1. Mrs. Renata converted the payment of her P50,000 debt to five (5) equal payments at the end of each year. If there is an interest rate of 10% per year, determine the present worth and future worth of the annual payments. What is the value of the five (5) annual payments at the end of the third period? Include the cash flow diagram in your solution.
1. Mrs. Renata converted the payment of her P50,000 debt to five (5) equal payments at the end of each year. If there is an interest rate of 10% per year, determine the present worth and future worth of the annual payments. What is the value of the five (5) annual payments at the end of the third period? Include the cash flow diagram in your solution.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. Mrs. Renata converted the payment of her P50,000 debt to five (5) equal payments at the end of each
year. If there is an interest rate of 10% per year, determine the present worth and future worth of the
annual payments. What is the value of the five (5) annual payments at the end of the third period? Include
the cash flow diagram in your solution.
2. Two 100-horsepower motors are being considered for use in the following table:
Brand X
Brand Y
Purchase Price
P102,543.95 | P334,617.10
Useful life in years
10
10
Market Value
None
None
Annual Maintenance
Expense
Efficiency
P9,174.99
P16,730.85
80%
90%
a. If the power costs P5.40 per kWh, and the interest rate is 12% per year, how many hours of
operation per year are required to justify the purchase of Brand Y? (1hp = 0.746 kW)
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