A company estimates that if a certain machine undergoes a major overhaul, its output can be increased by 20% which translates into additional cash flow of P 8,000 per quarter for 3 years. If money is worth 10% compounded quarterly, how much can we afford to invest to overhaul this machine?
II. Solve the following problems. Show clean and complete details of your work for each number.
1. A company estimates that if a certain machine undergoes a major overhaul, its output can be increased by 20% which translates into additional cash flow of P 8,000 per quarter for 3 years. If money is worth 10% compounded quarterly, how much can we
afford to invest to overhaul this machine?
2. Mr. Jones has P 1,000,000 that he wishes to distribute to his son at a rate of
P 100,000 per year. If the P 1,000,000 is deposited in a bank account that earns 4%
interest per year, how many years will it take for his son to completely receive the
account?
3. A new employee who is now 20 years old is planning to have personal savings totaling
P 1,500,000 when he retires at the age of 60. If the annual interest rate is 8%
compounded monthly over the next 40 years, how much must he save each month to
accomplish his goal?
4. A new civil engineer employee start a savings plan in which he saves P 10,000 each
year for 15 years. He makes her first payment at age 22 and after paying for 15 years
she leaves the accumulated sum in the savings plan until she reach age 65. If the
savings plan pays 10% per year, how much will be in the savings account when she
age 65?
5. Mr. Jo needs P 4,000,000 immediately to pay for a new home. Having insufficient
fund for this, he borrows P 2,000,000 from an insurance company and repay the loan
every six months for 15 years, the first payment being at the end of 8 years from now.
If the insurance company charged him 8% compounded semiannually, how much is
the amount of each payment?
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