Assignment 2-ITEC 3800 Section 602 - Summer 2022 There are 5 problemslisted below with point values assigned for each. Complete each problem in excel. Submit your excel worksheet in EXCEL format so I can see how you solved the problems. Be sure to read each question carefully. There are multiple parts to some of these. Please MARK or Outline Save the file with your name in it...for example: Assignment 2 McClung.xls See questions below. Problem 1 6 Points (1a. = 4, 1b. = 2) You had some unexpected expenses so you are considering working with a questionable lender. The loan is for $970 and you pay it back 17 days later You would have to pay back $1400 at the end of the 17 days. Assume the company compounds interst every 17 days. 1a. What is the effective interst rate per year? 1b. What would you owe if you kept the money for 1 year? Problem 2 6 Points (3+3) The lender seems like a bad idea based on the rates and amounts you calculated in problem 1. Instead, perhaps you will just get another credit card because you keep getting offers in the mail. BUT... You never want to pay more than 10.2% effective interest rate per year. The card company offers two variations 2a. What would be the APR (Nominal rate per year) if the card compounds every quarter? 2b. What would be the APR (Nominal rate per year) if the card compounds day? Problem 3 12 Create a CASHFlow chart and answer the following questions. The equipment will cost $620,000 and lasts the entire 11 year project. At the end of 11 years, the equipment will be sold for $91,000 in salvage. Operating costs start at $108000 and go up by 3.9% every tear. Benefits begin at $190000 and go up by 6.1% every year. The MARR value is 14% Use a MARR of 14% 3a. Determine the NPW 3b. Determine the AW 3c. Determine the FW 3d. De terine the IRR 3e. Graph the NPW versus MARR 3f. Are we making or losing money at 14% MARR? How can you tell? Problem 4 12 Points It's time to upgrade and buy that McMansion you've been wanting. The loan is for $421,000 and you are getting rate of 2.6% per year compounded monthly. BUILD the CASH FLOW chart for this project. You have decided on a 15 year mortgage and will make monthly payments (end of the month). To try and reduce the cost of the home, you plan to pay extra each month for 5 years by working extra hours and expect to pay an extra $801 per month to knock down the principle. You make these EXTRA payments for 5years. The FIRST extra payment will be on month 1. The last extra payment is on month 60. Build the amortization table. What month will you make your last payment? How much will the last payment be? Problem 5 14 Points your answers so I can tell where they are. You are trying to decide between two different machines on a project There are two machines under consideration. They will provide the same function, but there are difference in cost, benefits, life and other details. Costs, machine prices AND salvage all go up at the rate of inflation. Costs and benefits are shown for year 1. MARR Inflation Machine A Initial Cost $12,500 Salvage Life Benefits Benefit inc Costs 14.10% 2.880% Benefits go up by the % given and are different for each machine. Salvage costs are given for an 14 yr old machne A or a 7yr old machine B TODAY. Adjust with inflation. Help your employer to determine which machine is the best choice. $ 6,100 14 yr old machine today 14 Years $ 7,100 Per year 3.80% $ 3,200 Per year 5c. Determine the EUAW for both machines. 5d. Determine the NFW for both machines. Se. Determine the IRR for both machines Sf. Determine the DELTA IRR Machine B Initial Cost Salvage Life Benefits Benefits inc Costs 5a. Create the net cash flow chart for both machines. 5b. Deterine the NPW for both machines. $ $ $ S 9,300 3,200 7yr old machine today 7 Years 6,800 Per year 4.40% 2.900 Per year 5g. Which machine will you select? Show the decision table for these alternatives Sh. Graph the NPW versus MARR chart for both machines (both curves on the same graph) Assignment 2-ITEC 3800 Section 602 - Summer 2022 There are 5 problemslisted below with point values assigned for each. Complete each problem in excel. Submit your excel worksheet in EXCEL format so I can see how you solved the problems. Be sure to read each question carefully. There are multiple parts to some of these. Please MARK or Outline Save the file with your name in it...for example: Assignment 2 McClung.xls See questions below. Problem 1 6 Points (1a. = 4, 1b. = 2) You had some unexpected expenses so you are considering working with a questionable lender. The loan is for $970 and you pay it back 17 days later You would have to pay back $1400 at the end of the 17 days. Assume the company compounds interst every 17 days. 1a. What is the effective interst rate per year? 1b. What would you owe if you kept the money for 1 year? Problem 2 6 Points (3+3) The lender seems like a bad idea based on the rates and amounts you calculated in problem 1. Instead, perhaps you will just get another credit card because you keep getting offers in the mail. BUT... You never want to pay more than 10.2% effective interest rate per year. The card company offers two variations 2a. What would be the APR (Nominal rate per year) if the card compounds every quarter? 2b. What would be the APR (Nominal rate per year) if the card compounds day? Problem 3 12 Create a CASHFlow chart and answer the following questions. The equipment will cost $620,000 and lasts the entire 11 year project. At the end of 11 years, the equipment will be sold for $91,000 in salvage. Operating costs start at $108000 and go up by 3.9% every tear. Benefits begin at $190000 and go up by 6.1% every year. The MARR value is 14% Use a MARR of 14% 3a. Determine the NPW 3b. Determine the AW 3c. Determine the FW 3d. De terine the IRR 3e. Graph the NPW versus MARR 3f. Are we making or losing money at 14% MARR? How can you tell? Problem 4 12 Points It's time to upgrade and buy that McMansion you've been wanting. The loan is for $421,000 and you are getting rate of 2.6% per year compounded monthly. BUILD the CASH FLOW chart for this project. You have decided on a 15 year mortgage and will make monthly payments (end of the month). To try and reduce the cost of the home, you plan to pay extra each month for 5 years by working extra hours and expect to pay an extra $801 per month to knock down the principle. You make these EXTRA payments for 5years. The FIRST extra payment will be on month 1. The last extra payment is on month 60. Build the amortization table. What month will you make your last payment? How much will the last payment be? Problem 5 14 Points your answers so I can tell where they are. You are trying to decide between two different machines on a project There are two machines under consideration. They will provide the same function, but there are difference in cost, benefits, life and other details. Costs, machine prices AND salvage all go up at the rate of inflation. Costs and benefits are shown for year 1. MARR Inflation Machine A Initial Cost $12,500 Salvage Life Benefits Benefit inc Costs 14.10% 2.880% Benefits go up by the % given and are different for each machine. Salvage costs are given for an 14 yr old machne A or a 7yr old machine B TODAY. Adjust with inflation. Help your employer to determine which machine is the best choice. $ 6,100 14 yr old machine today 14 Years $ 7,100 Per year 3.80% $ 3,200 Per year 5c. Determine the EUAW for both machines. 5d. Determine the NFW for both machines. Se. Determine the IRR for both machines Sf. Determine the DELTA IRR Machine B Initial Cost Salvage Life Benefits Benefits inc Costs 5a. Create the net cash flow chart for both machines. 5b. Deterine the NPW for both machines. $ $ $ S 9,300 3,200 7yr old machine today 7 Years 6,800 Per year 4.40% 2.900 Per year 5g. Which machine will you select? Show the decision table for these alternatives Sh. Graph the NPW versus MARR chart for both machines (both curves on the same graph)