Present Worth, Annual Worth: 1.1 The cash flow associated with making self-locking fasteners is shown below. Determine the net present worth (year 0) at an interest rate of 10% per year. Year 0 1 2 3 4 5 6 7 8 9 Income, $1000 20 20 20 20 30 30 30 30 30 30 Cost, $1000 8 8 8 8 12 12 12 12 12 25 1.2 Two engineering graduates who recently got married are planning for their early retirement 20 years from now. They believe that they will need $2,000,000 in year 20. Their plan is to live on one of their salaries and invest the other. They already have $25,000 in their investment account. ( a ) How much will they have to invest each year if the account grows at a rate of 10% per year? ( b ) If the maximum they have available to invest each year is $40,000, will they reach their goal of $2 million by year 20? 1.3 For the cash flow diagram shown, determine the value of W that will render the equivalent future worth in year 8 equal to S_ 500 at an interest rate of 10% per year. / = 10% per year 2 5 6 7 8 Year $40 $40 $40 $40 $40 $40 $40Investments and Project Acceptance: 1. A companyr that manufactures magnetic membrane switches is investigating two production options that have the estimated cash flows shown (51 million units)_ Which one should be selected on the basis of a present worth analysis at 10% per year\"? ln-house to Mrs ct First rust. 5 3E] [.1 Annual cost. 5 per year 5 2 Annual income. 3 per year 1'] 3.1 Salvage value. $ 2 Lire. years 5 5 2. A metallurgical engineer is considering two materials for use in a space vehicle. All estimates are made. (a ) Which should be selected on the basis of a present worth comparison at an interest rate of 12% per year? ( b ) At what first cost for the material not selected above will it become the more economic alternative? Material X Material Y First cost, $ -15,000 -35,000 Maintenance cost, $ per year -9,000 -7,000 Salvage value, $ 2.000 20,000 Life, years 5 5 3. Machines that have the following costs are under consideration for a robotized welding process. Using an interest rate of 10% per year, determine which alternative should be selected on the basis of a present worth analysis. Show (a) hand calculations Machine X Machine Y First cost, $ -250,000 -430,000 Annual operating cost, $ per year -60,000 40.000 Salvage value, $ 70.000 95,000 Life, years 3 64. Ashley Foods, Inc. has determined that any one of five machines can be used in one phase of its chili canning operation. The costs of the machines are estimated below, and all machines are estimated to have a 4- year useful life. If the minimum attractive rate of return is 20% per year, determine which machine should be selected on the basis of a rate of return analysis. Annual Operating Machine First Cost, $ Cost, $ per Year -31,000 -16,000 -29,000 -19,300 -34,500 -17,000 49.000 -12,200 -41,000 -15,500Capital Cost 1. A wealthy businessman wants to start a permanent fund for supporting research directed toward sustainability. The donor plans to give equal amounts of money for each of the next 5 years, plus one now (i.e., six donations) so that $100,000 per year can be withdrawn each year forever, beginning in year 6. If the fund earns interest at a rate of 8% per year, how much money must be donated each time? 2. Compare the alternatives shown on the basis of their capitalized costs using an interest rate of 10% per year. Alternative M Alternative N First cost, $ -150,000 -800,000 Annual operating -50,000 -12,000 cost, $ per year Salvage value, $ 8,000 1,000,000 Life, years 5