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IE 226 HQ1 sp09 - Solution

# IE 226 HQ1 sp09 - Solution - Name IE 226 Exam 1 G Tonkay...

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Name ___________________________ IE 226 Exam 1 G. Tonkay February 20, 2009 INSTRUCTIONS: Answer all of the questions on the following 5 pages. If you need additional paper for a problem, raise your hand and I will provide more blank pages. Show all of your work (unless you do not want full credit). Point values are adjacent to the problem number. If you have a question, raise your hand and I will come to you. 1) (20 pts) General Motors is borrowing \$2,000,000 for 5 years in order to update a production line. Equal payments will be made each month. Interest accrues at 12 percent per year compounded monthly. a) Determine the monthly payment. b) Just after the 10 th payment is made, they decide to pay off the balance off the loan using government bailout money. How much do they need to pay to satisfy the loan assuming there are no prepayment penalties?

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Name ___________________________ 2) (30 pts) A \$500,000 five-year class asset is purchased to generate annual revenues of \$700,000 against \$100,000 in labor and \$50,000 in material costs. The effective tax rate is 34%. The salvage value is expected to be \$100,000 after 5 years. A \$300,000, equal principal, three year loan at 6% per year is used to fund part of the purchase.
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IE 226 HQ1 sp09 - Solution - Name IE 226 Exam 1 G Tonkay...

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