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Econ Probset 1

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5 views1 page

Econ Probset 1

Uploaded by

jdretumban
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Econ Probset 1

1. A manufacturer of off-road vehicles is considering the purchase of dual-axis inclinometers for


installation in a new line of tractors. The distributor of the inclinometers is temporarily
overstocked and is offering them at a 40% discount from the regular cost of $142. If the
purchaser gets them now instead of 2 years from now, which is when they will be needed, what
is the present worth of the savings per unit? The company would pay the regular price, if
purchased in 2 years. Assume the interest rate is 10% per year.
2. Profits from recycling paper, cardboard, aluminum, and glass at a liberal arts college have
increased at a constant rate of $1100 in each of the last 3 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 will the profit
be at the end of year 5 and ( b ) what is the present worth of the profit at an interest rate of 8% per
year?
3. Determine the present worth of a maintenance contract that has a cost of $30,000 in year 1 and
annual increases of 6% per year for 10 years. Use an interest rate of 6% per year.
4. The energy costs of a company involved in powder coating of outdoor furniture are expected to
increase at a rate of $400 per year. The cost at the end of the next year (year 1) is expected to be
$13,000. How many years will it be from now before the equivalent annual cost is $16,000 per
year, if interest is 8% per year?
5. Precision Instruments, Inc. manufactures high sensitivity mini accelerometers designed for
modal analysis testing. The company borrowed $10,000,000 with the understanding that it
would make a $2,000,000 payment at the end of year 1 and then make equal annual payments
in years 2 through 5 to pay off the loan. If the interest rate on the loan was 9% per year, how much
was each payment in years 2 through 5?

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