Solutions to HW #3
IE 1040
Fall, 2005
433
P
0
= $1,000 (P/A, 10%, 5)  $10,000 (P/F, 10%, 15)  $10,000 (P/F, 10%, 30)
= $1,000 (3.7908)  $10,000 (0.2394)  $10,000 (0.0573)
= $6,757.80
A
= $6,757.80 (A/P, 10%, 50) = $6,757.80 (0.1009) = $681.86
435
P
= $3,000 (P/A, 20%, 10) + $7,000 (P/A, 20%, 5)
= $3,000 (4.1925) + $7,000 (2.9906)
= $33,511.70
You can afford to pay as much as $33,511.70
for the equipment.
442
Number of monthly deposits = (5 years)(12 months/yr) = 60
$400,000 = $200,000(F/P, i' / month, 60) + $676(F/A, i' / month, 60)
Try i' / month = 0.75%:
$400,000 > $364,126.69,
∴
i' / month > 0.75%
Try i' / month = 1%:
$400,000 < $418,548.72,
∴
i' / month < 1%
Using linear interpolation:
i month
'/
.
$400,
$364,
.
.
$418,
.
$364,
.


=


0 75%
000
126 69
1%
0 75%
548 72
126 69
;
i' / month = 0.9148%
Therefore, i' / year = (1.009148)
12
 1 = 0.1155 or 11.55% per year
444
F
5
= $100 (F/A, 8%, 4) (F/P, 8%, 1) + $100 (P/A, 8%, 2)