Assignment
1. Profit from recycling paper, cardboard, aluminum, and glass at a recycling factory have increased at a constant rate of $1100 in the last years. If this year's profit (end of year 1) is expected to be $6000 and the profit trend continues through year 5;
a. What is the present worth of the profit at an interest rate of 8% per year?
c. What is the future worth at the same interest rate?
2. The training cost of workers in XYZ Aluminum Workshop is expected to decrease because of increased productivity, as shown in the table. Determine the equivalent annual cost at an interest rate of 8% per year.
|
Year
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
|
Cost (1CD)
|
2000
|
1950
|
1900
|
18500
|
18000
|
17500
|
17000
|
16500
|
3. Given the following cash flow, determine the amount in year 1 if the annual worth in year 1 through 9 is equal to $418.62 and the interest rate is 10% per year.
|
Year
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
|
Cost
|
Al
|
Ai+50
|
A1+150
|
A1+200
|
A1+250
|
A1+300
|
A1+350
|
A1+400
|
A1+450
|
4. Ahmad has invested his money in a fund. The fund promised a first year income of KD4250. The income is expected to increase at the rate of 5% per year. The fund will last for 5 years with an interest rate of 9%, Find the present worth of the yearly income. Draw the cash flow diagram.
5. An oil well is expected to produce 12,000 barrels of oil during its first year at $21 per barrel. If its oil production is expected to decrease by 10% per year, find the present worth of the expected revenue at an interest rate of 17% over the next 7 years.