To improve crack detection in aircraft, the U.S. Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair costs by as much as $200,000 per year. a) Write any equation using the appropriate compound interest factor(s) for the present worth of these savings over a 10-year period at an interest rate of 10% per year. b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s). c) Verify your result from Part B with a cash-flow table like the one shown below.
To improve crack detection in aircraft, the U.S. Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair costs by as much as $200,000 per year. a) Write any equation using the appropriate compound interest factor(s) for the present worth of these savings over a 10-year period at an interest rate of 10% per year. b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s). c) Verify your result from Part B with a cash-flow table like the one shown below.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
To improve crack detection in aircraft, the U.S. Air Force combined ultrasonic inspection procedures with laser heating to identify fatigue cracks. Early detection of cracks may reduce repair costs by as much as $200,000 per year.
- a) Write any equation using the appropriate
compound interest factor(s) for the present worth of these savings over a 10-year period at an interest rate of 10% per year. - b) Solve your equation from Part A. Use the Excel calculator to determine the compound interest factor(s).
- c) Verify your result from Part B with a cash-flow table like the one shown below.
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· EOY Cash Flow Equivalent at EOY 0 at 5%
$0.00
$1,190.48
$1,133.79
$1,079.80
$1,028.38
$0
$1,250
$1,250
$1,250
1
3
2
4.
3
$1,250
$1,250
$1,250
$1,250
4
5
$979.41
$932.77
7
$888.35
Total
$7,232.97
10
11
12
18
14
15
Expert Solution
Step 1
A.
Determine the present value of the annuity (PVA) using the following equation. Here, 'CF' refers to the annual savings which is $200,000, 'r' refers to the interest rate which is 10% and 't' refers to the time which is 10 years.
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