Unformatted text preview: • convert each X back to a present value; write down in an equation that when they are added, they should total the amount borrowed. • solve for X 3. (4 points) As the owner of an engineering firm, you are wondering if you should replace your office furniture now or wait and do so 1 year from now. If you do it now, the cost of new furniture and installation will be $3,000. If you wait 1 year from now, the cost is expected to be $3,200. 3.1. (2 points) Draw a cash flow diagram for each of the two alternatives. 3.2. (2 points) Using an interest rate of 5% per year and annual compounding, should you replace your furniture now? Show and explain your rationale....
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 Fall '08
 HORVATH
 Time Value Of Money, Interest, Net Present Value, cash ﬂow diagram

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