Question

Cummins Crane Corporation (3C) is considering replacing its controllers on its heavy lift cranes with new portable infrared controllers. 3C expects to achieve cost savings of S15K the second year, increasing by S1500 each year thereafter for the next 4 years. Draw the Cash Flow Diagram (10 points) At an interest rate of 12% per year, what is the equivalent annual worth of the savings? (40 points) 1. a. b. 2. Given the nominal rate of 22% if compounded annually (10 points) What is the effective rate For the following compounding periods, fill in the blanks. Show your work beside each row for credit (5 points each row) a. b. # Compound Periods EAIR% Compound Period CSA CM CD C Hourly C Minutely C Secondly NIA

Answer 1

Year Cash Flows Rate $56,845.68 4 2 15,000 16,500 18,000 19,500 21,000 EAW 13,826.33 4 10 Nominal Rate Compounding Period Compound # | EAR 2. a Compounding Annuall 2 23.210000% 4 | 23.882465% 12 24.359658% 365 | 24.599415% 21.900 24.607535% 1,314,000 24.607671% 78,840,000 24.607672% 24.607673% 12 13 EAR ca CM 2.Ь СО 16 I 17 18 C Hourly C Minutel C Secondl NA

Year Cash Flows Rate 0.12 NPV NPV(H2,D3:D8) 1. b D4+1500 D5+1500 -D6+1500 D7+1500 EAW 10 Nominal Rate 0.22 Compounding Annually EAR Compounding Period Compound # CSA ca CM CD C Hour C Minute C Secondl EAR 1+SD$10/H11)^Н 11-1 1+SDS10/H12)^H 12-1 (1+SD$10/H13) AH13-1 1+SDS10/H14)4H14-1 1+SD$10/H15)AH15-1 1+SD$10/H16)H16-1 (1+SDS10/H171AH17-1 12 13 (1+D10)A1-1 12 365 -H14 60 -H15 60 H16 60 NA 2. b 15 16 17 18 -EXP D10)-1
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