Homework 2

# Homework 2 - c Annual deposits totaling \$75,000 are made...

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Homework 2 1. Draw the net cash flow diagrams for each of the following situations: a. The sum of \$100,000 is invested in a project at Time 0. Over the next 5 years, the project produces \$50,000 per year in revenues with \$2000 in expenses. b. A piece of equipment is purchased for \$25,000. Its annual operating and maintenance (O&M) costs are \$1000 in Year 1. The O&M costs increase by \$500 in each of the next four years. At the end of Year 5, the equipment is sold for scrap, generating \$2000 in revenue.
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Unformatted text preview: c. Annual deposits totaling \$75,000 are made into an account for each of three years. One year later \$235,000 is withdrawn from the account. 2. Keisha borrows \$85,000 at an interest rate of 4.5% per year. The loan will be repaid as a lump sum at the end of 5 years. Create a table defining the amount of interest charged each year and the total amount owed at the end of each year. Assume the terms of the loan call for simple interest. 3. Repeat the previous problem assuming compound interest....
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