Week 4 Group Project

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Trine University *

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5203

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Industrial Engineering

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Feb 20, 2024

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xlsx

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S.No. Group Members Email ID 1 Fnu Mohammed Sohail 2 Abdul Majeed Mohammed amohammed2141@my.trine.edu Project questions Mohammedsohail22@my.trine.edu Finance for Engineers Group Project 1 - Week 4 Question 1 (based on Week 1 Excel Examples – Chapters 1-4) You are considering purchasing a car in 4 years, anticipating a purchase price of $40,000. (N answer, but you need to clearly indicate your answers to parts a, b, and c.) a. How much do you need to deposit in an account today, if you want to have $40,000 in th 5% annual interest rate? (assume annual compounding) b. If you deposit $30,000 in the account today, what rate of interest would you need to ear account in 4 years? (assume annual compounding) c. If your account earns 0.25% of interest every month, and if you make an initial deposit o every month in your account in order to have exactly $40,000 in 4 years? (assume monthly Question 2 (based on Week 1 Excel Examples – Chapters 1-4) Note: This question is a little more complex than the previous one, and will require you co You plan on retiring in 25 years. In order to increase your retirement income, you open a r deposit. In addition, you will deposit $5,000 every year for the next 25 years. Your plan is from the account, after you retire. Assuming the account is earning 7% rate of interest, ho the funds in your account are completely exhausted? Please include a written answer in a Question 3 (based on Week 1 Excel Examples – Chapters 1-4) You are planning on buying a new house, and want to make sure you can afford the mont you borrow $300,000. You think you can get the following mortgage terms: borrow $300,0 3.775%; to be paid off in equal monthly payments over 15 years.

3.775%; to be paid off in equal monthly payments over 15 years. Compute the required monthly payment, and prepare an amortization table, showing for payment applied to interest, payment applied to principal, and ending balance. (assume m require a written answer.) Question 4 (based on Week 3 Excel Examples – Chapters 5-6) Millennium Freight is evaluating the possibility of adding a new shipping route, which wou with several models available. If accepted, the new route is expected to be serviced for ma assumed for the analysis in parts b) and c) below. Assume minimum attractive rate of retu part of the question. a) Calculate the present worth of the new route assuming the El Grande vehicle model is c $250,000; the vehicle will require annual maintenance and operating costs of $12,000; it i new route is expected to result in additional annual net revenues of $62,000. Calculate the period of one cycle. Explain whether the new route should be accepted or rejected and wh b) Assume the management ultimately decides to consider two vehicle models for the new Assume the vehicle model choice has no impact on revenues (ignore revenues, and only c model purchase price is $350,000, its annual maintenance and operating costs are $9,000 sold for $100,000. Assuming whichever model is chosen, the vehicle will be replaced with the Least Common Multiple method in conjunction with the Present Worth method to det Explain your answer. c) Repeat part b), except this time, use the Annual Worth method, instead of the Least Com your answer again. Question 5 (based on Week 4 Excel Examples – Chapters 16-17) Friendly Tests Inc. is a commercial testing lab, performing a variety of lab tests for hospital addition of a new type of test. There is plenty of room in its existing lab facility, but the ne equipment. The purchase price of the equipment is $215,000. It will be depreciated using in Table 16-2 in the textbook). The management expects the demand for the new test type expected to end in 6 years, and the equipment to be sold for $60,000 at the end of year 6. technician, for $30,000 in the first year of the project, with an annual pay increase of 5% e operating cost is expected to be $4,000 per year. It is also expected additional supplies wil revenues from the new test are expected to be $70,000 in year 1, $80,000 in year 2, $90,0 and $65,000 in year 6. Compute the after-tax cash flows for each year of the project. Assume 30% tax rate, and 9 whether the company should launch the new testing service, and explain why. Please inclu

