Contemporary Engineering Economics Plus MyLab Engineering with eText -- Access Card Package (6th Edition)
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Chapter 5, Problem 18P
To determine

Calculate the future worth.

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A business executive is offered a management job at Generous Electric Company, which offers him a 5-contractyear that calls for a salary of $62,000 per year, plus 600 shares of GE stock at the end of the 5 years. This executive is currently employed by Fearless Bus Company, which also has offered him a 5-year contract. It calls for a salary of $65,000, plus 100 shares of Fearless stock each year. The Fearless stock is currently worth $60 per share and pays an annual dividend of $2 per share. Assume end-of-year payments of salary and stock. Stock dividends begin one year after the stock is received. The executive believes that the value of the stock and the dividend will remain constant. If the executive considers 9% a suitable rate of return in this situation, what must the Generous Electric stock be worth per share to make the two offers equally attractive? Use the future worth analysis method in your comparison.
The proposal of Mutual Savings Fund will cost ₱500,000. The benefits at the end of the first year are estimated to be ₱100,000, increasing ₱10,000 per year in subsequent years. Assuming a 12% interest rate, with no salvage value and an 8-year analysis period, compute the benefit cost ratio.
A $10,000 mortgage bond that is due in 20 years pays interest of $250 every 6 months. The bond coupon rate is: (a) 2.5% per year, payable quarterly (b) 5.0% per year, payable quarterly (c) 5% per year, payable semiannually (d) 10% per year, payable quarterly
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