(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

See similar textbooks

Related questions

Q: Consider a uniform series of cash flows. The first cash flow of $10,000 occurs at time 10 and the…

A: A cash flow is the movement of funds over a predetermined time period into or out of the financial…

Q: You are planning to become a millionaire (i.e., save $1 M) over the next 30 years when you finally…

A: Time value of money The time value of money is the mostly accepted conjecture that there is more…

Q: Joe Grant won the state lottery for $20M. He will receive $600,000 per year after taxes for 20…

A: Joe Grant won a lottery and will receive $600,000 per year after taxes. The expected annual interest…

Q: Suppose the interest rate is 6.9% APR with monthly compounding. What is the present value of an…

A: The nominal interest rate is 6.9% per year compounded monthly. There is a uniform annuity of $105…

Q: Find the value of T, the equivalent uniform flow of the given set of flows, if the interest rate is…

A: Constant arithmetic growth refers to a pattern or rate of growth where a variable increases or…

Q: Calculate the effective annual rate of interest which is equivalent to an effective rate of interest…

A: Present value is the value of investment in today's dollar.Future value is the value of investment…

Q: You earn SEK 10,000 for three years. After these three years, you have SEK 13,000. The interest rate…

A: Annual percentage rate (APR) refers to the yearly interest generated by a sum that's charged to…

Q: You deposit $6000 into an 7% account today. At the end of two years, you will deposit another $2500.…

A: Amount after compound interest is applied is calculated by using the formula A = P(1+r) n

Q: Mahmud Hassan inherited $250,000 from a great uncle, and immediately quit his software engineering…

A: We will answer the first three subparts only. Please resubmit the question with any other parts…

Q: An equation of the form y=1 = 7000 (1.09)* provides an example of interest compounded annually. This…

A: Growth rate is the addend by which a quantity increases (or decreases) over time. For example,…

Q: Tuition at a local college is currently $4,000 per year. If tuition rates are expected to increase…

A: The present amount of annual tuition and annual rate will be used to determine the annual tuition 19…

Q: Suppose you were given a one time gift of $10,000 to put into a savings account. The account earns…

A: Compound interest is the rate of interest that is used to calculate the value added to a loan or a…

Q: To make CDs look more attractive as an investment than they really are, some banks advertise that…

A: We are going to find the compounding interest rate to answer this question. Note: As per Bartleby…

Q: If a nominal interest rate of 6% is compounded continuously, determine the unknown quantity in each…

A: DISCLAIMER “Since you have asked multiple questions, we will solve the first three questions for…

Q: Consider the following two cash flow series of payments: Series A is a geometric series increasing…

A: The present worth (PW) represents the current or present value of a series of future cash flows,…

Q: (1 point) A sum of $9500 is invested for the months of June and July at 7,8% simple interest. Find…

A: Principle(P)=$9500 r=7.8% Time=Months of june and july Days in June=30 Days in July=31 Time =31 days…

Q: If a bond with a normal value (N) of £100 and a coupon of 2.5% can be bought a a market price (P) of…

A: Given bond value = 100 Euros Counpon rate = 2.5 % = 2.5 % of 100 = 2.5 Euros Market price of bond =…

Q: Tuition at a local college is currently $3,600 per year. If tuition rates are expected to increase…

A: The present value is the current value of future sum of the money. The future value is the…

Q: Don Money inherited $29.21 from a not-so-rich uncle. If Don Money deposits his money into an account…

A: Compounded interest and continuously compounded interest. are two different methods of calculating…

Q: A bond pays a semiannual coupon, and the last coupon was paid 61 days ago. If the annual coupon…

A: The annual coupon payment = $75 The last coupon paid = 61 days ago Accrued interest =?

Q: 3. If you borrow $24,000 now at an interest rate of 10% per year and promise to repay the loan with…

A: An interest rate is the amount of interest due per period, as a proportion of the amount lent,…

Q: A rich donor gives a hospital $950,000 one year from today. Each year after that, the hospital will…

A: Payment made at the end of year 1 = 950000 $ Time = 10 years interest rate = 10 % Increase in…

Question

6.
(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.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Explanation. Part a:

VIEW

Step 3: Explanation. Part b:

VIEW

Solution

VIEW

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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

Suppose that under the Plan of Repayment one should pay off the debt in a number of equal end-of-month installments (principal and interest). This is the customary way to pay off loans on automobiles, house mortgages, etc. A friend of yours has financed $15,000 on the purchase of a new automobile, and the annual interest rate is 6% (0.5% per month). a. Monthly payments over a 36-month loan period will be how much? b. How much interest and principal will be paid within three month of this loan?
Show the steps of your calculation O For example, question: a person deposits $500 to bank now, if the annual interest rate is 8%, what will be the worth of this deposit after 3 years? You need to write down F = P (F/P, i, n) – 500 (F/P, 8%, 3) mem
Chandrika has a student loan for $12,600.00 at an interest rate of i(12)%. The loan will be paid off with monthly payments (at the end of each period) of $175.73 for the next 7 years. Find i(12). (Answer to the nearest 0.1%.) a. i(12) = 4.5300%. b. i(12) = 4.6700% c. i(12) = 4.9800%. d. i(12) = 4.6000%. e. i(12) = 4.5900%.
Trevor's starting salary at his new job is $40,000. His company gives a performance raise of 5% each year. If Trevor continues in the same position and always receives the performance raise, in how many years will he double his salary?
ou decided to go and apply for a credit card at your local financial institution.The Prime rate currently announced on June 1 was 3.25%. You have goodcredit history and a FICO score of 700. The lowest rate that they can offer toindividuals is a 18.99% APR for a credit card that gives cashback on purchasesand rewards. You were offered 21.99% APR for the credit card. How did thelender determine or calculate what rate they should offer you?
TBTF Bank makes a 8 year interest only loan to AFC Inc of $4,150,000.00. The interest rate on the loan is i(4) = 7.250%, and the payments will be made annually. TBTF reinvests the payments at an interest rate of i(26) = 8.625%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a.7.783% b.6.382% c.7.394% d.6.849% e.6.537%
Please show your work through formulas not just in a Excel spreadsheet
UPVOTE WILL BE GIVEN. PLEASE WRITE THE COMPLETE SOLUTIONS. BOX THE FINAL ANSWER. MANUAL COMPUTATION.
In saving for a future major purchace, Oksana has been making uniform deposits of $5,000 per year in an account that has earned variable annual interest rates of in-12-13-5% and i=15-7% (see cash flow diagram below). How much does she have in the account immediately after making the last deposit? ATT The account will have ! (Round to the nearest dollar) GUILD
Mr. Smith invested $2,500 in a savings account that earns 3% interest compounded annually. He made no additional deposits or withdrawals. Which expression can be used to determine the number of dollars in this account at the end of 4 years? 2500(1+0.03)^(4),2500(1+0.04)^(3) 2500(1+0.3)^(4),2500(1+0.4)^(3).
What is the interest rate that would make $10,000 received in the first year equivalent to $3,500 received each year for 4 years?
Find an expression for the present value of an annuity on which payments are 1 at the end of each 4-month period for 12 years assuming a rate of interest per 3-month period.