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24 views5 pages

Solved Examples

Uploaded by

hatem akeedy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1- A company borrowed $10,000 at 12% interest.

The loan was repaid according


to the following
schedule. Find X, the amount that will pay off the loan at the end of year 5.

Year Amount
1 $2,000
2 2,000
3 2,000
4 2,000
5 X

Solution

10,000 = 2,000 (P/A, 12%, 4) + X(P/F, 12%, 5)


3,926 = X(.5674)
X = 3,926/.5674
= $6,919.28

2- A young engineer wishes to buy a house but only can afford monthly
payments of $500. Thirty year loans are available at 12% interest compounded
monthly. If she can make a $5,000 down payment, what is the price of the
most expensive house that she can afford to purchase? Solution
i 12%/12 = 1 % n = (30)(12) = 360
P* = 500(P/A, 1%, 360) = 48,609
P = 48,609 + 5000
P = $53,609
3- Find C if i = 12%

Solution
20C(P/A, 12%, 4) - 5C(P/G, 12%, 4) = 100(P/A, 12%, 4) + 100(P/G, 12%, 4)

40.105C = 716.4
C = 17.86

4- Find the Uniform Equivalent for the following cash flow diagram if i = 18%.
Use the appropriate gradient and uniform series factors.

Solution
5- Al-Qaem cement corporation plans to open a new rock pit. Two plans have
been devised for movement of raw material from the quarry to the plant. Plan
A requires the purchase of two earth movers and construction of an unloading
pad at the plant. Plan B calls for construction of a conveyor system from the
quarry to the plant. The costs for each plan are detailed in the following table.
Using PW analysis to determine which plan should be selected based on
Present cost if interest rate 15% per year, and select the better plan for a 12-
year period .
Details Of Plans To Move Rock From Quarry To Cement Plant

COSTS Plan A Plan B


Mover Pad Conveyor
Initial cost $ 45000 28000 175000
Annual operating cost $ 6000 300 2500
Salvage value $ 5000 2000 10000
Life year 8 12 24

Solution:

5000 5000 5000


N=8 N=16
Mover: N=24

6000
45000 45000 45000

PW of plan A:

2000 2000
Pad: N=12 N=24

300
28000 28000

10000
Conveyor: N=24

2500
175,000

PCA=2PCmovers+PCpad
PCmovers= 2(45,000)[1+(P/F,15%,8)+(P/F,15%,16)]

-2(5,000)[(P/F,0.15,8)+(P/F,15%,16)+ (P/F,15%,24)]+2(6,000)(P/A,15%,24)=

PCmovers= 2(45,000)[1+(0.3269)+(0.1069)]

-2(5,000)[( 0.3269)+( 0.1069)+ (0.0349)]+2(6,000)(6.4338)=$201,560.6

PCpad= 28000[1+(P/F,15%,12)]+

-2000[(P/F,15%,12)+(P/F,15%,24)]+300(P/A,15%,24)=

PCpad= 28000[1+(0.1869)]+

-2000[(0.1869)+(0.0349)]+300(6.4338)=$34,719.74

PCA=$201,560.6+$34,719.74=236,280.35

PC of plan B:

PCB= PCconveyer=

175,000+2,500(P/A,0.15,24) -10000(P/F,15%,24)=

=175,000+2,500(6.4338) -10000(0.0349)=$190,735.5

Since the PC of plan B is less than of plan A, the conveyer should be constructed.

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