1. (30%) A wholesale distributor of automobile spare parts plans to modify the material handling system of its existing facility. The facility will require an initial redesign cost of $370,000 and a monthly operating and maintenance cost of $30,000. It will have a $66,500 salvage value of the system after 7 years. What is the net present worth of this investment if the company's minimum attractive rate of return is 6% per year compounded monthly? a. (5%) What is the monthly interest rate? b. (5%) Draw the cash-flow diagram for the wholesale distributor. c. (10%) Formulate the problem using standard notation for interest factors used in engineering economy. d. (5%) Calculate the net present worth of this investment. e. (5%) If the wholesale distributor has a $2,500,000 investment budget, do you think that the distributor will make this investment? 2. (35%) What value of G makes the two series of cash flows described below (A and B) equivalent at an interest rate of 18% per year? A: 14 annual deposits in the amount of $150 B: 7 annual deposits, starting in the amount of $150 in the first year and increasing by $G each year. a. (10%) Draw the cash-flow diagrams of both series. b. (10%) Formulate both series using standard notation for interest factors used in engineering economy. c. (10%) Calculate the value of G. d. (5%) If these series represent an installment plan for buying a new mobile phone, comment on what type of customer prefers "B". 3. (35%) A major drug store chain plans to spend $35 million in capital investments for its new inventory loss reduction initiative. By upgrading the current inventory tracking system using advanced RFID technology, the company estimates the annual maintenance cost of $210,000. The salvage value of the system at the end of year 13 is expected to be 0.4% of the original investment. Drugstore chain wants to know the minimum annual inventory loss prevention required to make this investment economically acceptable, if the company's minimum attractive rate of return is 8% per year. a. (10%) Draw the cash-flow diagram for the drugstore chain. b. (15%) Formulate the problem using standard notation for interest factors used in engineering economy. C. (5%) Calculate the net annual worth of this investment. d. (5%) What is the minimum annual inventory loss prevention required to make this investment economically acceptable? Explain