1. A rail road branch line to a landfill site is to be constructed. It is expected the landfill will be used for 8 years, after which the landfill site will be closed and the land turn back to agricultural use. Building the landfill site cost $150,000 and in the end of the 8th year it will be sold for $70,000. The landfill site will yield $30,000 in revenue annually for 8 years while an O & M expense of $5,000 is required from EOY 1.

Draw the cash flow diagram. Assume the EOP discrete cash flows.

2. John opened a bar and plans to ask $200,000 loan for decorating and buying new facilities. Bank suggests two options for financing the loan: a 20 year mortgage at 4% APR and a 30 year mortgage at 8% APR.

i) What is the difference in monthly payments (for the first 20 years) between these two options?

ii) If John would like to prepay the mortgage (pay the remainder of the loan in a single payment before maturity), how much does he need to pay at the end of 15th year for both options? Assume monthly compounding.

3. On January 1, Frank Jenson bought a new BMW X6 with an automobile loan of $80,000. He will repay the loan in the next 10 years (10 equal EOY payments). If the interest rate is 8% per year, calculate how much of the original principal of $80,000 will be paid in the second payment?

4. In 1980s, Nate borrowed $38,672 from bank and his friends to expend his casino business. Nate set up an aim to pay $2,500 at the end of each week for 16 weeks. Find the interest rate per week. What are the nominal rate per year and the effective interest rate per year? Assume 1 year = 52 weeks 

5. A paper mill is considering two types of wastewater reuse equipment:

a. For the two alternatives,

i) Calculate the PW (DO NOT use the AW or FW values);

ii) Calculate the AW (DO NOT use the PW or FW values);

iii) Calculate the FW (DO NOT use the PW or AW values)

b. Which alternative should be purchased? Why?

6. A bulldozer can be purchased for $380,000 with a service life of 6 years, when its salvage value is 15% of the first cost. The annual revenue of the bulldozer is $85,000 and annual O&M cost is $20,000. Use a MARR of 12%, calculate the EUAC of this bulldozer.

7. Moon Medical Company upgraded their lab equipment with an initial cost of $350,000. The financial data is as listed.

What is the IRR for this new equipment?

Note: Please use both interpolation and Excel function: submit electronically. 

8. An investor is considering buying some land with $100,000 and constructing an office building on it. Two different buildings are being analyzed.

Using benefit-cost ratio analysis and an 8% MARR, determine which alternative, if any, should be selected.

9. The Acasti Pharma hospital purchased a medical treatment machine at a cost of $ 90,000 five years ago. After 5 years’ useful life, this machine has an estimated salvage value of $20,000. Calculate the amount of annual depreciation & its book value:

a. By using the straight line method

b. By using the DDB method