Assignment Task :

Pregunta 1:

Chloe wishes to obtain a loan to purchase a house. Her gross annual income is 84,000. The bank will allow her to spend a maximum of 20% of this income on her loan repayments. The interest rate on the loan is 4.08%. The bank allows loans of 20, 25 or 30 years. Repayments are made monthly and interest is charged on the same day of the month as the repayments are made. In order to save a deposit for her home she has been depositing 2,100 per month of into an account that pays an interest rate of 1.44%. Her first deposit into this account was exactly 8 years ago. She has made all of her monthly deposits on the same day of the month, which is also the day that the bank pays interest. Today, instead of making her regular deposit, Chloe is going to close the account and withdraw all the money she has saved. What will be the total she will withdraw (including all of the interest)? What is the maximum amount of money that Chloe can borrow? 

The bank decides to offer a discount on its home loans. The discount involves an interest rate of 2.52% for the first 2 years, with the interest rate for the remainder of the loan reverting to 4.08%? What is the maximum amount of money can Chloe borrow in these circumstances?. 

 

Pregunta 2: 

A farmer owns a property that contains 8 fields and some forest. Each year he plants a crop at the start of the year and harvests it at the end of the year. Each field gives a profit of $17,100 per year. Between planting and harvesting his crop he clears some of the forest to create 1 new field of the same size as the others, which he can then use for crops in subsequent years. He uses a discount rate of 12% per year. What is the present value of all the profits he makes in the first 8 years? (Answer to the nearest dollar) 

 

Pregunta 3: 

The owner of a road collects $8 per car that drives on the road. In the current year, 17,000 cars will drive on the road. This number will grow by 4% per year. What is the present value of all of the tolls collected for the next 30 years if the discount rate is 14% and the toll per car does not change? 

 

Pregunta 4: 

A developer is considering two projects. Project A has a capital cost of $1,280,000 and a life of 10 years. Income for the project will be $295,000 per year. At the end of 10 years, the project can be sold for $250,000. The project's discount rate is 14%. What is the Net Present Value for Project A? (Answer to the nearest dollar) Project B has a capital cost of $530,000 and a life of 16 years. Income for the project will be $80,000 per year. At the end of 16 years, the project can be sold for $500,000. The project's discount rate is 12%. What is the Net Present Value for Project B? 

 

Pregunta 5:

A council needs to rebuild a road between two towns. It is considering two different designs: 

A concrete pavement 

A flexible pavement Installing a concrete pavement will have a capital cost of $ 38,400,000 and a life of 32 years. The benefits of the project will be $ 5,600,000 per year. Annual maintenance costs for the project will be $ 780,000 per year. At the end of 32 years, the road will need to be torn up and replaced. The road pavement materials can be sold for $ 9,800,000. Installing a flexible pavement will have a capital cost of $ 11,900,000 and a life of 22 years. The benefits of the project will be $ 4,300,000 per year. (These are lower because the cars will be be required to travel slower). Annual maintenance costs for the project will be $ 1,425,000 per year. At the end of 22 years, the road will need to be torn up and replaced. The road pavement materials can be sold for $4,600,000. The council uses a discount rate for its road projects of 19%. What is the Annual Equivalent for the concrete pavement? (Answer to the nearest dollar). What is the Annual Equivalent for the flexible pavement? (Answer to the nearest dollar). 

At the end of the life of the road, the council expects to rebuild the road using a similar design with similar costs and benefits repeatedly. Which type of road should the council build? 

(a) Do not build either 

(b) Concrete Pavement 

(c) Flexible Pavement 

 

Pregunta 6: 

A council is considering how to spend its limited funds. It has two streets that often suffer from flooding, and is considering installing larger storm drains in one or both of them. Replacing the drains in Street A has a capital cost of $760,000 and a life of 12 years. Reduction in flooding will have a value of $80,000 per year. At the end of 12 years, the drains will need to be replaced, but some of the works can be reused in the future project up to a value of $300,000. The project's discount rate is 8%. What is the Benefit-Cost Ratio for replacing the drains in Street A? (Answer to two decimal places) Replacing the drains in Street B has a capital cost of $1,940,000 and a life of 12 years. Reduction in flooding will have a value of $200,000 per year. At the end of 12 years, the drains will need to be replaced, but some of the works can be reused in the future project up to a value of $300,000. The project's discount rate is 14%. What is the Benefit-Cost Ratio for Project B? (Answer to two decimal places). 

 

Pregunta 7:

A developer is considering two projects. Project A has a capital cost of $2,582,909.407285 and a life of 18 years. Income for the project will be $295,000 per year. There is no salvage value. What is the Internal Rate of Return for Project A? (Answer to the nearest percent, if you think the answer is 12% then answer 

 

Project B has a capital cost of $957,586.740604 and a life of 18 years. Income for the project will be $140,000 per year. There is no salvage value. What is the Internal Rate of Return for Project B?. 

 

Pregunta 8:

A developer is considering two projects.

Project A has a capital cost of $1,981,643.618255. Income for the project will be $455,000 per year. There is no salvage value. The company's discount rate for this project is 10%.

What is the Discounted Payback Period for Project A? (Answer to the nearest number of years) 

Project B has a capital cost of $502,823.264702. Income for the project will be $150,000 per year. There is no salvage value. The company's discount rate for this project is 15% What is the Discounted Payback Period for Project B? (Answer to the nearest number of years) 

 

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