Assignments 1. You have received $100,000 from your grandparents to be used for your graduate studi You plan to start a program in 5 years. You can invest the money at 6% interest, compound annually. How much will you have in 5 years? 2. Mobile Health needs to replace its mobile medical unit to continue providing diagnos services and preventative medicine to city residents. The van costs $120,000, and a bank is w ing to lend the nonprofit the money at a 6% interest rate for 5 years. Payments are due at the e of each month, and interest is compounded monthly. How much should you budget for t monthly payment? 3. The Department of Corrections (DOC) needs to replace two of its prison transport buse There are two companies that have a track record of making reliable vehicles, and both make bus that meets the needs of the department. The DOC pays an 8% interest rate on money it ba rows. The bus from Company A has a purchase price of $105,000 and a 10-year service life expe tancy, and it averages $2,000 per year in maintenance costs. The bus from Company B has purchase price of $110,000 and a 10-year service life expectancy, and it averages $1,500 per yer in maintenance costs. Which bus should the Department of Corrections select? 4. The information technology (IT) department has recently completed a major refurbis! ment and upgrade of the city's data center, at a cost of $10,145,825. The chief information office (CIO) has informed the central budget office that the IT department will need to do the sam kind of upgrade in 5 years, and he expects the total cost of that project to be 10% more than thi year's project, accounting for better future technology and future increases in costs. The cit does not expect to have enough funding available to pay for the refurbishment in 5 years and must put money away during each of the next 4 years to meet this need. How much money should the city put aside in each of the next 4 years to be able to pay for the data center refur bishment 5 years from now, assuming the city can invest the money at a 4.5% interest rate? 5. The local community center has been notified that it is the beneficiary of an endowment The community center can accept cash today in the amount of $550,000 or receive $875,000 in 5 years. The community center expects to be able to invest the money at a 5% interest rate if it were to take the money now. Should it take the money now or wait? 6. The municipal golf course has made a budget request to remodel and upgrade the clubhouse. The project will cost $7,200,000, based on reliable estimates. The additional annual operating expenses after the upgrade are expected to be $200,000 per year. An analysis of the experiences of other municipal golf courses reveals an expected revenue increase of $1 million per year after the upgrade. The useful life of the upgraded clubhouse is estimated at 9 years, and the golf course expects to get a loan for the renovations at an interest rate of 4.25%. Should the renovations be approved? 67 of 384 1. You have received $100,000 from your grandparents to be used for your graduate studies. You plan to start a program in 5 years. You can invest the money at 6% interest, compounded annually. How much will you have in 5 years? 2. Mobile Health needs to replace its mobile medical unit to continue providing diagnostic services and preventative medicine to city residents. The van costs $120,000, and a bank is will ing to lend the nonprofit the money at a 6% interest rate for 5 years. Payments are due at the end of each month, and interest is compounded monthly. How much should you budget for the monthly payment? 3. The Department of Corrections (DOC) needs to replace two of its prison transport buses. There are two companies that have a track record of making reliable vehicles, and both make a bus that meets the needs of the department. The DOC pays an 8% interest rate on money it bor. rows. The bus from Company A has a purchase price of $105,000 and a 10-year service life expec. tancy, and it averages $2,000 per year in maintenance costs. The bus from Company B has a purchase price of $110,000 and a 10-year service life expectancy, and it averages $1,500 per year in maintenance costs. Which bus should the Department of Corrections select? 4. The information technology (IT) department has recently completed a major refurbish- ment and upgrade of the city's data center, at a cost of $10,145,825. The chief information officer (CIO) has informed the central budget office that the IT department will need to do the same kind of upgrade in 5 years, and he expects the total cost of that project to be 10% more than this year's project, accounting for better future technology and future increases in costs. The city does not expect to have enough funding available to pay for the refurbishment in 5 years and must put money away during each of the next 4 years to meet this need. How much money should the city put aside in each of the next 4 years to be able to pay for the data center refur- bishment 5 years from now, assuming the city can invest the money at a 4.5% interest rate? 5. The local community center has been notified that it is the beneficiary of an endowment. The community center can accept cash today in the amount of $550,000 or receive $875,000 in 5 years. The community center expects to be able to invest the money at a 5% interest rate if it were to take the money now. Should it take the money now or wait? 6. The municipal golf course has made a budget request to remodel and upgrade the clubhouse. The project will cost $7.200,000, based on reliable estimates. The additional annual operating expenses after the upgrade are expected to be $200,000 per year. An analysis of the experiences of other municipal golf courses reveals an expected revenue increase of $1 million per year after the upgrade. The useful life of the upgraded clubhouse is estimated at 9 years, and the golf course expects to get a loan for the renovations at an interest rate of 4.25%. Should the renovations be approved? Additional Reading eOg