A company is considering investing $17,500 in a heat exchanger. The heat exchanger will last five vears, at which time it will be sold for $2.000, The maintenance cost at the end of the first vear is estimated to be $1.500.Maintenance costs for the exchanger are estimated to increase by $1,000 per year over its life. As an alternative, the company may lease the equipment for $X per year, including maintenance, with the annual payments to madeat the end of each year.a. Choose cash flow diagrams of both alternativesb. For what value of X should the company lease the heat exchanger? The company expects to earn 8% on its investments. Assume end-of-year lease payments.Click the icon to view the interest and annuity table for discrete compounding when i= 8% per year.EOYEOY$2,00023452$1,500 $1,500 $1,500 $1,500 $1,500$1,500$2,500$3.500$4,500$5,500$17,500$17,500OD.C.EOY$2,000EOY$2,00012352.$1,500$2,500$3,500$4,500$5.500 $4.500 $3.500 $2,500 $1,500$5,500$17,500$17,500

Click the icon to view the interest and annuity table for discrete compounding when i=8% per year. EOY ΕΟΥ $2.000 2 3. 5 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,500 $3,500 $4,500 $5,500 $17,500 $17,500 C. OD. EOY $2,000 ΕΟΥ $2.000

Click the icon to view the interest and annuity table for discrete compounding when i=8% per year. EOY ΕΟΥ $2.000 2 3. 5 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $2,500 $3,500 $4,500 $5,500 $17,500 $17,500 C. OD. EOY $2,000 ΕΟΥ $2.000

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: A child's grandparents have opened a #574895 savings account for the child on the day of her birth.…

A: Given Present value P = Money deposit by grandparents at the time of birth of grandchild = 574895…

Q: What value of T makes these two cash flow diagrams (see figure) economically equivalent at 15%…

A: 1000 + 500(NPV at 15% in year 2) + 1000(NPV at 15% in year 4) + 500(NPV at 15% in year 6) = T(NPV at…

Q: An individual makes six annual deposits in a savings account starting one year from now that pays…

A: Present value is a financial concept that measures the current worth of a future sum of money,…

Q: ou were scheduled to receive PHP 10,000 annually starting this year. It will increase by PHP 5,000…

A: Present worth is the idea that expresses a measure of cash today is worth more than that equivalent…

Q: An investment allows for end-of-year payments that grow by 2% per payment for 15 years, starting at…

A: A=$1100g=2%i=3.4%N=15 years

Q: 1 You deposit $17,000 in a retirement account on your 25th birthday, and you plan to retire on your…

A: Here we calculate the following by using the given information , and conclude the answer so the…

Q: You have borrowed $300K to purchase a house. The term of the mortgage is 15-year fixed with a…

A: here we calculate monthly payment and increase in pay off mortgage in 10 year by using the formula…

Q: Tyrone wants to spend $14,500 on a new car three years from now. He opens a savings account and…

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

Q: $1,000 $1,000 2T $500 $500 4 3. ΕΟΥ ΕΟΥ 3T

A: * SOLUTION :- Given that , Interest rate i = 15%

Q: Grandma wants to give you $420 at the beginning of each month while you are at school for 3 years.…

A: Periodic Payment (PMT) = $420 Time period = 3 years or 36 months n = 36 Interest rate = 4.8%…

Q: What uniform series over periods (1,11) years is equivalent at 3% compounded annually to the…

A: First, we will find the present value of all the cashflows. Then, we can find the uniform series…

Q: 7. Joe wants to have $7000 to buy a car. How much does he need to invest into a savings account that…

A: Given Amount(A) = $7,000Time(t) = 5Years (5 x 365)Interest Rate = 4.15% 0r 0.0415

Q: A deposit of $20,000 is made in a savings account that pays a nominal interest of 3.5% compounded…

A: The future value of cash flow refers to the value of a sum of money or a series of cash flows at a…

Q: You borrowed $100,000, agreeing to pay the balance in 10 equal annual installments at 8% annual…

A: When a person opts for loan then he or she has to repay the loan with increased amount. The…

Q: -What is the present worth of two 500 payments at the end of the fourth year and fifth year, if the…

A: Note: Since you have asked multiple question, we will solve the first question for you. If you want…

Q: Compute for the effective interest rate per monthl Nominal rate= 2.35% compounded yearly

A: The effective annual interest rate refers to the return on an investment or the rate owed in…

Q: After graduation, you just got hired by an engineering company and you were planning to take a loan…

