Question

What amount of money deposited 50 years ago at 4% interestwood perpetual payment of $25,000 a year beginning this year? $98,651 $87,938 $78,345 $87,174

q9 q10

Answer 1

Answer:

Question 9]

Correct option: B] $87,938

Present value of the perpetual payment is
PV=A/i
=25000/0.04
=625000

PV of a future amount is
PV=FV*(1+i)^(-n))

PV=value 50 year ago

FV=value now =625000

i=4%

n=50

PV=625000*(1.04^-50)
=87945.3846

The amount deposited 50 year ago is approximately $87938.

Question 10]

Question 10]

Initial cost = $ 1,000

Uniform annual benefit = $ 200

Maintenance costs = $ 50

Required rate = 10%

PW = - $ 1,000 + $ 200(P/A,10%,Infinity) - $ 50(P/A,10%,infinity)

= - $ 1,000 + $ 150(P/A,10%,infinity)

= - $ 1,000 + 1500

= $ 500

EUAW = PW(A/P,10%, Infinity)

= $ 500 *0.1

= $ 50

Or, EUAW = -$ 1,000(A/P,10%,infinity) + $ 150

= - $ 1,000*0.1 + $ 150

= - $ 100 + $ 150

= $ 50

Hence correct option: C]50