You want to deposit an amount P now such that you can withdraw an equal annual amount of

A1 $1500 per year for the first 4 years, starting 1 year after the deposit, and a different annual
withdrawal of A2 $3000 per year for the following 3 years.

a. Draw Cash Flow Diagram

b. If the interest rate for the first 3 years was 8% compounded annually and 8%
compounded bi-annually for the remaining duration, calculate the amount to be
deposited now?

A company spent $1000 on a new air compressor 7 years ago. The annual rental income from
the compressor has been $350. The $50 spent on maintenance the first year has increased each
year by $10. The company plans to sell the compressor at the end of next year for $50.

a. Construct the cash flow diagram from the company’s perspective and indicate
where the present worth now is located.
b. Find the net worth as on date, if the interest rate is 10%, compounded quarterly

Citizens of a particular locality have agreed to pool road tax resources already designated for
bridge refurbishment. At a recent meeting, the engineers estimated that a total of $500,000 will
be deposited at the end of next year into an account for the repair of old and safety-questionable
bridges throughout the area. Further, they estimate that the deposits will increase by $100,000
per year for only 9 years thereafter, then cease. Determine the equivalent present worth and
annual series amounts, if public funds earn at a rate of 5%,
(a) Compounded annually
(b) Compounded quarerly

An engineering company in Wyoming that owns 50 hectares of valuable land has decided to
lease the mineral rights to a mining company. The primary objective is to obtain long-term
income to finance ongoing projects 6 and 16 years from the present time. The engineering
company makes a proposal to the mining company that it pay $20,000 per year for 20 years
beginning 1 year from now, plus $10,000 six years from now and $15,000 sixteen years from
now. If the mining company wants to pay off its lease immediately,

(a) How much should it pay now if the investment is to make 16% per year?
(b) What is the difference in the above amount if the interest rate is 16%, compounded
quarterly?

Henry is planning to make two deposits: $25000 now and $30000 at the end of six years. He
wants to withdraw ‘C’ amount per year for the first six years and C+1000 for the next six years.
Determine the value of ‘C’ if the interest rate is 10% compounded monthly.