic machine costs $300,000 and is expected to save $111,837.50 per year while in operation. Using a 12% interest rate, what is the discounted payback period?
(a) 4 (b) 5 (c) 6 (d) 7 (e) 8
3. With interest at 8% compounded annually, how much money is required today to provide a perpetual income of $14,316 per year?
(a) $178,950 (b) $96,061 (c) $175,134 (d) $171,887
4. What is the internal rate of return in the following cash flow?
Year End 0 1 2 3 4 Cash Flow($) -3,345 1,100 1,100 1,100 1,100
(a) 12.95% (b) 11.95% (c) 9.05% (d) 10.05% (e) 11.05%
5. If you invest $5,123 in a venture, you will receive $1,110 per year for the next 20 years. Assuming 10% interest, what is the discounted payback period for your investment?
(a) 7 (b) 8 (c) 5 (d) 9 (e) 6
6. What is the equivalent annual worth of a two-year contract that pays $5,000 at the beginning of the first month and increases by $500 for each month thereafter? MARR = 12% compounded monthly.
(a) $10,616 (b) $121,982 (c) $5,511 (d) $5,235 (e) $134,649
7. A new machine was bought for $9,000 with a life of six years and no salvage value. Its annual operating costs were as follows:
$7,000, $7,350, $7,717.499, …. , $8,933.968. If the MARR = 12%, what was the annual equivalent cost of the machine?
(a) $7,809 (b) $41,106 (c) $9,998 (d) $2,190 (e) $9,895
8. A bank offers a loan at a nominal interest rate of 6% per year to be paid back in five equal annual installments. The bank also charges an application fee equal to 13.67%