Engineering Economic Analysis

Problems

Non-Negotiable INE

1/96

For the

Amount of $3000 or $2000 or $1000

Pay to the Order of I Feel Rich

Limited Time Offer

Dollars

For the Amount of $3000 Dollars

Pay to the

Order of I Feel Rich

Total of Payments $4,280.40

Number of Monthly Payments

36 Months

Amount Financed $3,246.25

APR 18.95%

Finance Charge $1034.29

Monthly Payment $118.90

Credit Line Premium

$83.46*

Credit Disabilit Premium $162.65*

For the Amount of $2000 Dollars

Pay to the

Order of I Feel Rich

Total of Payments $2,731.50

Number of Monthly Payments

30 Months

Amount Financed $2,137.25

APR 19.95%

Finance Charge $594.25

Monthly Payment $91.05

Credit Line Premium

$44.38*

Credit Disabilit Premium $92.87*

For the Amount of $1000 Dollars

Pay to the

Order of I Feel Rich

Total of Payments $1,300.80

Number of Monthly Payments

24 Months

Amount Financed $1055.26

APR 20.95%

Finance Charge $245.54

Monthly Payment $54.20

Credit Line Premium

$16.91 *

Credit Disabilit Premium $39.02*

*Credit insurance. If selected, premium will be paid from amount financed. If not selected,

cash advance is total amount financed.

To borrow $3000,

$2000, or $1000

$3000 loan terms

$2000 loan terms

$1000 loan terms

The owner of a comer lot wants to find a use that will

yield a desirable return on his investment. After much

study and calculation, the owner decides that the two

best alternatives are:

7-44 A finance company is using the "Money by

Mail" offer shown in Problem 7-43. Calculate the

yearly nominal IRR received by the company if a

customer chooses the $3000 loan but declines the

credit insurance.

7-45 In his will, Frank's uncle has given Frank the choice
between two alternatives:

7-46

$2000 cash

$150 cash now plus $100 per

month for 20 months beginning

the first day of next month

(a)At what rate of return are the two alternatives

equivalent?

(b)If Frank thinks the rate ofretum in(a)is too low,

which alternative should he select?

First cost

Annual property taxes

Annual income

Life of building, in years

Salvage value

Alternative 1

Alternative 2

Build

Gas Station

$80,000

3,000

11,000

20

o

Build Soft

Ice Cream

Stand

$120,000

5,000

16,000

,20

o

Selecting a Minimum Attractive Rate of Return

on his investment of 6%, which of the two alternatives

would you recommend?

---

--