Question 5 - The formula to calculate an effective yearly rate for continuous compounding is:

(1+i)^m-1

(1+i)^n-1

E^r-1

n/1+i

Question 6 - Home Health Care, Inc. purchased a sonogram machine for $400,000.Its functional life is 6 years and its salvage value will be 10% of its purchase price.Rounding to the nearest dollar, make a table and fill in the values for t = 0, 1, 2, 3, 4, 5, 6 showing (a) year t, (b) the straight-line (SL) depreciation amount for year t, (c) the book value in year t using SL depreciation, (d) the double declining balance amount in year t, (e) the book value in year t using DDB depreciation.

What is the book value in year 5 using double declining balance?

$48,906

$67,008

$64,483

$52,683

$72,226

$58,998

Question 7 - A contractor is trying to decide between a gasoline or a diesel bulldozer engine.The gasoline engine will cost $2,000 and have annual maintenance cost of $200.It will consume $7.20 per hour worth of fuel to operate.It will have a life of 5 years with a salvage value of $300.

The diesel engine can be purchased for $2800 and will require $240 annually to maintain.The diesel engine will have a life of 7 years with a salvage value of $230.It will cost $6.60 per hour worth of fuel to operate.

How many hours would the bulldozer have to operate for the gasoline and diesel engine options to be equally attractive at an interest rate of 12%

172

119

268

56

84

205

Question 8 - An asset has a first cost of $15,000, an annual operating cost of $10,000 and a salvage value of $8,000 after 5 years. The interest rate is 7%.

What is the capital recovery cost?

-$14,532

$12,267

$2,267

$5,000

$8,000