A: Cost of the car P=26500 JD Yearly installment for car A =4200 JD Rate of interest i =9.5%

Q: A father wants to set up a bank account that will pay his daughter $16,000 at the end of quarter…

A: Given:Use the future value formula for annuities:in math mode at position 8: FV_1 =…

Q: Save At age 20, a person deposits $355 in a savings account paying 1% interest compounded…

A: Here, given information is: Principal amount (P): $355 Interest rate (r): 1% Time period (n): 70…

Q: Some time ago, you put £500 into abank account for a "rainy day." Sınce then, the bank has been…

Q: The annual interest rate on a credit card is 13.99%. If the minimum payment of $10 is made each…

A: An intеrеst ratе is thе cost of borrowing monеy or thе rеturn on invеstmеnt еxprеssеd as a…

Q: 9. Which of the following statements is (are) correct: jam hab. (A) The change in the amount of…

A: The time value of money refers to the concept that tells that a sum of money is value more today…

Q: Suppose that Rajiv borrows $50,000 at 5% per year to purchase equipment for his business. Complete…

A: Compound interest is the interest which is calculated on the initial principal, and it also includes…

Q: V of se00 paid each 6 mentha for s years at a nominal rate of 12% compounded semiannualy. De not…

A: Future value is the value of an asset at a specific date. It measures the nominal future sum of…

Q: Please answer completely and clearly. , year יויויויויי in millions whatis the future worth of these…

A: We have given the cash flow in which yearly payment is made but the rate of interest is compounded…

Q: A friend was left $50,000 by his uncle. He has decided to put it into a savings account for the next…

A: Sum to be put in savings = 50,000Alternative 1 return : 23/8% compounded annually Alternative 2…

Q: DRAW CASH FLOW DIAGRAM Suppose that P 4500 is deposited each year into a bank account that pays 8%…

A: A series of money paid at regular intervals is known as an annuity. Monthly savings account…

Q: Complete solution needed.thanks 1. Nominal rate: 5% compounded semi annually Effective rate bi…

A: Formula to calculate the effective interest rate: i=1+rmlm-1 Here l= length of time interval in…

Q: One borrows a $120,000 for 6 years at 7.24% APR, compounded monthly? a. What is the monthly payment?…

Q: Student Loans Willie Wilson plans to borrow $36,627 at the beginning of each of his 4 years of…

A: The objective of this question is to calculate the annual installment amount that Willie Wilson…

Q: What value of T makes these two cash flow diagrams (see figure) economically equivalent at 15%…

A: * SOLUTION :- Given that , Interest rate ( i ) = 15% = 0.15

Q: What is the present equivalent of a uniform series of quarterly payments of $4,500 each for 8 years…

A: Given From the first quarter of year 1 to 4th quarter of year 8, the payment is $4500 From the…

Q: Find the periodic payments PMT necessary to accumulate the given amount in an annuity account.…

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

Q: 9. Money is mvested at 10.5% nommal annual rate. Interested is compounded monthly. How much will…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Suppose that $12,000 is placed in a bankaccount at the end of each quarter over the next 15years.…

A: A. Future value when compounded quarterly=A1+rn-1rInterest rate,…

Q: Sofia borrows Php8000.00 from a bank that has an interest rate of 2% compounded quarterly. a.) How…

A: Formula for the future if the interest rate is compunded quarterly F = P(1 + r4)t*4 P : Present…

Q: $1,000 $1,000 2T $500 $500 T 6. 1 2 3 5 6 2 3 4 5 EOY EOY 3T

A: Given Rate of interest = 15% per annum We have to find the value of T that makes these two cash…

Q: Suppose $5,000 is invested at an annual interest rate of 7%. Compute the balance after 10 years if…

A: (Q)Suppose $5,000 is invested at an annual interest rate of 7%. Compute the balance after10 years if…

Q: If you invest $2000 at 12% annual interest rate, compounded weekly, how much would you have after 5…

A: Given, P = Principal Amount = $2000 r = Interest Rate = 12% = 0.12 t = Time = 5 years Compounded…

Q: 6. What interest rate compounded monthly is equivalent to 10% effective rate?

