(a) At time t = 0 a construction company pays £60,000 to purchase a plot of land and material to build a house that will be sold for £100,000 after one year (t = 1). For 11 months, from t = 0 to t = 11/12, the company has also to pay £35,000 for the salary of the workers. Assuming that the payment of the salaries can be modeled as an annuity paid continuously, calculate the net present value of the project. The interest rate is 3% p.a. effective. (b) For a 6-month internship, a student is paid £20 per day. The effective interest rate is 3% p.a. in the first three months and 2% p.a. in the final three months. Modeling the daily payments as an annuity paid continuously, compute the accumulated value of the salary at the end of the internship. Consider 30 days in each month and 360 days in a year.

(a) At time t = 0 a construction company pays £60,000 to purchase a plot of land and material to build a house that will be sold for £100,000 after one year (t = 1). For 11 months, from t = 0 to t = 11/12, the company has also to pay £35,000 for the salary of the workers. Assuming that the payment of the salaries can be modeled as an annuity paid continuously, calculate the net present value of the project. The interest rate is 3% p.a. effective. (b) For a 6-month internship, a student is paid £20 per day. The effective interest rate is 3% p.a. in the first three months and 2% p.a. in the final three months. Modeling the daily payments as an annuity paid continuously, compute the accumulated value of the salary at the end of the internship. Consider 30 days in each month and 360 days in a year.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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