# Manaf H.W - Eng Economics Manaf Alwaheeb U30512542 H.W(CH6...

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Eng. Economics Manaf Alwaheeb U30512542 H.W (CH6 – CH10) 03/30/2011 CH6: 6-1 C = \$15 + \$15 (A/G, 10%, 4) = \$15 + \$15 (1.381) = \$35.72 6-5 A = \$100 (A/P, 3.5%, 3) = \$100 (0.3569) = \$35.69 6-8 A = F[(e r −1)/(e m − 1)] = \$5 × 10 6 [(e 0.15 − 1)/(e (0.15)(40) − 1)] = \$5 × 10 6 [0.161834/402.42879] = \$2,011 =================================================== CH7: 7-2 (a) F = \$5, P = \$1, n = 5 F = P (1 + i) n \$5 = \$1 (1 + i) 5 (1 + i) = 5 0.20 = 1.38 i * = 38% (b) For a 100% annual rate of return F = \$1 (1 + 1.0) 5 = \$32, not \$5! Note that the prices diagonal charges do not necessarily reflect what anyone will pay a collector for his/her stamps. 7-4 The rate of return exceeds 60% so the interest tables are not useful. F = P (1 + i) n \$25,000 = \$5,000 (1 + i) 3 (1 + i) = (\$25,000/\$5,000) 1/3 = 1.71 i * = 0.71 Rate of Return = 71% 7-10 3,000 = 30 (P/A, i * , 120) (P/A, i * , 120) = 3,000/30 = 100 Performing Linear Interpolation: ( P/A, i%, 120) I 103.563 ¼% 90.074 ½% i * = 0.0025 + 0.0025 [(103.562 − 100)/(103.562 − 90.074)] = 0.00316 per month

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Nominal Annual Rate = 12 (0.00316) = 0.03792 = 3.79% ==================================================== CH8: 8-2 Compute Rates of Return Alternative X: \$100 = \$31.5 (P/A, i%, 4) (P/A, i%, 4) = \$100/\$31.5 = 3.17 ROR X = 9.9% Alternative Y: \$50 = \$16.5 (P/A, i%, 4) (P/A, i%, 4) = \$50/\$16.5 = 3.03 ROR Y = 12.1% Incremental Analysis Year X − Y 0 −\$50 1-4 +\$15 \$50 = \$15 (P/A, i%, 4) Δ ROR X-Y = 7.7% (a) At MARR = 6%, the X − Y increment is desirable. Select X.
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