Note: This question doesn’t require a written he account in 4 years, assuming the account earns rn annually in order to have exactly $40,000 in the of $10,000 today, how much do you need to deposit y compounding) ompute your answer in 2 stages. retirement account today, and make a $20,000 to start making annual withdrawals of $50,000 ow many years will it take, after you retire, before a text box. (assume annual compounding) thly payments. The house you picked will necessitate 000 at a fixed quoted (nominal) annual rate of

each month the beginning balance, payment, monthly compounding) (Note: This question doesn’t uld require an acquisition of a new delivery vehicle, any years, and therefore an infinite life can be urn of 14%. Pease include a written answer with each chosen. The purchase price of the vehicle is is expected to be sold for $70,000 in 10 years. The e present worth of the new route for the 10-year hy. w route, the El Grande from part a), and Bandito. compare costs and the salvage values). The Bandito 0, and it is expected to be used for 15 years, and then the same model (same cash flows) when sold, use termine which of the two models should be chosen. mmon Multiple – Present Worth method. Explain ls in the area. The management is considering an ew test would require an acquisition of new test MACRS 7-year recovery period (use the rates listed e to only last 6 years, and therefore the project is . The company will also need to hire a part-time lab each year after. Equipment maintenance and ll be needed, costing $10,000 per year. The additional 000 in year 3, $100,000 in year 4, $85,000 in year 5, 9% minimum attractive rate of return. Determine ude a written answer.

Solution for 1 (a) Future Cash Flow $40,000 Discount Rate 5% Number of years 4 Present Value (PW) ($32,908.10) Solution for 1 (b) Initial Investment $30,000 Ending Balance $40,000 Number of Years 4 Rate of Return 7% Solution for 1 (c) Initial Deposit $10,000 Ending Balance $40,000 Compounding frequency (m) 12 Rate per compound period (i%) 0.25% 0.14% (1+i)^m-1 (1+0.25)^12-1 14.5519152283669 13.55 Number of years 48 Compounding for 48 years Data 10000.00 $0.00 13.50 1 10000.00 $0.00 13.50 2 10013.50 $0.00 13.52 3 10027.00 $0.00 13.54 4 10040.52 $0.00 13.55 5 10054.05 $0.00 13.57 6 10067.61 $0.00 13.59 7 10081.18 $0.00 13.61 8 10094.77 $0.00 13.63 9 10108.38 $0.00 13.65 10 10122.01 $0.00 13.66 11 10135.66 $0.00 13.68 12 10149.32 $0.00 13.70 13 10163.01 $0.00 13.72 14 10176.71 $0.00 13.74 15 Effective Annual Rate (i a )

10190.43 $0.00 13.76 16 10204.17 $0.00 13.78 17 10217.92 $0.00 13.79 18 10231.70 $0.00 13.81 19 10245.49 $0.00 13.83 20 10259.31 $0.00 13.85 21 10273.14 $0.00 13.87 22 10286.99 $0.00 13.89 23 10300.86 $0.00 13.91 24 10314.74 $0.00 13.92 25 10328.65 $0.00 13.94 26 10342.57 $0.00 13.96 27 10356.52 $0.00 13.98 28 10370.48 $0.00 14.00 29 10384.46 $0.00 14.02 30 10398.46 $0.00 14.04 31 10412.48 $0.00 14.06 32 10426.52 $0.00 14.08 33 10440.58 $0.00 14.09 34 10454.65 $0.00 14.11 35 10468.75 $0.00 14.13 36 10482.86 $0.00 14.15 37 10496.99 $0.00 14.17 38 10511.14 $0.00 14.19 39 10525.32 $0.00 14.21 40 10539.51 $0.00 14.23 41 10553.71 $0.00 14.25 42 10567.94 $0.00 14.27 43 10582.19 $0.00 14.29 44 10596.46 $0.00 14.31 45 10610.74 $0.00 14.32 46 10625.05 $0.00 14.34 47 10639.37 $0.00 14.36 48

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