TIME VALUE OF MONEY 1: INTRODUCING THE FACTORS

For each of the following problems, (a) draw the cash flow diagram; (b) present clean and clear manual solutions to the problem; (c) highlight the final answer (only the final answer as required by the problem] by enclosing it within a box. 1. 10. The Department ofTraffic Security of a city is considering the purchase of a new drone for aerial surveillance oftraffic on its most congested streets. A similar purchase 5 years ago cost $1,500,000. At an interest rate of 15% per year, what is the equivalent value today? How much money should a bank be willing to loan a real estate developer who will repay the loan by selling seven lakefront lots at $100,000 each 3 years from now? Assume the bank's interest rate is 5% per year. How much could BTU Oil and Gas Fracking afford to spend on new equipment each year for the next 5 years if it expects a profit of $60 million 5 years from now? Assume the company's MARR is 18% per year. Atlas Long-Haul Transportation is considering installing Valutemp temperature loggers in all of its refrigerated trucks for monitoring temperatures during transit. If the systems will reduce insurance claims by $100,000 in each ofthe next 4 years, how much should the company be willing to spend now if it uses an interest rate of 10% per year? A cash flow sequence starts in year 1 at $6,000 and decreases by $100 each year through year 9. Determine the present worth of the sequence. Use an interest rate of 10%. The future worth in year 8 of an arithmetic gradient cash flow series for years 1 through 8 is $500,000. lfthe gradient increase each year is $3,000, determine the cash flow in year 1 at an interest rate of 9% per year. Calculate the present worth of a geometric gradient series with a cash flow of $40,000 in year 1 and increases of 6% each year through year 6. The interest rate is 9% per year. A northern California consulting firm wants to start saving money for replacement of network servers. If the company invests $10,000 at the end of year 1 but decreases the amount invested by 5% each year, how much will be available 4 years from now at an earning rate of 8% per year? A start-up company that make robotic hardware for CIM (computer integrated manufacturing] systems borrowed $1 million to expand its packaging and shipping facility. The contract required the company to repay the lender through an innovative mechanism called "faux dividends\