Year Cash Flow
0 -5640
1 0
2 100
3 200
4 300
5 300
Year Cash Flow
0 -$6440
1 40
2 +$100
3 +$200
4 +$300
5 +$300
$640 = $100 (P/G,1%,4) + $300 (P/F,1%,5)
Try i = 9%
$100 (4,551) + $300 (0,6499) = $646,07 > $640
Try i = 10%
$100 (4.378) + $300 (0,6209) = $624,07 < $640
Rate of Return = 9% + (1%) [(%646.07 - $640)/($646.07-$624.07)]
8.13. A firm is considering two altematives:
A B
Initial cost $10.700 $5500
Uniform annual benefits 2.100 1800
Salvage value at end of useful life 0 0
Useful life, in years 8 4
At the end of 4 years, another B may be purchased with the same cost, benefits, and so forth. If the MARR is 10% which alternative should be selected?
Year A B A-B
0 -$10,700 -$5,500 -$5,200
1-4 +$2,100 $1,800 +$300
4 -$5,500 +$5,500
5-8 +$2,100 +$1,800 +$300
Computed 11,3% 11,7% 10,8%
ROR
Since Ξ”RORa-b> MARR, the increment is desirabel. select A
9.11. Stamp collecting has become an increasingly popular and expensive hobby. One favorite method is to save plate blocks (usually four stamps with the printing plate number in the margin) of each new stamp as it is issued by the post office. But with the rising postage rates and increased numbers of new stamp being issued. This collecting plan costs more each year.
Stamps, hower, may have been a good place to invest money over the last 10 years, as the demand for stamps previously issued has caused resale princes to increase 18% each year. Suppose a collector purchased $100 worth of stamps 10 years ago, and increased his purchases by $50 per year in each subsequent year. After 10 years of stamp collecting, what is the future worth of the stamp collection?
F= $100 (F/A, 1/2%,24) (F/P, 1/2% 60)
= $100 (25,432) (1,349)
= $3,430,78
