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Expanded growth in a certain portion of the city

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2) Due to expanded growth in a certain portion of the city, a new waste truck capacity is needed. An additional truck can be purchased now to replace the presently owned assets. The city uses a 5% interest rate for project evaluation. It is economically viable to buy the new waste truck?

New Model

Present value $72,000
Annual cost 12,500
Annual savings 31,000
Salvage value 7,200
Life in years 10

a.   PW = 191,097.03
b.    PW = -326,256.87
c.   PW = 70,851.45
d.   PW = $75,271.53

5) You just opened a savings account at a bank. You deposited $1,000 in the bank. The bank pays a simple interest at an annual rate of 6%. The second bank pays compound interest at an annual rate of 6%, compounded monthly. How much more money you will have in the compound interest savings account at the end of five years?

    a.    I = 1348.85
    b.    I = $48.85
    c.    I = 1,300
    d.    I = 867.60

6) A machine is under consideration for a new manufacturing process. The interest rate is 10% computed semiannually. Compute the future worth of this alterntive.

First cost = $70,000
Semiannual cost = $6,000
Semiannual income = $18,000
Salvage value = $9,000
Life in years = 5

    a.    $45,911.80
    b.    $36,911.80
    c.    -$255,958
    d.    $273,957.80

7) A gourmet ice-cream store has fixed cost expenses (rent, utilities, etc.) of $100,000/year. The ice cream cost $5 / liters to produce and sell for $7 per liter. The store sells around 150,000 liters of ice cream per year. If the gourmet ice cream store is going to operate for five (5) years, what is the payback period for an investment of $400,000 in the first year?

a. payback = 2 years
b. payback = 0.88 years
c. payback = 2.67 years
d. payback = 0.42 years

Reference no: EM13294515

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