Please show your work for all problems. 1) Josh deposited (10 years ago) $2,000
ID: 1143357 • Letter: P
Question
Please show your work for all problems. 1) Josh deposited (10 years ago) $2,000 into an account that paid 5% simple interest for the first 4 years and an interest rate of 6%, compounded monthly, for the remaining 6 years. The amount in the account at the end of 10-year period is closes to A. $3,400 B. $3,440 C. $3,480 D. $3,520 2) A project has a first cost of $14,000, annual benefits of $2,400 each period, and a salvage value of $3,000 at the end of its 10-year useful life. What is the net present worth at an interest rate of 12%?Explanation / Answer
I= P x R x T= 2000 x 5%(5/100=0.05) x 4= $400
A= P + != $2000+$400= $2400 (for four years)
Carry Forward= $2400
Compund Interest formula= A = P(1+r/n)(nt)
A= $2400(1 + 0.06/12)^(12*6)= $3436.91
Hence, Option B
2) 1st Year= $14000+$2400*12% + 14000= $15968
2nd Year= 15968+2400*12% + 15968= $18172 (rounded off)
3rd Year= 18172+2400*12% + 18172= $20641
4th Year= 20641+2400*12% + 20641= $23406
Keep adding the final value with the annual benefit, for example: 25806= 23406+2400
5th year= 25806*12% + 23406= $26,503
6th year= 28903*12% + 26503= $29,971
7th year= 32371*12% + 29971= $33,856
8th Year= 36256*12% + 33856= $38,207
9th year= 38207*12% + 38207= $43080
10th year= 45480*12% + 43080= $48,538
Net Present Value= $48,538 + $3000= $51,538
The numbers have been rounded off after the second year.
If annual benefit is not subject to interest rate, then:
I= 14000*12%*10= $16,800
Annual Benefits for ten years= $24000
Salvage value= $3,000
Net Present Value= 16,800+24000+3000= $43,800