# Assume a planning horizon of four years (all three can last this long) and a MARR of 10%. The initial cost is at (year 0) and the payments are in years 1-4. Determine the present worth, future worth, and annual worth for when a) the salvage value is in year 4.

Boston Engineering is considering the purchase of an additional earth moving machine to meet new business needs. Three machines are being considered, but only one can be purchased. Assume a planning horizon of four years (all three can last this long) and a MARR of 10%. The initial cost is at (year 0) and the payments are in years 1-4.
Determine the present worth, future worth, and annual worth for when a) the salvage value is in year 4.
Machine 1 Machine 2 Machine 3
Initial Cost (in Year 0) \$800,000 \$650,000 \$575,000
Annual Operating Cost \$50,000 \$90,000 \$105,000
Salvage value (in year 4) \$40,000 \$32,500 \$28,750

Document Preview:

Boston Engineering is considering the purchase of an additional earth moving machine to meet new business needs. Three machines are being considered, but only one can be purchased. Assume a planning horizon of four years (all three can last this long) and a MARR of 10%. The initial cost is at (year 0) and the payments are in years 1-4.
Determine the present worth, future worth, and annual worth for when a) the salvage value is in year 4.
Machine 1
Machine 2
Machine 3
Initial Cost (in Year 0)
\$800,000
\$650,000
\$575,000
Annual Operating Cost
\$50,000
\$90,000
\$105,000
Salvage value (in year 4)
\$40,000
\$32,500
\$28,750
Hughes Industries borrowed \$80,000 at 8% per year, compounded quarterly. It pays back the loan over three years in equal quarterly payments.
For each part below, use both the Time Value of Money Factors Discrete Compounding (2% or 8%) tables and Excel financial functions. Compare answers between the two.
a. How much interest is in the sixth payment?
b. How much principle is in the six payment?
c. How much principle is owed immediately following the six payment?
8% Time Value of Money Factors Discrete Compounding
n
To Find F Given P (FOP i%,n)
To Find P Given F (PIP-. i%,n)
To Find F Given A (FAA i%,n)
To Find A Given F (AV’ i%,n)
To Find P Given A (PIA i%,n)
To Find A Given P (AIP i%,n)
To Find P Given G (PIG i%,n)
To Find A Given G (AIG i%,n)
1
1.08000
0.92593
1.00000
1.00000
0.92593
1.08000
0.00000
0.00000
2
1.16640
0.85734
2.08000
0.48077
1.78326
0.56077
0.85734
0.48077
3
1.25971
0.79383
3.24640
0.30803
2.57710
0.38803
2.44500
0.94874
4
1.36049
0.73503
4.50611
0.22192
3.31213
0.30192
4.65009
1.403%…

Attachments: