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Question #1:

Consider the cash flow diagram below. Determine the present- worth, annual-worth, and future -worth, that is equivalent to all of the cash flows shown, assuming an annual interest rate of 10%.
i = 10% per year

2241_Cash flow.jpg

Question #2:

Determine the present worth of a geometric gradient series with a cash flow of $50,000 in year 1, and an increase of 6% each year after through year 8, assuming an annual interest rate of 10%.

Question #3:

A new bridge is expected to be permanent and will have an initial construction cost of $30 million. Its recurring (repeated until infinity) inspection & operating costs are estimated to be $50,000 per year. The bridge must be also rehabilitated at a recurring cost of $1 million every 5 years. What is its capitalized cost, assuming an interest rate of 10% per year?

Question #4:

ABC-Chemicals is considering investing in a new equipment that will reduce its product shipping Cost. If the new equipment will cost $220,000 to he purchased and installed, how much the company should save each year for the next
3 years, in order to justify this investment, assuming an annual interest rate of 10%?

Question #5:

Consider the cash flows shown below. Assuming an annual interest rate of 8%,

a. Draw the cash flow diagram for each alternative.

b. Using the present worth analysis, identify the best alternative.

c. Confirm the best alternative using annual worth analysis.


P Q
First cost 23000 30000
Annual operating cost, $per year 4000 2500
salvage value 3000 1000
Life years 3 6

 

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