Question

(1 point) This problem is similar to one in your textbook.

Suppose that a company needs new equipment, and that the machinery
in question earns the company revenue at a continuous rate of
58000t+42000 dollars per year during the first six months of
operation, and at the continuous rate of $71000 per year after the
first six months. The cost of the machine is $175000. The interest
rate is 6.75% per year, compounded continuously.

a) Find the present value of the revenue earned by the machine
during the first year of operation. Round your answer to the
nearest cent.

Value: $

b) Determine how long it will take for the machine to pay for
itself; that is, how long until the present value of the revenue is
equal to the cost of the machine. Round your answer to the nearest
hundredth.

Years:

Answer #1

Company MNO generates between 10800 and 14500 million dollars
revenue per year. Suppose that the company's revenue stays within
this range. Use an interest rate of 9% per year compounded
continuously. Fill in the blanks in the paragraph below, rounding
your answers to the nearest tenth.
The present value of MNO's revenue over a five year period is
between ________________ and ________________ million dollars. Over
a twenty-five year period, the present value falls between
__________________ and ________________ million dollars.

Suppose that a printing firm considers its production as a
continuous income stream. If the annual rate of flow at time
t is given by
f(t) =
91.5e−0.8(t + 3)
in thousands of dollars per year, and if money is worth 8%
compounded continuously, find the present value and future value
(in dollars) of the presses over the next 10 years. (Round your
answers to the nearest dollar.)
present value$ =
future value$ =

Question 6 - Chapter 7 Textbook:
The current share price of Elica plc is £2.26 per share. It
offers a continuously compounded dividend yield of 2.00% per year.
The volatility of its stock returns is 50% and risk free rate is
5%, both per annum with continuous compounding.
Using Black-Scholes-Merton (B-S-M) model, find the values of
N(d1) and N(d2) for an option with a strike price of £2.00 and
maturity in six months. (show all step-by-step calculations)
Determine the price...

Your company needs $500,000 in two years' time for renovations
and can earn 4% interest on investments.
(a) What is the present value of the renovations? Present value
= $_____ dollars.
(b) If your company deposits money continuously at a constant
rate throughout the two-year period, at what rate should the money
be deposited so that you have the $500,000 when you need it? $
_____ should be deposited per year to have $500,000 in two years'
time.

Problem 3: A one-year-long forward contract on a
non-dividend-paying stock is entered into when the stock price is
$50 and the risk-free interest rate is 5% per annum (continuous
compounding).
(a) What are the forward price and the initial value of the
forward contract?
(b) Six months after the signing of the forward contract, the
price of the stock is $55 and the risk-free interest rate is still
5%. What is the new market forward price for the same contract...

Esquire Company needs to acquire a molding machine to be used in
its manufacturing process. Two types of machines that would be
appropriate are presently on the market. The company has determined
the following: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate
factor(s) from the tables provided.)
Machine A could be purchased for $66,000. It will last 10 years
with annual maintenance costs of $2,300 per year....

Esquire Company needs to acquire a molding machine to be used in
its manufacturing process. Two types of machines that would be
appropriate are presently on the market. The company has determined
the following ((FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.) Machine A could be purchased for $16,500. It will last
10 years with annual maintenance costs of $600 per year....

Esquire Company needs to acquire a molding machine to be used in
its manufacturing process. Two types of machines that would be
appropriate are presently on the market. The company has determined
the following ((FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.) Machine A could be purchased for $36,000. It will last
10 years with annual maintenance costs of $1,200 per year....

Esquire Company needs to acquire a molding machine to be used in
its manufacturing process. Two types of machines that would be
appropriate are presently on the market. The company has determined
the following: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate
factor(s) from the tables provided.)
Machine A could be purchased for $57,000. It will last 10 years
with annual maintenance costs of $1,800 per year....

Esquire Company needs to acquire a molding machine to be used in
its manufacturing process. Two types of machines that would be
appropriate are presently on the market. The company has determined
the following ((FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.) Machine A could be purchased for $36,000. It will last
10 years with annual maintenance costs of $1,200 per year....

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