Homework #2
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School
Stony Brook University *
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Course
392
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
Pages
2
Uploaded by AdmiralWorld7933
Brian Zhao
113824300
Stony Brook University
EST 392: Engineering Economics
Professor Moriarty
February 3, 2024
Homework #2
1.11 Abby purchased 100 shares of her dad’s favorite stock for $25.80 per share exactly 1 year
ago, commission free. She sold it today for a total amount of $2865. She plans to invest the
entire amount in a different corporation’s stock today, but must now pay a $50 commission fee.
If she plans to sell this new stock exactly 1 year from now and realize the same return as she has
just made, what must be the total amount she receives next year? Include the commission fee as a
part of the purchase price, but neglect any tax effects.
1.
Total Share: 2865 - (25.80*100) → 2865 - 2580 = $2852.
2.
Rate of return = interest/principal * 100
a.
285/2580 = 0.110 * 100 → 11%
3.
Total invested price + Commission Fee = 2865 + 50 = $2915
4.
Amount required for 11% return = 2915 * (1.1105) = $3237.11
1.12 In order to build a new warehouse facility, the regional distributor for ValcoMulti-position
Valves borrowed $1.6 million at 10% per year interest. If thecompany repaid the loan in a lump
sum amount after 2 years, what was (a) theamount of the payment, and (b) the amount of
interest?
1.
Borrowed 1,600,000 at 10% interest per year → paid in 2 years
2.
a) Amount of the payment after 2 years: 1,600,000 * 1.10 * 1.10 = $1,936,000
3.
b) Amount of interest: Interest = total amount paid - principal
= 1,936,000 - 1,600,000 = $336,000
1.17 Determine the amount of money FrostBank might loan a housing developerwho will repay
the loan 2 years from now by selling eight water-view lots at $240,000 each. Assume the bank’s
interest rate is 10% per year.
F = $240,000 * 8 = $1,920,000
n = 2
i = 0.1
P = ?
Present Value = $1,920,000*(1/(1+0.1)2) = $1,586,776.86
1.21 Southwestern Moving and Storage wants to have enough money to purchase a new
tractor-trailer in 3 years. If the unit will cost $250,000, how much should the company set aside
each year provided the account earns 9% per year?
F = 250,000
n = 3
i = 0.09
A = ?
Annuity Value = 76,263.69
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