Question

1- A Pentsys lift table equipped with a powered deck extension can provide a safer and faster method for maintenance personnel to service large machinery. If labour savings are estimated to be $15,000 per 6 months, how much can Follansbee Steel afford to spend to purchase one, if the company uses a MARR of 1% per month and wants to recover its investment in 2-1/2 (two and a half year) years? (* use 2 decimal place for i and then calculate all the values)

2-For an interest rate of 8% per 6 months, determine the nominal interest rate per 2 years

Answer 1

Answer :-

1) :- Cash flow will be :-

• End of 0.5year = 15000

• End of 1 year = 15000

• End of 1.5year = 15000

• End of 2 year = 15000

• End of 2.5year = 15000

• MARR = 1% per month

PV of all savings = 15000 / 1.01^6 + 15000 / 1.01^12 + 15000 / 1.01^18 + 15000 / 1.01^24 + 15000 / 1.01^30

= 15000 / 1.01^6 * ( 1 + 1/1.01^6 + 1/1.01^12 + 1/1.01^18 + 1/1.01^24)

~62925

2) :- APR (Annual percentage rate) = 8%

Rate is compounded monthly, therefore, monthly interest rate = 8/12 = 0.67%

Nominal interest rate = ((1+r)n - 1), where r is interest rate and n is number of periods

Nominal interest rate for 6 months = (1+0.0067)6 - 1, as there are 6 months

Nominal interest rate for 6 months = 4.07%

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