EGG 307 Exam 1 Solutions

EGG 307 Exam 1 Solutions - 1 = 0.0539 5.39%/year. Problem 3...

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EGG 307: First Midterm Exam (Sample solutions) Problem 1 Solution: (a) Let P = Unit price of the filters Total cost, TC = $90,000 + 80x6,000 + 0.3Px6,000; Total revenue, TR = $Px6,000 For a 40% profit, TR = 1.4 TC , i.e., 6,000P = 1.4(90,000 + 80x6,000 + 0.3x6,000P) (6,000/1.4 – 0.3x6,000)P = (90,000 + 80x6,000) Solve for P = 570,000/2,485.7 = $229.31/filter (b) Fixed cost, C F = 90,000; Variable cost, C V = $80+60 = $140; Price, P = a – bD = 280 – 0.01D Optimal quantity, D* = (a – C V )/(2b) = (280 – 140)/(2x0.01) = 7,000 filters/year Price, P = 280 – 0.01(7,000) = $210/filter Problem 2 Solution: (a) P = A[P/A, i , N], where P = $1,800; A = $350; i = 6%/year; N = ? 1,800 = N N i i i ) 1 ( 1 ) 1 ( 350 + + = + N ) 06 . 0 1 ( 1 1 06 . 0 350 350 06 . 0 800 , 1 1 ) 06 . 0 1 ( 1 × = + N = 0.6914 Î N = ) 06 . 1 ln( ) 6914 . 0 / 1 ln( = 6.33 years Î 7 years (b) F = P[F/P, i , N] , where F = $4,000; P = $290; N = 50 years; i = ? 4,000 = 290(1+ i ) 50 i = (4,000/290) (1/50)
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Unformatted text preview: 1 = 0.0539 5.39%/year. Problem 3 Solution: (a) A = P[A/P, i , N], where P = 90% of $180,000 = $162,000; I = %; N = 120 months; i.e., A = 162,000(A/P, %, 120) = 162,000x0.0127 = $2,057 (factor obtained from tables) (b) Balance after 24 months = PW of remaining (120-24 = 96) payments, i.e., P B = A[P/A, %, 96] = 2,057x68.259 = $140,436 (factor obtained from tables) Total new loan amount, P N = 140,436 + 1,500 = $141,936 New monthly payment, A = P N (A/P, %, 36) = 141,936x0.0304 = $4,315 Problem 4 Solution: Present worth of the revenues, P R = $1,200,000(P/A, 20%, 9) - $80,000(P/G, 20%, 9) = $1,200,000x4.031 80,000x11.434 = $3,922,480 Present worth of the costs, P C = $1,000,000 + 300,000(P/A, 20%, 9) = $1,000,000 + 300,000x4.031 = $2,209,290 Since PW(revenues) > PW(costs) This is an economical investment....
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This note was uploaded on 07/13/2009 for the course EGG a taught by Professor Dr.kaseko during the Spring '09 term at University of Nevada, Las Vegas.

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