Solucion ingen economica degarmo

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SOLUTIONS TO SELECTED PROBLEMS

Student: You should work the problem completely before referring to the solution.

CHAPTER 1

Solutions included for problems 1, 4, 7, 10, 13, 16, 19, 22, 25,28, 31, 34, 37, 40,
43, 46, and 49

1. Time value of money means that there is a certain worth in having money and the
worth changes as a function of time.

1.4 Nearest, tastiest,quickest, classiest, most scenic, etc

1.7 Minimum attractive rate of return is the lowest rate of return (interest rate) that
companies or individuals consider to be high enough to inducethem to invest their
money.

1.10 Rate of increase = [(29 – 22)/22]*100 = 31.8%

1.13 Profit = 8 million*0.28 = $2,240,000

1.16 (a) Equivalent future amount = 10,000 +10,000(0.08)
= 10,000(1 + 0.08)
= $10,800

(b) Equivalent past amount: P + 0.08P =10,000
1.08P = 10,000
P = $9259.26

19. 80,000 + 80,000(i) =100,000
i = 25%

22. Simple: 1,000,000 = 500,000 + 500,000(i)(5)
i = 20% per year simple

Compound:1,000,000 = 500,000(1 + i)5
(1 + i)5 = 2.0000
(1 + i) = (2.0000)0.2
i = 14.87%

1.25 Plan 1: Interest paid eachyear = 400,000(0.10)
= $40,000

Total paid = 40,000(3) + 400,000
= $520,000Plan 2: Total due after 3 years = 400,000(1 + 0.10)3
= $532,400

Difference paid = 532,400 – 520,000...
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