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16.1: Exercise Solutions (Appendix A)

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    Note: Some solutions are too big or space consuming to be placed into this appendix such as schedules and tables. Please see the instructor manual for these complete solutions.

    Chapter 1

    1. End of chapter or glossary
    2. End of chapter
    3. Chapter sections
    4. Guided examples
    5. End of Chapter or How It Works
    6. Review or Lyryx
    7. End of Chapter
    8. Beginning of chapter OR End of chapter OR table of contents
    9. Plan, Understand, Perform, Present; it is a systematic problem-solving process
    10. Insufficient; proceed onto Applications to develop problem solving skills.
    11. (i) unknown section from which question derived; (ii) integration of various chapter concepts.
    12. to 18. Answers are student dependent.

    Chapter 2

    Section 2.1

    1. 15
    2. 10
    3. 40
    4. 100
    5. 55
    6. 10
    7. $21.70
    8. $7,645.52
    9. $19,215.37
    10. 400
    11. $25,967.38
    12. $1,345.87
    13. $5,978.08
    14. $1,056,767.41
    15. $2,156,764.06
    16. $41,271.46
    17. $83,228.60
    18. $2,339.07
    19. $26,450.25
    20. $14,561.43

    Section 2.2

      1. proper
      2. compound
      3. improper
      4. proper
      5. complex
      6. improper
      7. complex
      8. proper
      1. \(\frac{3}{4} = \frac{27}{36}\)
      2. \(\frac{2}{8} = \frac{16}{64}\)
      3. \(\frac{2}{5} = \frac{18}{45}\)
      4. \(\frac{5}{6} = \frac{75}{90}\)
      1. \(\frac{5 \times 2}{10 \times 2} = \frac{10}{20}\) \(\frac{5 \div 5}{10 \div 5} = \frac{1}{2}\)
      2. \(\frac{6 \times 5}{8 \times 5} = \frac{30}{40}\) \(\frac{6 \div 2}{8 \div 2} = \frac{3}{4}\)
      1. 0.875
      2. 16.25
      3. 2.6
      4. 135.5
      1. 0.875
      2. 16.250
      3. 1.111
      4. 0.469
      1. \(0.08 \overline{3}\)
      2. \(5. \overline{24}\)
      3. \(1. \overline{3}\)
      4. \(−0. \overline{309}\)
      1. 5.95
      2. 15.3125
      1. 1.04
      2. 0.96
      3. 9.64
      1. \(3. \overline{20}\)
      2. 0.5
    10. $1,182.14
    11. $14,005.26
    12. $525,745.68
    13. $2,693.13
    14. $149,513.74
    15. $4,450.29
    16. $9,579.23
    17. $138,934.38
    18. $12,252.25
    19. $267,952.30
    20. $1,041.58

    Section 2.3

      1. 46.38%
      2. 315.79%
      3. 0.0138%
      4. 1.5%
      1. 37.5%
      2. 53.125%
      3. 350%
      4. 280%
      1. \(383. \overline{3} \%\)
      2. \(22. \overline{2} \%\)
      3. \(27. \overline{27} \%\)
      4. 51.6129%
      1. 0.153
      2. 0.0003
      3. 1.53987
      4. 0.140005
    5. 5. 67.5%
    6. $2,500
    7. $0.003061
    8. 3,862,105
    9. $608,600
    10. 8.2358%
    11. 7,325
    12. $147.8 billion
    13. $8.50
    14. 1.48%
    15. 13.0235%
    16. $124,722.22
    17. $20,000,000
    18. $128,000.03
    19. Share price = $12.36; Money made = $2,360
    20. \(116. \overline{6} \%\)

    Section 2.4

    1. 5a + 1
    2. 20b2 + 10b
    3. 2x2 + 4x + 4.5
    4. (1 + i)17
    5. 4
    6. I = $55.48
    7. 15r2 + 3r + 5
    8. 1,024x40
    9. 0.75t +3.5t3
    10. 2 + 3(1 + i)3 − 5(1 + i)6
    11. 3.995628R
    12. 0.0256
    13. PV=$2,550
    14. PMT=$246.64
    15. a4 − 9a2 + 18
    16. −2x2 − 0.6xy + 4.8y2 − 7.2x + 4.2y
    17. −3,888z19
    18. $15,223.10
    19. $39,963.05
    20. $12,466.44

    Section 2.5

    1. x = 10
    2. b = 1
    3. m = 2
    4. x = 4, y = 2
    5. h=5, q=1
    6. a=8, b=0.6
    7. y = $620.14
    8. \(t = 6.151 \overline{3}\)
    9. Delay = 1.5 hours
    10. Users in 2000 = 107,998,376
    11. Direct cost = $3,000
    12. Gross income = $140,000
    13. Single tickets = 10,363, 3-pack Tickets = 1,879
    14. A = 700 units, B = 550 units
    15. Company shares = $975,000
    16. 240 minutes
    17. Marianne = $50,000; William = $40,000; Hendrick = $65,000; Charlotte = $20,000
    18. Regular stalls = 10,860; Handicap stalls = 240; Small car stalls = 720; RV stalls = 180
    19. Z = $25,000
    20. q = 2.78; r = 9.31

