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Assignment 1

1. Apple wants to have $2.1 billion available in 5 years to finance a handheld device that will learn users' behaviors and control home electronics. If Apple sets aside $50 million after year 1, how much must it increase the amount set aside each year assuming 18% annual growth? 2. A report shows the US Postal Service will lose $7 billion this year, and losses will total $241 billion over 10 years if not changed. If losses increase uniformly, determine the (a) yearly increase and (b) equivalent uniform worth at 8% interest. 3. Determine the difference in present worth of two commodity contracts: Contract 1 costs $10,000 yearly, escalating 4%

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708 views

Assignment 1

1. Apple wants to have $2.1 billion available in 5 years to finance a handheld device that will learn users' behaviors and control home electronics. If Apple sets aside $50 million after year 1, how much must it increase the amount set aside each year assuming 18% annual growth? 2. A report shows the US Postal Service will lose $7 billion this year, and losses will total $241 billion over 10 years if not changed. If losses increase uniformly, determine the (a) yearly increase and (b) equivalent uniform worth at 8% interest. 3. Determine the difference in present worth of two commodity contracts: Contract 1 costs $10,000 yearly, escalating 4%

Uploaded by

hamza shahbaz
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment 1

Question 1
Apple Computer wants to have $2.1 billion available 5 years from now to finance production of a
handheld electronic brain that, based on your behavior, will learn how to control nearly all the
electronic devices in your home, such as the thermostat, coffee pot, TV, and sprinkler system. The
company expects to set aside uniformly increasing amounts of money each year to meet its goal.
If the amount set aside at the end of year 1 is $50 million, how much will the constant increase G
have to be each year? Assume the investment account grows at a rate of 18% per year.

Question 2
A report by the Government Accountability Office (GAO) shows that the GAO expects the Postal
Service to lose a record $7 billion at the end of this year, and if the business model is not changed,
the losses will total $241 billion by the end of year 10. If the losses increase uniformly over the
10-year period, determine the following:
(a) The expected increase in losses each year
(b) The equivalent uniform worth of the losses at an interest rate of 8% per year

Question 3
Determine the difference in the present worth values of the following two commodity contracts at
an interest rate of 8% per year. Contract 1 has a cost of $10,000 in year 1; costs will escalate at a
rate of 4% per year for 10 years. Contract 2 has the same cost in year 1, but costs will escalate at
6% per year for 11 years.

Question 4
A mechanical engineering graduate who wanted to have his own business borrowed $350,000 from
his father as start-up money. Because he was family, his father charged interest at only 4% per
year. If the engineer was able to pay his father $15,000 in year 1, $36,700 in year 2, and amounts
increasing by $21,700 each year, how many years did it take for the engineer to repay the loan?

Question 5
Gesky Industrial Products manufactures brushless blowers for boilers, food service equipment,
kilns, and fuel cells. The company borrowed $18,000,000 for a plant expansion and repaid the loan
in seven annual payments of $3,576,420, with the first payment made 1 year after the company
received the money. What was the interest rate on the loan?

Question 6
A company has to replace a present facility after 15 years at an outlay of Rs. 5,00,000. It plans to
deposit an equal amount at the end of every year for the next 15 years at an interest rate of 18%
compounded annually. Find the equivalent amount that must be deposited at the end of every year
for the next 15 years.

Question 7
A company wants to set up a reserve which will help the company to have an annual equivalent
amount of Rs. 10,00,000 for the next 20 years towards its employees welfare measures. The
reserve is assumed to grow at the rate of 15% annually (i.e the interest rate is 15%). Find the single-
payment that must be made now as the reserve amount.

Question 8
A person is planning for his retired life. He has 10 more years of service. He would like to deposit
Rs. 8,500 at the end of the first year and thereafter he wishes to deposit the amount with an annual
decrease of Rs. 500 for the next 9 years with an interest rate of 15%. Find the total amount at the
end of the 10th year of the above series.

Question 9
A person invests a sum of Rs. 50,000 in a bank at a nominal interest rate of 18% for 15 years. Find
the maturity amount of the deposit after 15 years, if the compounding is monthly, daily, and
continuously?
Question 10
Alpha Associates has the following details:
Fixed cost = Rs. 20,00,000;
Variable cost per unit = Rs. 100;
Selling price per unit = Rs. 200
Find:
(a) The break-even sales quantity,
(b) The break-even sales;
(c) If the actual production quantity is 60,000,
(d) contribution;
(e) Margin of safety by all methods.

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