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The first pages is just background information. The questions are in the last page. If you could please help me with questions 4&5.
Interest and MARR Interest is expected to be 10% per year unless stated otherwise Time . 13 weeks in a quarter, 52 weeks in a year, 4 quarters in a year, 3 months per quarter Anatomy The average human, if they have a full set of teeth, has 32 of them. The average hand has 27 bones. Salary Average salary cost at is $85 per hour (including all benefits and fringe) Taxation Effective tax rate is 38% Capital & Exchange Hightower Towers has $300K in available funding Exchange Rates USD MXN ARS EURO CAD 1 16.8 9.5 0.9 1.35 Maxwell's Equations: V.EE EO aB V x E = - at aE V x B = MOJ + Moeo at V.B=0 Etymology Faust, in the legend, traded his soul to the devil in exchange for knowledge. To "strike a Faustian bargain is to be willing to sacrifice spiritual values or moral principles to obtain other benefits like monetary or material gain. Background info: Why, Arizona, is a real place. Whynot, Mississippi, this is also a real place. Papa Ral Enrquez Cuauhtemoc Blanco de la O is starting a rock quarry business in Why and a bar in Whynot. His rock business is called Cold Mountain and his bar, which is next to an egg factory, is called Huevones. He has $10,000 to put in the bank and finds the following offers for a certificate of deposit (CD): Payoff of CD Cost of CD $3,000 Rate per Period 1.25% quarter Life of CD [yr] 1 Bank Bank of the 1% Bank of the Chase West Capital 1 of Whynot West Star United Federal Credit Union of Why Why Bank of Why $2,000 0.79% month 2 $5,000 $5,000 10.00% year 5.05% half year 2 2 To start his quarry, he needs to purchase rock digging systems. There are 3 options on the market. Rock and Roller Bigger and Boulder C Starter Unit 15 25 33 $K 14 9 14 Cost of equipment Material and labor savings per year AOC Life Scrap 6 8 6 1.5 $K $K yrs $K 6 7 3.3 8 2.5 One machine needed for Cold Mountain is a Diamond Cutting Diamond Cutter, which costs $40,000 to purchase and $10,000 per year to operate. The operating costs increase by 10% per year every year after year 1. The machine has no salvage value, and a 20-year life. Cuauhtemoc got himself into some trouble with Hugo the Enforcer after a Faustian bargain. He owes him $2000, plus interest, and Hugo has given Cuauhtemoc 3 options: (A.) 1% per month or (B.) 3.5% per quarter or (C.) Cuauhtemoc loses all his teeth (he has 32 of them). Each tooth is worth $70 in PW to Cuauhtemoc (including pain and suffering, dental costs, etc). Considering Cuauhtemoc survives his experience with Hugo and his appreciation for his teeth and life are deepened, he will expand his business by providing free sand from his quarry for kids' playgrounds. He has three options for sand machines: Costs for Machine A: Costs for Sand Machine A [in $K] 40 35 35 29.24 30 26.58 25 24.17 21.97 19.97 18.16 20 16.51 15.01 13.64 15 12.40 11.27 10 7 7 7 7 7 7.70 8.479.32 10.25 5 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 [note that there appears to be an increase of 10% per year in costs after year 5] Costs for Machine B: Costs for Sand Machine B [in $K] 40 35 35 32.55 30 28.30 24.61 25 21.40 20 18.61 16.18 14.07 12.24 10.64 15 9.25 10 8.05 7.00 6.08 5 4 4 4 4 4.60 5.29 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 [note that there appears to be an increase of 15% per year in costs after year 5] Costs for Machine C: Costs for Sand Machine B [in $K] 60 50 50 40.00 40 30 20 21.23 18.46 16.05 13.96 12.14 10 3 3 3.45 3.97 4.56 5.25 6.03 6.94 7.98 9.18 10.55 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 [note that there appears to be an increase of 15% per year in costs after year 5] 4. What is the equivalent uniform annual cost of the Diamond Cutting Diamond Cutter machine over its entire life [magnitude only]? 5. If the purchase price of the Diamond Cutting Diamond Cutter remains the same, when should a new one be purchased? If you should wait until the end of its life then enter 20. Otherwise enter the year when a new one should be bought. 6. What is Cuauhtemoc's most economical option with regard to his repayment to Hugo. Cuauhtemoc already owes Hugo 6 months of interest on the original balance of $2,000 (calculated at whichever rate is best) and you have to decide right this moment between the three options (which rate is best or goodbye teeth). a. You tell Cuauhtemoc to take a selfie so he has something to remember his teeth by and choose C because it saves him around $100 over the next best option. b. You take option (A) (1% per month) because it saves you around $120 compared to (C) and $20 over B. c. You take (B) (3.5% per quarter) because it saves you around $120 compared to (C) and $20 over A. d. You take (A) because it saves you around $20 compared to (C) and $10 over B. e. You take (C) because it saves you around $20 compared to (B) and $10 over A. Interest and MARR Interest is expected to be 10% per year unless stated otherwise Time . 