    Section 2.6

    1. e1.367188 = 3.9243
    2. e−0.295042 = 0.7445
    3. e0.609336 = 1.83921
    4. e2.585852 = 12.2746
    5. e−2.051398 = 0.128555
    6. 0.392393
    7. 2.302585
    8. 1.811554
    9. 0.455460
    10. 0.519446
    11. 1.529094
    12. 50.517191
    13. 22.48254
    14. 36.904108
    15. N = 87.808096
    16. N = 160.423164
    17. 0.583198
    18. 1.451535
    19. 403.428793
    20. 33.115452

    Chapter 2 Review

    1. 0.003016
    2. \(4. \overline{324}\)
    3. \(71. \overline{3} \%\)
    4. x
    5. r=1
    6. 3 × ln(2) = ln(23) = 2.079442
    7. $632.86
    8. 1.277142
    9. 204ml
    10. 43.1548%
    11. $3,417.44
    12. 5.196152a3b3
    13. 28.186510PMT
    14. 799 starts
    15. Behind Plate tickets = 3,489; Base line & outfield tickets = 1,843
      1. $55,680
      2. $51,782.40
      3. 112.01%
    17. $2,034.86
    18. 6.1543%
    19. Regular Tires = 205; Promotional Tires (sold in sets of 4) = 300
    20. 102.9%

    Chapter 3

    Section 3.1

    1. 5.0023%
    2. $549.25
    3. 5.346%
    4. 5.0005%
    5. $17.99
    6. $2,500
    7. 7.1773%
    8. $218.34
    9. 16.2624%
    10. Δ% = −26.2937%; RoC = −3.0048%
      1. −2.7248%
      2. $246,308.72
      3. 10.4833%
    12. −28.5714%
      1. 10%
      2. −9.5801%
      3. −0.5381%
    14. 5.1452%
    15. 15 years
    16. 2.5148%
    17. Amount saved = $193.18; Δ%=−70.0004%
    18. −0.6155%
    19. 61.9048% less time.
      1. \(8. \overline{3} \%\)
      2. \(4.08 \overline{3} \%\) per period.

    Section 3.2

    1. 15
    2. $1,779
    3. 10
    4. $3,795
    5. 6.7910%
    6. 2.6888%
    7. $0.00802/ml
    8. $6.46
    9. 5.0821%
    10. $15.88
    11. $314.83
    12. 2.74
    13. $125,000
    14. 1.8666%
    15. $0.8082
    16. 99.0805%
      1. Pert better; Pert=$ \(0.00591 \overline{6}\)/ml; H&S=$0.006680/ml
      2. Pert saves $1.74
    18. Grocery 11.2853%; Cosmetics 9.4493%; Pharmaceuticals 8.9208%
    19. $213.64
    20. 10.2809%

    Section 3.3

      1. 11:2
      2. 6:13:10
      3. 2:3:7:9
      1. 6:5
      2. 6:7:4
      1. 35:4
      2. 5:6:7
      3. 17:9:27:8
      1. 24:5
      2. 5:2:12
      3. 12:28:21:15
      1. 1:1.10
      2. 2.14:1:1.12
      3. 1:16.64:8.33:3.12
      1. y=1.87
      2. x=44.55
      3. q=0.92
      1. r=$17.47; x=$18,775.25
      2. g=212,142.40; h = $66,294.50; i=$119,330.10
    8. $6,820.95 : $4,547.30
    9. $21,897.82 : $15,641.30 : $9,384.78
    10. 5:7:4
    11. 6:3:4:11
    12. m=$778.88
    13. $383.20
    14. $44,916.67
    15. Gingerale = 4.08L, Grenadine = 2.176L, Vodka = 2.244L
    16. $46,965,000
    17. 7-11: transactions, 4% savings; Tim Horton's: square metres, 12.963% savings; Quizno's: transactions, 26.3636% savings
      1. Texts = 4,052; Video = 54, Cost = $3,381.18
      2. $887.73.
    19. 1.64 : 1.29 : 3.21 : 1
    20. Manager = $11,015.12; Supervisor = $5,507.56; Worker = $2,753.78

