Quiz 5 sec 2 sol

# Quiz 5 sec 2 sol - and will be used for 5 years At the end...

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IE 343 Spring 2010 Name: Section 2, Quiz 5 (last) (first) Closed book, closed notes. No calculators. 1. You have just opened a savings account that pays 3% nominal interest compounded monthly. You will be depositing \$1000 every 6 months into this account, for the next 10 years (for a total of 20 deposits). The first deposit will occur 6 months from now. Write an expression for the amount of money in this account after your last deposit. ANS: (3) ???±°?²³± ´µ?± ?±´ ¶²· ¸¹º?ℎ¶ = ² = (1 + 0.03 12 ) 6 1 (2) » = 1000( » | ¼ , ² %, 20) 2. Perdue is considering establishing a new machine to automate its packaging process. The machine will save \$50,000 in labor annually. It can be purchased for \$200,000,
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Unformatted text preview: and will be used for 5 years. At the end of 5 years, it will be sold for \$25,000 (salvage value). Maintenance costs for the machine are estimated to be \$9,000 per year. The directors have stated that they require a minimum rate of return of 10% a year. Write an expression for the future worth of this investment. What criterion would you use to decide if this is a wise investment? ANS: (3) »½ = − 200,000 »¾¿ , 10%, 5 À + 50000 »¾¼ , 10%, 5 À − 9000 »¾¼ , 10%, 5 À + 25000 = − 200,000 »¾¿ , 10%, 5 À + 41000 »¾¼ , 10%, 5 À + 25000 (2) Á ²? »½ > 0, µ°°±?? . ²? »½ < 0, ´±Â±°? . Ã ▄ \$200,000 \$9,000 \$50000 \$25000...
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## This note was uploaded on 02/07/2012 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue.

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