ST ADME62 @ chenzeb x @ chenzebi x x | © Wod|Mc x | 55 Sonintoy x | © Word|mi [CREAT It = 2 ell 1 X O° C Assignments 1. You have received $100,000 from your grandparents to be used for your graduate studies. You plan to start a program in 5 years. You can invest the money at 6% interest, compounded annually. How much will you have in 5 years? 2. Mobile Health needs to replace its mobile medical unit to continue providing diagnostic services and preventative medicine to city residents. The van costs $120,000, and a bank is will- ing to lend the nonprofit the money at a 6% interest rate for 5 years. Payments are due at the end of each month, and interest is compounded monthly. How much should you budget for the monthly payment? 3. The Department of Corrections (DOC) needs to replace two of its prison transport buses. There are two companies that have a track record of making reliable vehicles, and both make a bus that meets the needs of the department. The DOC pays an 8% interest rate on money it bor- rows. The bus from Company A has a purchase price of $105,000 and a 10-year service life exp tancy, and it averages $2,000 per year in maintenance cc The bus from Company B has a purchase price of $110,000 and a 10-year service life expectancy, and it av $1,500 per year in maintenance costs. Which bus should the Department of Corrections sel 4. The information technology (IT) department has recently completed a major refurbis ment and upgrade of the city’s data center, at a cost of $10,145,825. The chief information of! (CIO) has informed the central budget office that the IT department will need to do the kind of upgrade in 5 years, and he expects the total cost of that project to be 10% more than this project, accounting for better future technology and future increases in costs. The city L PSI SENN + I] ST ADME62 @ chenzeb x @ chenzebi x ADM © Word |Mc x | 58 Sonintoy x | © Word mic x Rr 142 The information technology (IT) department has ri ample a major refurbish- me nt and upgrade of the city’s data center, at a cost of $10,145,825. The chief information officer (CIO) has informe d the central budget office that the IT depar ould nt will need to do the same kind of upgrade in 5 years, and he expects the total cost of that project to be 10% more than this year’s project, accounting for better future technology and future increases in costs. The city does not expect to have enough funding available to for the refurbishment in 5 years and must put money away during each of the next 4 years to meet this need. How much money should the city put aside in each of the next 4 years to be able to pay for the data center refur- bishment 5 years from now, assuming the city can invest the money at a 4.5% interest rate? The local community center has been notified that it is the beneficiary of an endowment. The community center can accept cash today in the amount of $550,000 or receive $875,000 in 5 years. The community center expects to be able to invest the money at a 5% interest rate if it were to take the money now. Should it take the money now or wait? 6. The municipal golf course has made a budget request to remodel and upgrade the clubhouse. The project will cost $7,200,000, based on reliable estimates. The additional annual operating expenses after the upgrade are expected to be $200,000 per year. An analysis of the experiences of other municipal golf courses reveals an expected revenue increase of $1 million per year after the upgrade. The useful life of the upgraded clubhouse is estimated at 9 years, and the golf course expects to get a loan for the renovations at an interest rate of 4.25%. Should the renovations be approved? Additional Reading [ PSI SENN + I]