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    Economics of a new manufacturing process

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

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

    4. You deposit $5,000 in a savings certificate. The bank pays compound interest at an annual rate of 12%, compounded quarterly. At the end of 4 years, how much money have you earned in the savings certificate?

    7. Consider the following sets of investments projects in Table 1. All projects have a 5 year investment life, with and interest rate of 10%.

    Table 1 Project Cash Flow ($)
    N A B
    0 -$17,000 -$18,000
    1 4100 3300
    2 4200 3500
    3 4300 3700
    4 4400 3900
    5 4500 4100
    5 (Salvage Value) 5000 5500

    Compute the present worth of project A, in Table 1.

    8. How much do you have to pay for a bond rate that pays 6% dividend compounded semiannually, with a face value of $5,000 that is going to be paid (maturity) in 5 years. The buyer wants to have an interest rate profit of 8% compounded semiannually.

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