Exercise: Rate of Return 2 Attempt to Calculate Rate of Return by Trial and Error (Uniform Gradient Series). Given Revenues are A, the first year, and increase Go each subsequent year AR = 8.1E3 $ GR = 1.2E3 $ Operation and Maintenance Costs are a Uniform Series of amount AOM AM = 4.5E3 $ Capital Costs = 4.4E4 $ Salvage Value = 1.9E4 $ Project Lifetime = 5 yr The Rate of Return is the effective interest rate that gives net present worth = zero. It may occur between one of the effective interest rates used below. If greater accuracy is required, one could subdivide the interval of interest. If the present worth is negative when the effective interest rate is zero, the project has no return. If the present worth is positive when the effective interest rate is 0.10, the rate of return is > 0.10 Question(s) 1. What total number of compounding periods should be used? Answer: n = 5 yr = 5 (Unitless) 2. What is the Present Worth if the Effective Interest Rate = 0? $ (Answer Significant Figures = 3) Score My Answer Practice Investigate 3. What is the Present Worth if the Effective Interest Rate = 0.02? 4. What is the Present Worth if the Effective Interest Rate = 0.04? 5. What is the Present Worth if the Effective Interest Rate = 0.06? 6. What is the Present Worth if the Effective Interest Rate = 0.08? 7. What is the Present Worth if the Effective Interest Rate = 0.10? Attempt 1/3 of Part 2/7 for 1.43 points. Points (So Far/Possible/Total): 1.43/10/10 points. Exercise: Rate of Return 2 Attempt to Calculate Rate of Return by Trial and Error (Uniform Gradient Series). Given Revenues are A, the first year, and increase Go each subsequent year AR = 8.1E3 $ GR = 1.2E3 $ Operation and Maintenance Costs are a Uniform Series of amount AOM AM = 4.5E3 $ Capital Costs = 4.4E4 $ Salvage Value = 1.9E4 $ Project Lifetime = 5 yr The Rate of Return is the effective interest rate that gives net present worth = zero. It may occur between one of the effective interest rates used below. If greater accuracy is required, one could subdivide the interval of interest. If the present worth is negative when the effective interest rate is zero, the project has no return. If the present worth is positive when the effective interest rate is 0.10, the rate of return is > 0.10 Question(s) 1. What total number of compounding periods should be used? Answer: n = 5 yr = 5 (Unitless) 2. What is the Present Worth if the Effective Interest Rate = 0? $ (Answer Significant Figures = 3) Score My Answer Practice Investigate 3. What is the Present Worth if the Effective Interest Rate = 0.02? 4. What is the Present Worth if the Effective Interest Rate = 0.04? 5. What is the Present Worth if the Effective Interest Rate = 0.06? 6. What is the Present Worth if the Effective Interest Rate = 0.08? 7. What is the Present Worth if the Effective Interest Rate = 0.10? Attempt 1/3 of Part 2/7 for 1.43 points. Points (So Far/Possible/Total): 1.43/10/10 points
