Question

infrastructure

1. Develop a cash flow diagram for the following car purchase/ownership scenario: A car is purchased for the agreed upon total price of $18,500, and the payments/maintenance are to be completed as follows:
   • An immediate down payment of $5,000 is made.
   • A payment of $6,000 (which includes interest) is made at the end of the 1^st, 2^nd, and 3^rd years.
   • Maintenance for the car costs $1,000 at the end of the 1^st year, and $2,000 at the end of each subsequent year.
   • The car is sold at the end of the 4^th year (after paying for maintenance) for $7,000.

2. Develop a cash flow diagram for the following scenario:
   • A company is considering buying a machine for an initial cost of $20,000.
   • The salvage value after 7 years will be $2,000.
   • An overhaul maintenance cost of $5,000 will be required at the end of year 4.
   • Annual O&M costs will be $2,500 per year.

Answer 1