Please read t e questions carefully. Please draw the cash flow diagrams and expl

Question

Please read t e questions carefully. Please draw the cash flow diagrams and explain the steps at you are going to approach to solve the problems then solve the problem. Show the details in solving the problems. Please write legible hand writing, otherwise there is a deduction from grade 10 points. Missing Cash Flow Diagram, is deductible points equal to 20% of the total points for each question Question 1)-30 points Part a) The maintenance on a machine is expected to be $155 at the end of the first year, thern increasing by $35 each year for the next 7 years. What sum of money would need to be set aside now to pay the maintenance for the 8-year period? Assume 10% interest. b) What is the uniform annual equivalent maintenance cost for the abo ve machine? Compute an equivalent A for the maintenance costs. Part 2 An individual is considering the purchase of a used automobile. The total price is $6200 with S1240 as a down payment and the balance to be paid in 48 equal monthly payments with interest of 12% compounded monthly. The payments are due at the end of each month. Compute the monthly payment. ou purchased a $10,000 face value commercial bond for $9 ys $500 interest at the end of each six months. It is now June 1, 1992. Thus, you have alread ceived two $500 payments. The bond matures in five more years on May 31, 1997. What is the bond (or coupon) interest rate? What is the bond worth today, if 10% is an acceptable value for M ARR? 35 point ,000 on June 1, 1991. The bond

Explanation / Answer

Total money to be kept aside = 1201.364

UAEC= initial cost/ annuity factor + annual maintenance cost

Annuity factor= (1-(1/1.10)8)/.10= 5.315

Assume initial cost= 10000

UAEC= 10000/5.315 + 155=2036.46$

2. EMI= {P*R*(1+R)n}/ {(1+R)n-1}

={4960*0.01*(1.01)48}/ {(1.01)48- 1}= 130.12$

3. Bond coupon payment= 500+ 500= 1000$

Coupon rate= 1000/10000*100= 10%

If marr = 10%

Then value of bond today will be = 1000/0.10= 10000$

Year maintenance cos PV @10% 1 155 140.9 2 190 157.024 3 225 169.05 4 260 177.58 5 295 183.17 6 330 186.27 7 365 187.37 Total of the PV of costs 1201.364

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.