Week_2_Solutions

Week_2_Solutions - Question 2-3 Pooi Phan needs $2,000 to...

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Question 2-3 Cash Flow Diagram (CFD) frpm bank's perspective (Not necessarily to scale) $x $x $x $x 0 1 2 3 4 $2,000 $x= $564.02 =PMT(5%,4,-2000,0) Then the CFD becomes: $564.02 $564.02 $564.02 $564.02 0 1 2 3 4 $2,000 Pooi Phan needs $2,000 to pay off her bills. She borrows this amount from a bank  with plans to pay it back over the next 4 years at $ X  per year. Create a cash flow  diagram from the bank's perspective Created by shading a cell(s) and right clicking on "Format" and then clicking on "Borders". Also, the "Format Painter came in handy. The value of $x can be determined as follows since the payments are all equal and assuming some interest rate such as 5% annual:
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Question 2-5 Cash Flow Diagram (CFD) OF Mercrusier CNC Machine (Not to scale) Since planning horizon is 10 years, an upgrade would not show at year 10. (+) $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 0 1 2 3 4 5 6 7 8 9 10 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 (-) + $5000 $50,000 Mercruiser purchases a used, recently upgraded computer numerical control (CNC) machine for turning operations. It costs $50,000, and since the machine will increase productivity, the company expects to increase sales by $7,000 per year. Maintenance costs are $1,000 per year starting 1 year after purchase. Every 5 years, the machine will require a software upgrade costing $5,000. Draw the cash flow diagram for the scenario described if Mercruiser uses a 10-year planning horizon.
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Question 2-5 Account 1 for $500 or over: 5.5 percent per year simple interest Account 2 for $2,000 or over: 5 percent per year compound interest Account 3 for $6,000 or over: 6.5 percent per year simple interest Account 4 for $10,000 or over 6 percent per year compound interest Account Amount Rate Type Years End of Year 5 Equation Excel Function 1 $10,000  5.50% Simple 5 $12,750.00  =C12*(1+D12*E12) 2 $10,000  5% Compound 5 $12,762.82  =C13*(1+D13)^E13 =FV(D13,E13,0,-C13) 3 $10,000  6.50% Simple 5 $13,250.00  =C14*(1+D14*E14) 4 $10,000  6% Compound 5 $13,382.26  =C15*(1+D15)^E15 =FV(D15,E15,0,-C15) Prefer 6% compounded annually.
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