Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 5, Problem 32P
To determine

Calculate the present worth.

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Use a calculator for this exercise.Suppose you obtain a five-year lease for a Porsche and negotiate a selling price of $143,000. The annual interest rate is 8.4%, the residual value is $76,000, and you make a down payment of $7000. Find each of the following. (a) The net capitalized cost$ (b) The money factor (rounded to four decimal places)(c) The average monthly finance charge (rounded to the nearest cent)$ (d) The average monthly depreciation (rounded to the nearest cent)$ (e) The monthly lease payment (rounded to the nearest cent)$
A friend of yours bought a small apartment building for $100,000 in a college town. She spent $10,000 of her own money for the building and obtained a mortgage from a local bank for the remaining $90,000. The annual mortgage payment to the bank is $10,500. Your friend also expects that annual maintenance on the building and grounds will be $15,000. There are four apartments (two bedrooms each) in the building that can each be rented for $360 per month. Solve, (a) Does your friend have a problem? If so, what is it? (b) What are her alternatives? (Identify at least three.) (c)Estimate the economic consequences and other required data for the alternatives in Part (b). (d) Select a criterion for discriminating among alternatives, and use it to advise your friend on which course of action to pursue. (e) Attempt to analyze and compare the alternatives in view of at least one criterion in addition to cost. (f) What should your friend do based on the information you and she have generated?
Item A is currently in use at a plant. The original cost of the piece of machinery was $2,000. Its maintenance cost is $500 this year, increasing each year by $30. Items A can be replaced by Item B which has a current cost of $3,500. Item B has no annual maintenance costs, but it is anticipated that the item purchase cost increases by $50 per year. Disregarding income taxes effects (such as depreciation), what is the predicted optimum time (after year 'X') to schedule a replacement of Item A with Item B. Use 8% as the 'interest rate', which really is the value of money to the company. a. 5 years b. 6 years c. 7 years d. 8 years
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