ST ADME62 @ chenzeb x @ chenzebi x x | © Wod|Mc x | 55 Sonintoy x | © Word|mi
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Assignments
1. You have received $100,000 from your grandparents to be used for your graduate studies.
You plan to start a program in 5 years. You can invest the money at 6% interest, compounded
annually. How much will you have in 5 years?
2. Mobile Health needs to replace its mobile medical unit to continue providing diagnostic
services and preventative medicine to city residents. The van costs $120,000, and a bank is will-
ing to lend the nonprofit the money at a 6% interest rate for 5 years. Payments are due at the end
of each month, and interest is compounded monthly. How much should you budget for the
monthly payment?
3. The Department of Co
ections (DOC) needs to replace two of its prison transport buses.
There are two companies that have a track record of making reliable vehicles, and both make a
us that meets the needs of the department. The DOC pays an 8% interest rate on money it bor-
ows. The bus from Company A has a purchase price of $105,000 and a 10-year service life exp
tancy, and it averages $2,000 per year in maintenance cc The bus from Company B has a
purchase price of $110,000 and a 10-year service life expectancy, and it av $1,500 per yea
in maintenance costs. Which bus should the Department of Co
ections sel
4. The information technology (IT) department has recently completed a major refu
is
ment and upgrade of the city’s data center, at a cost of $10,145,825. The chief information of!
(CIO) has informed the central budget office that the IT department will need to do the
kind of upgrade in 5 years, and he expects the total cost of that project to be 10% more than this
project, accounting for better future technology and future increases in costs. The city
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The information technology (IT) department has ri ample a major refu
ish-
me nt and upgrade of the city’s data center, at a cost of $10,145,825. The chief information office
(CIO) has informe d the central budget office that the IT depar ould nt will need to do the same
kind of upgrade in 5 years, and he expects the total cost of that project to be 10% more than this
year’s project, accounting for better future technology and future increases in costs. The city
does not expect to have enough funding available to for the refu
ishment in 5 years and
must put money away during each of the next 4 years to meet this need. How much money
should the city put aside in each of the next 4 years to be able to pay for the data center refur-
ishment 5 years from now, assuming the city can invest the money at a 4.5% interest rate?
The local community center has been notified that it is the beneficiary of an endowment.
The community center can accept cash today in the amount of $550,000 or receive $875,000 in
5 years. The community center expects to be able to invest the money at a 5% interest rate if it
were to take the money now. Should it take the money now or wait?
6. The municipal golf course has made a budget request to remodel and upgrade the
clubhouse. The project will cost $7,200,000, based on reliable estimates. The additional annual
operating expenses after the upgrade are expected to be $200,000 per year. An analysis of the
experiences of other municipal golf courses reveals an expected revenue increase of $1 million
per year after the upgrade. The useful life of the upgraded clubhouse is estimated at 9 years, and
the golf course expects to get a loan for the renovations at an interest rate of 4.25%. Should the
enovations be approved?
Additional Reading
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