13 weeks in a quarter, 52 weeks in a year, 4 quarters in a year, 3 months per quarter Anatomy The average human, if they have a full set of teeth, has 32 of them. The average hand has 27 bones. Salary Average salary cost at is $85 per hour (including all benefits and fringe) Taxation Effective tax rate is 38% Capital & Exchange Hightower Towers has $300K in available funding Exchange Rates USD MXN ARS EURO CAD 1 16.8 9.5 0.9 1.35 Maxwell's Equations: V.EE EO aB V x E = - at aE V x B = MOJ + Moeo at V.B=0 Etymology Faust, in the legend, traded his soul to the devil in exchange for knowledge. To "strike a Faustian bargain is to be willing to sacrifice spiritual values or moral principles to obtain other benefits like monetary or material gain. Background info: Why, Arizona, is a real place. Whynot, Mississippi, this is also a real place. Papa Ral Enrquez Cuauhtemoc Blanco de la O is starting a rock quarry business in Why and a bar in Whynot. His rock business is called Cold Mountain and his bar, which is next to an egg factory, is called Huevones. He has $10,000 to put in the bank and finds the following offers for a certificate of deposit (CD): Payoff of CD Cost of CD $3,000 Rate per Period 1.25% quarter Life of CD [yr] 1 Bank Bank of the 1% Bank of the Chase West Capital 1 of Whynot West Star United Federal Credit Union of Why Why Bank of Why $2,000 0.79% month 2 $5,000 $5,000 10.00% year 5.05% half year 2 2 To start his quarry, he needs to purchase rock digging systems. There are 3 options on the market. Rock and Roller Bigger and Boulder C Starter Unit 15 25 33 $K 14 9 14 Cost of equipment Material and labor savings per year AOC Life Scrap 6 8 6 1.5 $K $K yrs $K 6 7 3.3 8 2.5 One machine needed for Cold Mountain is a Diamond Cutting Diamond Cutter, which costs $40,000 to purchase and $10,000 per year to operate. The operating costs increase by 10% per year every year after year 1. The machine has no salvage value, and a 20-year life. Cuauhtemoc got himself into some trouble with Hugo the Enforcer after a Faustian bargain. He owes him $2000, plus interest, and Hugo has given Cuauhtemoc 3 options: (A.) 1% per month or (B.) 3.5% per quarter or (C.) Cuauhtemoc loses all his teeth (he has 32 of them). Each tooth is worth $70 in PW to Cuauhtemoc (including pain and suffering, dental costs, etc). Considering Cuauhtemoc survives his experience with Hugo and his appreciation for his teeth and life are deepened, he will expand his business by providing free sand from his quarry for kids' playgrounds. He has three options for sand machines: Costs for Machine A: Costs for Sand Machine A [in $K] 40 35 35 29.24 30 26.58 25 24.17 21.97 19.97 18.16 20 16.51 15.01 13.64 15 12.40 11.27 10 7 7 7 7 7 7.70 8.479.32 10.25 5 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 [note that there appears to be an increase of 10% per year in costs after year 5] Costs for Machine B: Costs for Sand Machine B [in $K] 40 35 35 32.55 30 28.30 24.61 25 21.40 20 18.61 16.18 14.07 12.24 10.64 15 9.25 10 8.05 7.00 6.08 5 4 4 4 4 4.60 5.29 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 [note that there appears to be an increase of 15% per year in costs after year 5] Costs for Machine C: Costs for Sand Machine B [in $K] 60 50 50 40.00 40 30 20 21.23 18.46 16.05 13.96 12.14 10 3 3 3.45 3.97 4.56 5.25 6.03 6.94 7.98 9.18 10.55 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 [note that there appears to be an increase of 15% per year in costs after year 5] 4. What is the equivalent uniform annual cost of the Diamond Cutting Diamond Cutter machine over its entire life [magnitude only]? 5. If the purchase price of the Diamond Cutting Diamond Cutter remains the same, when should a new one be purchased? If you should wait until the end of its life then enter 20. Otherwise enter the year when a new one should be bought. 6. What is Cuauhtemoc's most economical option with regard to his repayment to Hugo. Cuauhtemoc already owes Hugo 6 months of interest on the original balance of $2,000 (calculated at whichever rate is best) and you have to decide right this moment between the three options (which rate is best or goodbye teeth). a. You tell Cuauhtemoc to take a selfie so he has something to remember his teeth by and choose C because it saves him around $100 over the next best option. b. You take option (A) (1% per month) because it saves you around $120 compared to (C) and $20 over B. c. You take (B) (3.5% per quarter) because it saves you around $120 compared to (C) and $20 over A. d. You take (A) because it saves you around $20 compared to (C) and $10 over B. e. You take (C) because it saves you around $20 compared to (B) and $10 over A
