W/COMPLETE SOLUTION 1.) A student has money given by his grandfather in the amount of P20,000.00. How much money in the form of interest will he get if the money is put in a bank that offers 8% rate compounded annually, at the end of 7 years?
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ENGINEERING ECONOMY
W/COMPLETE SOLUTION
1.) A student has money given by his grandfather in the amount of P20,000.00.
How much money in the form of interest will he get if the money is put in a
bank that offers 8% rate compounded annually, at the end of 7 years?
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- Mahmud Hassan inherited $250,000 from a great uncle, and immediately quit his software engineering job to start his own catering business, BigM’s Catering (BigM). Mahmud had been earning $125,000 per year as a software engineer. If Mahmud had NOT started BigM, he could have invested the money in a friend’s tech start-up company and earned a guaranteed return of 15%. However, Mahmud loves food and wanted to work for himself. The catering business’s accounts for 2020 are as follows (assume NO income taxes): Revenue $600,000 Cost of goods sold 250,000 Salaries expense 100,000 Advertising expense 65,000 Rent expense 50,000 Required: Identify the name of the costs that accountants typically concentrate on and the name of the costs that economists typically concentrate on. Determine BigM’s accounting profit for 2020. Determine BigM’s economic profit for 2020. Determine if BigM is a successful business and explain whether Mahmud made a good choice.2. 1. Company A is eyeing to purchase a piece of factory equipment for P300,000. It is expected to generate P150,000 of additional annual profit during those years. The equipment could would only last for three years. The company thinks it can sell the equipment for scrap afterward for about P10,000. Using IRR, will it be a good decision for the company to purchase the equipment considering a return of 10%.SHOW YOUR COMPLETE SOLUTION 1. A merchant loaned P20,000.00 to a friend to start a business, the loan was originally madeat 8% simple interest for 4 years. However, due to the pandemic the business operation isnot stable, thus, the merchant was not able to pay the debt including its interest. The lenderdecided to extend the loan period for 6 years but, the merchant must pay equal paymentsat a new interest rate of 10% compounded semi-annually. How much is the equal paymentat the end of 10 years?2. A parent wishes to develop an educational fund for a new born child's college education.The fund is to pay an equal withdrawal on the eighteenth, nineteenth and twentieth andtwenty-first birthdays of the child. The fund will be built up by depositing P1,000.00quarterly until the 17th birthday of the Child. Find the amount of money that the child canwithdraw after the last deposit is made.3. The average price of gasoline was given P77.50 per liter. We computed the average annualrate of…