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#1 #2 #3 1. An asset with an expected life of 4 years is to be purchased for $5,000. It is estimated that it will
#1 #2 #3 1. An asset with an expected life of 4 years is to be purchased for $5,000. It is estimated that it will produce annual revenues of $2,000 while incurring annual expenses of $400. At retirement at the end of 4th year it is estimated that the asset will be sold for $900. At that time it is expected that $700 will have to be paid to remove the asset from the plant. The interest rate is 8% compounded annually. a. Find the present worth of the receipts and the present worth of the disbursements and subtract the equivalent disbursements from the equivalent receipts. b. Find the cash flow for the investment and calculate the net present worth from this cash flow. Compare your result with that of part (a) 2. You have a bank loan for $10,000 to pay for your truck that you financed. This loan is to be repaid in equal end of month installments for five years with a nominal interest rate of 12% compounded monthly. What is the amount of each payment? 3. A laptop can be purchased for $500. If a credit plan calls for a 20% down payment of the initial cost plus 12 end-of- month payments of $40. What are the monthly and the effective annual rates of return charged by the plan
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