A: 6. Monthly (n)= 12 compounding periods i= 0.1

Q: f you have only $750 on January 1, 2019, what interest rate, compounded annually for 3 years, must…

A: Given: The amount of initial investment is = $750 Years = 3 The maturity amount is = $1,000 To Find:…

Q: What is the future worth of a series of equal year end deposits of $2.800 for 13 years in a savings…

A: here we calculate the future worth of a series of equal year end deposits as follow

Q: A) $37,365 B) $37,205 C) $37,890 D) $36,36511. 11. A machine has a first cost of $150,000. Its…

A: The information being given is as follows:- First cost = $150,000 Service life = 10 years Annual…

Q: 3. Jen spends 9000 to buy a 12-payment annuity, which pays K at the end of each month. The nominal…

A: Maximizing Returns with Annuities and Savings AccountsPeople look for a variety of investment…

Question

A company is considering investing $17,500 in a heat exchanger. The heat exchanger will last five vears, at which time it will be sold for $2.000, The maintenance cost at the end of the first vear is estimated to be $1.500.
Maintenance costs for the exchanger are estimated to increase by $1,000 per year over its life. As an alternative, the company may lease the equipment for $X per year, including maintenance, with the annual payments to made
at the end of each year.
a. Choose cash flow diagrams of both alternatives
b. For what value of X should the company lease the heat exchanger? The company expects to earn 8% on its investments. Assume end-of-year lease payments.
Click the icon to view the interest and annuity table for discrete compounding when i= 8% per year.
EOY
EOY
$2,000
2
3
4
5
2
$1,500 $1,500 $1,500 $1,500 $1,500
$1,500
$2,500
$3.500
$4,500
$5,500
$17,500
$17,500
OD.
C.
EOY
$2,000
EOY
$2,000
1
2
3
5
2.
$1,500
$2,500
$3,500
$4,500
$5.500 $4.500 $3.500 $2,500 $1,500
$5,500
$17,500
$17,500

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

VIEW

Step 2

VIEW

Step by step

Solved in 2 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

1. Engr. Dela Cruz, the buyer of a certain equipment may pay either in 4,000.00 cash down paymentand 2,000.00 annually for the next 6 years, or pay 5,000.00 cash down payment and 2,000.00 annuallyfor the next 5 years. A.) What type of annuity are the options of Engr. Dela Cruz?B.) If money is worth 12% compounded annually, which method of payment is better for Engr.Dela Cruz and how much?
Don
Ramoncito deposited P15,000.00 today and he deposited the same equal amount each month for the next 9 months. Interest is 7% compounded monthly. a. How much is the value of these 10 equal deposits after 9 months from today? b. If Ramoncito failed to pay the last two monthly payments (8th and 9th), how much should he pay the bank a single amount of 14th month? show formula used and systematic solution
3. Ramoncito deposited P15,000.00 today and he deposited the same equal amount each month for the next 9 months. Interest is 7% compounded monthly. a. How much is the value of these 10 equal deposits after 9 months from today? b. If Ramoncito failed to pay the last two monthly payments (8th and 9th), how much should he pay the bank a single amount of 14th month?
7. Five equal deposits of $8000 will be made every 3 years starting next year at %12 per year compounded quarterly. What will be the total accrued amount withdrawn 4 years after the last deposit is made?
How long will it take money to double if it earns 4 percent per annum compounded annually?
Q 10 please
fast urgent i will 10 upvotes.
1.12 Choose the equation below that can be used to determine the value of "P" for a known interest rate, i. Hint think in gradient payment series. No need to show work on this one. Year Cash Flow, $ 0 P 1 0 2 -2,000 a) P = 10,000(P/F, i%, 5) - 2,000(P/G, i%, 5) b) P = 10,000- 1,000(P/G, i%, 5) (F/P, 1%, 5) c) P= 10,000(P/F, i%, 5) -2,000(P/G, i%, 5) d) P= -10,000(P/F, i%, 5) + 2,000(P/G, 1%, 4) 3 -4,000 4 -6,000 5 10,000
Ramoncito deposited P15,000.00 today and he deposited the same equal amount each month for the next 9 months. Interest is 7% compounded monthly. a. How much is the value of these 10 equal deposits after 9 months from today? b. If Ramoncito failed to pay the last two monthly payments (8th and 9th), how much should he pay the bank a single amount of 14th month? using this fomulas given
2. Sherry expects to deposit $1000 now, $3000 4 years from now, and $1500 6 years from now and earn at a rate of 12% per year compounded semiannually through a company-sponsored savings plan. What amount can she withdraw 10 years from now? a. Draw cash flow diagram. 4 b. What amount can she withdraw 10 years from now?
2. Find the amount at the end two years znd seven months of P 1M if invested at 9& compounded quarterly and using simple interest for anytime less than a year interest period.