Assignment no.

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Chapter 2: Q1. Venus Computer can produce 23,000 personal computers a year on its daytime shift. The
fixed manufacturing costs per year are $2 million and the total labor cost is $9,109,000. To increase its
production to 46,000 computers per year, Venus is considering adding a second shift. The unit labor cost
for the second shift would be 25% higher than the day shift, but the total fixed manufacturing costs would
increase only to $2.4 million from $2 million.

(a) Compute the unit manufacturing cost for the daytime shift.

(b) Would adding a second shift increases or decrease the unit manufacturing cost at the plant?

Chapter 3: Q2. A woman borrowed $2000 and agreed to repay it at the end of 3 years, together with 10%
simple interest per year. How much will she pay 3 years hence?

Chapter 3: Q3. A $5000 loan was to be repaid with 8% simple annual interest. A total of $5350 was
paid. How long was the loan outstanding?

Chapter 3: Q4. Solve the diagram below for the unknown Q assuming a 10% interest rate

Chapter 3: Q5. What sum of money now is equivalent to $8250 two years hence, if interest is 4% per 6-
month period?

Chapter 3: Q6. The local bank offers to pay 5% interest on savings deposits. In a nearby town, the bank
pays 1.25% per 3-month period (quarterly). A man who has $3000 to put in a savings account wonders
whether the increased interest paid in the nearby town justifies driving his car there to make the deposit.
Assuming he will leave all money in the account for 2 years, how much additional interest would he
obtain from the out-of-town bank over the local bank?

Chapter 3: Q7. We know that a certain piece of equipment will cost $150,000 in 5 years. How much will
it cost today uses 10% interest?
Chapter 4: Q8. The following cash flow transactions are said to be equivalent in terms of economic
desirability at an interest rate of 12% compounded annually. Determine the unknown value A.

Chapter 4: Q9. Mark Johnson saves a fixed percentage of his salary at the end of each year. This year he
saved $1500. For the next 5 years, he expects his salary to increase at an 8% annual rate, and he plans to
increase his savings at the same 8% annual rate. He invests his money in the stock market. Thus there will
be six end-of-year investments (the initial $1500 plus five more). Solve the problem using the geometric
gradient factor.

(a) How much will the investments be worth at the end of 6 years if they increase in the stock market at a
10% annual rate

(b) How much will Mark have at the end of 6 years if his stock market investments increase only at 8%
annually?