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4BUSx21 - UniformSeriesProblemsFall2024

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21 views2 pages

4BUSx21 - UniformSeriesProblemsFall2024

Uploaded by

lodacarrier
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Faculty of Engineering

BUS x21 – Engineering Economy


Fall 2024
Money-Time Relationships – Uniform Series
Formulas

P = Present sum of money

F = Future sum of money

A= Uniform amounts of money

i = Interest rate per period

N = Number of compounding periods

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Practice Problems
Use interest tables in solving the following problems
1. Suppose your friend deposits 15 equal annual payments of $2,000 into a bank account earning
5% interest per year. The first deposit will be made one year from today. How much money can
be withdrawn from this account immediately after the 15th deposit?
2. If you plan to deposit $6,000 at the end of each year into a retirement account that pays 6%
interest. How much will be in his account after 35 deposits?
3. A company that manufactures screws plans to invest in new machinery in three years. How much
should the business set aside year if the new equipment will cost $350,000 after three years and
the account earns 10% interest annually?
4. You need save money to replace the truck that has been used for deliveries. After seven years, the
truck will need to be replaced, and the replacement cost will be around $62,000. How much must
you deposit at the end of each year to meet your demands if you earn 10% interest on your
savings?
5. If a certain piece of equipment can save $22,000 per year in labor and materials costs and the
equipment has an expected life of five years. If the interest rate is 15% annually, how much could
be justified now for the purchase of this piece of equipment?
6. How much must be invested right now at an interest rate of 8% to generate $5,000 every year for
ten years?
7. A company borrowed $10,000,000 at 7% interest per year, which must be repaid in equal annual
amounts over the next six years. How much must the company repay at the end of each year?
8. A major electronic store is thinking about purchasing of software that will reduce shipping costs
throughout its supply chain. The retailer would invest $10 million in this software. What annual
savings in shipping costs must there be if the interest rate is 8% per year and the software has a
four-year lifespan in order to justify the purchase of the software?
9. Let's assume that you want to receive $35,000 every year for the next ten years starting next year.
If you will invest a lump-sum of $300,000 in an account to get your desired annual amount. What
rate of interest is necessary to make this happen?
10. Suppose you want to have $2,000,000 in your bank account. To achieve this goal, you plan to
invest $24,000 each year (starting one year from now) into an account that earns 10% interest
compounded annually. For how many years should you deposit $24,000 annually to have
$2,000,000 in your bank account?

Final Answers
1. $43,157.2 6. $33,550.5
2. $668,608.8 7. $2,098,000
3. $105,735 8. $3,019,000
4. $6,534.8 9. i% = 2.91%
5. $73,748.4 10. N = 24 years

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