exam1solution - 1.
 How
 long
 will
 it
 take
...

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Unformatted text preview: 1.
 How
 long
 will
 it
 take
 for
 an
 investment
 to
 triple
 at
 10
 %
 per
 year
(a)
simple
interest
(5
pt)
and
(b)
compound
interest?
(5
pt)
 2.
 A
 northern
 California
 consulDng
 firm
 wants
 to
 start
 saving
 money
for
replacement
of
network
servers.
If
the
company
starts
 to
 invest
 $3000
 at
 the
 end
 of
 year
 2,
 increases
 the
 amount
 invested
by
5%
each
year
and
earns
interest
at
a
rate
of
10%
per
 year,
 (a)
 draw
 a
 cash
 flow
 diagram
 (5
 pt)
 and
 (b)
 calculate
 how
 much
will
be
in
the
account
5
years
from
now.
(15pt)
 3.
BKM
Systems
sales
revenues
are
shown
below.
(a)
Draw
a
cash
 flow
diagram
(5
pt)
and
(b)
calculate
the
equivalent
annual
worth
 (years
1
through
7),
using
an
interest
rate
of
10%
per
year.
(15
pt)
 4.
You
love
a
red
mustang,
of
which
MSRP
is
$22,000
(You
are
buying
 at
 MSRP).
 In
 September,
 Ford
 offers
 0%
 interest
 rate
 for
 60
 months.
 However,
 your
 dealer
 offers
 $8,000
 instant
 rebate
 if
 you
 do
 not
 finance.
 Barney‐bank
 offers
 12%
 APR
 for
 60
 months
 (i.e.
 MONTHLY
 INTEREST
RATE
is
12/12
=
1%).
From
whom
are
you
going
to
finance?
 You
 are
 going
 to
 repay
 equal
 amount
 money
 every
 month
 for
 60
 months
(starDng
from
month
1).
 (a)
IdenDfy
and
explain
two
alternaDves.
 (b)
 Calculate
 MONTHLY
 value
 of
 each
 alternaDve
 and
 jusDfy
 your
 choice.
(10
pt)
 5.
 ABC
 Networks
 is
 considering
 3
 machines
 to
 implement
 a
 new
 product.
 ParDal
 informaDon
 is
 available
 for
 all
 the
 machines
 (see
 the
 table
 below).
 Find
 all
 the
 unknown
 values
 (i.e.x,
 y,
 andz).
 If
 MARR
 is
 20%
 per
 year
 and
 available
 capital
 is
 $80,000,
 which
 machine
 should
 they
choose?
They
deposit
the
rest
of
money
aeer
investment
in
the
 bank
and
get
the
interest
at
MARR.
 (a)
Calculatex,
y,
andz.
(10
pt)
 (b)
 Calculate
 the
 future
 value
 for
 each
 alternaDve
 and
 jusDfy
 your
 decision.

(20pt)
 ...
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This note was uploaded on 10/18/2009 for the course GSG sdgqg taught by Professor Inkla during the Spring '09 term at École Normale Supérieure.

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