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4403_HW3_2011

# 4403_HW3_2011 - Advanced Engineering and Corporate...

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Advanced Engineering and Corporate Economics Fall 2011 IEOR E4403 Prof. Ali Sadighian Years Problem Set #3 Due date: 12/1/2011 1) Compute the present worth of cash flow that has a triangular pattern with 10% interest compounded continuously. 2) Suppose a cash flow increases continuously according to the function below, from year 0 to year 15. Find the present value of this cash flow stream under continuous compounding at r = 10%. ) 1 ( * 20 2 . 0 t t e F - - = Years t F 0 15 18 9 12 0 6 15 F t

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Advanced Engineering and Corporate Economics Fall 2011 IEOR E4403 Prof. Ali Sadighian 3) Consider the following project balance profiles for proposed investment projects. Note: The project balance represents the net equivalent amount of dollars committed to the project at each point in time over the life of the project. Project Balance(End of Year) Project i PB(i) 0 PB(i) 1 PB(i) 2 PB(i) 3 PB(i) 4 PB(i) 5 A 10% -\$1,000 -1,000 -900 -690 -359 100 B 10% -\$1,000 -750 -350 -120 55 150 C 15% -\$1,000 -730 -199 -200 -76 -50 D 0% -\$1,000 -800 -600 -400 -200 0 E 20% -\$1,000 -1,225 -1,440 -1,528 -1,234 -1,000 F 18% -\$1,000 -700 -302 0 233 354 Projectbalancefiguresareroundedtodollars.
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4403_HW3_2011 - Advanced Engineering and Corporate...

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