1. A person wishes to accumulate P2,500 over a period of 15 yrs so that a cash payment can be made for a new roof on a summer cottage. To have this amount when it is needed, annual payments will be made into a savings account that earns 8% interest per year. How much must each annual payment be? Draw a cash flow diagram.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
100%
Answer number 1 with cash flow diagram
1. A person wishes to accumulate P2,500 over a period of 15 yrs so that a cash payment can be
made for a new roof on a summer cottage. To have this amount when it is needed, annual
payments will be made into a savings account that earns 8% interest per year. How much must
each annual payment be? Draw a cash flow diagram.
2. Mrs. X has just purchased a new car for 1M. She makes a down payment of 30% of the
negotiated price and then makes payments of P15,000 per month thereafter for 60 months.
Furthermore, she believes the car can be sold for P750,000 at the end of 3 years. Draw a cash
flow diagram of this situation from Mrs. X's point of view.
3. An individual makes 6 annual deposits of P2,000 in a savings account that pays interest rate of
4% compounded annually. Two years after making the last deposit, the interest rate changes
to 7% compounded annually. Ten years after the last deposit, the accumulated money is
withdrawn from the account. How much is withdrawn?
4. What value of N comes closest to making the upper cash flow diagram (a) equivalent to the
one below (b)? Let i = 15% per annum.
Years
N=?
(a)
Transcribed Image Text:1. A person wishes to accumulate P2,500 over a period of 15 yrs so that a cash payment can be made for a new roof on a summer cottage. To have this amount when it is needed, annual payments will be made into a savings account that earns 8% interest per year. How much must each annual payment be? Draw a cash flow diagram. 2. Mrs. X has just purchased a new car for 1M. She makes a down payment of 30% of the negotiated price and then makes payments of P15,000 per month thereafter for 60 months. Furthermore, she believes the car can be sold for P750,000 at the end of 3 years. Draw a cash flow diagram of this situation from Mrs. X's point of view. 3. An individual makes 6 annual deposits of P2,000 in a savings account that pays interest rate of 4% compounded annually. Two years after making the last deposit, the interest rate changes to 7% compounded annually. Ten years after the last deposit, the accumulated money is withdrawn from the account. How much is withdrawn? 4. What value of N comes closest to making the upper cash flow diagram (a) equivalent to the one below (b)? Let i = 15% per annum. Years N=? (a)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Cash Flow
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education