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Quiz 10 sec 2-1 sol

Quiz 10 sec 2-1 sol - 1 = 1 0.1 1 0.02 − 1 = 7.8 ·¸ =...

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IE 343 Spring 2010 Name: Section 2, Quiz 10 (last) (first) Closed book, closed notes. No calculators. 1. Sony is thinking of investing in a plant in the US. Its net cash flows for the next 4 years, in terms of the USD, are given in the table below. The current exchange rate is 1 USD = 93 JPY. Sony ’s MARR relative to the JPY is 10% a year. It is estimated that the JPY will weaken against the USD at 2% a year. Write an expression for the present worth of this investment in terms of USD. ANS: 1 + 𝑖 ?𝑚 = 1 + 𝑖 𝑢? 1 + ? ? → 𝑖 𝑢? = 1 + 𝑖 ?𝑚 1 + ? ? 1 =
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Unformatted text preview: 1 = 1 + 0.1 1 + 0.02 − 1 = 7.8% ·¸ = − 20 ¹ + 5 ¹ ( · | º , 7.8%, 4) 2. Say you invested $1500 in the stock market in 2000. If the real rate of return on this investment has been 2.5% a year, and if inflation has been constant at 3% a year for the last 10 years, write an expression for how much you actually have in your investment account in 2010). ANS: ° ± = ³ 1 + ° » ¶ (1 + ? ) = ³ 1 + 2.5% ¶³ 1 + 3% ¶ = 5.575% º $ = 1500( ¼ | · , ° ± , 10) EOY Net cash flow (in USD) 0 -20M 1 5M 2 5M 3 5M 4 5M...
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