    Chapter 3 Review

    1. $2,135.32
    2. 5.25
      1. 16%
      2. $1,680,000
      3. 5.346%
      1. 3.0776%
      2. −27.5684%
      1. 7:2:9
      2. 12:7
      3. 10:16:25
      4. 68:81
      1. 1:1.86
      2. 1.20:1.38:1
      3. 1.41:3.52:1:1.74
      1. x=4
      2. q=25, r=31.25
    8. $11,250:$10,000:$3,750
    9. 10.39%
    10. $160,000
    11. Refrigerated = $105,322.68; Nonrefrigerated = $135,129.69; Non-food = $95,547.63
    12. total sales = $997.50; average price = $1.27
    13. 16:3:1
    14. Three years ago = $1,500; Two years from now = $1,886.73
    15. $153.45
    16. Euros = $677.84; Pounds = 590.06; Yen = 77,104.02
    17. Rachard = 10 slices for $6.25, Sergey = 2 slices for $1.25, Basilio = 4 slices for $2.50, Alphonso = 8 slices for $5.00
      1. $1.27:$1.00
      2. $1.29:$1.00 then $1.25:$1.00
    19. 2008-2009 ∆% = −1.6470%; 2009- 2010 ∆% = 1.4306%; 2008-2010 RoC = −0.1201%
    20. New Zealand = 287.35; Indian Rupees = 15,932.06; South African Rand = 1,357.52

    Chapter 4

    Section 4.1

      1. $5,000
      2. $2,500
      3. $2,307.69
      4. $1,153.85
    2. $1,277.21
    3. $57,600
    4. $6,110
    5. $468.24
    6. $188
    7. $3,767.58
    8. $1,443
    9. $19,162.50
    10. $16,860
    11. $850
    12. Offer #2 Best = $3,412.50; Exceeds Offer #1 = $312.50; Exceed Offer #3 = $67.50
    13. $5,902.89
    14. $1,454.38
    15. $43,550.45
    16. $168,000
    17. 2%
    18. Option 1 = 1.47%; Option 2 = 1.05%
    19. $3,342.35
    20. $1,755.25

    Section 4.2

    1. $1,777.20
    2. $34,410.41
    3. $18,735.35
    4. $5,478.46
    5. $8,417.62
    6. $4,731.86
    7. $8.701.20
    8. $16,981.20
    9. $12,121.55
    10. $4,604.80
    11. −$817.22
    12. British Columbia is $4,025.28 better
    13. Saskatchewan - $78,120.88 (LOW); Ontario = $81,278.61 (HIGH); NWT = $81,081.29; Difference = $3,157.73
    14. New Brunswick = $62,322.77 (MORE); Nunavut = $62,240.61
    15. Federal = $5,808.87; Provincial = $2,692.38; Total = $8,501.25
    16. Federal = $1,930.95; Provincial = $1,537.82; Total = $3,468.77
    17. Federal = $380.56; Provincial = $262.50; Total = $643.06
    18. 5.5097%
    19. $46,846.57
    20. Nunavut = $46,434.59 (HIGH); Quebec = $40,659.97 (LOW) which is −12.436%

    Section 4.3

    1. 103.7
    2. $25,370.69
    3. 100
    4. $385.29
    5. 92.6784%
    6. 125.0
    7. $37,500
    8. $31,000
    9. 107.1
    10. Toronto=122.6; Montreal=145.6
    11. $53,850.80
    12. $105.22
    13. $3,934.61
    14. 3.6256%
    15. $325,167.63
    16. 8.7853% then 8.8743%
    17. $72,968.21
    18. $193,934.64
    19. 100.0 (base year), 140.1, 198.4, 132.4, 206.3
      1. 95.2381%, 91.2409%, 86.3558%, 85.6164%
      2. $36,225; $37,812; $39,951; $40,296

    Chapter 4 Review

    1. $1,196.25
    2. $3,500
    3. $18,186.75
    4. $1,250.89
    5. −7.4007%
    6. 2004 RI = $22,000; 2009 RI = $24,194.95; ∆% = 9.977%
    7. 2nd Emp. Higher = $36,855; higher by $1,215.48
    8. $3,031.92
    9. $128.00
    10. BC = $2,950.69; ON = $3,298.52; Ontario pays 11.7881% more
    11. $2,823,220
    12. $31.32
      1. $768.00
      2. Federal = $169.67; Provincial = $88.30
    14. $47,979.31
    15. $255,000
    16. $356.85
    17. Federal = $1,144.07; Provincial = $476.12
    18. $26,477.92
    19. British Columbia = $13,795.59 or 20.6954%; Alberta = $15,146.37 or 22.7218%; Saskatchewan = $16,426.64 or 24.6424%; Manitoba = $17,167.25 or 25.7535%
    20. Total Regular Earnings = $4,791.01; Total Holiday Earnings = $349.77; Total Overtime Earnings = 272.96; Total Statutory Worked Earnings = $75.39; Total Payroll = $5,489.13

    Chapter 5

    Section 5.1

      1. Blended; FC = $15, VC = $0.33
      2. Fixed cost
      3. Variable cost
      4. Fixed cost
      5. Blended; FC = $40; VC = $0.25
      6. Variable cost
      7. Blended, FC = $1,000; VC = 15% of sales
    2. TR=$16,000; VC=$5.50; n=1,200; CR=57.69%;
    3. n=1,000; TVC=$5,000; NI=$3,000; CR=50%; CM=$5
    4. n=800; CM=$26.25; VC=$48.75; TVC=$39,000; TFC=$6,500
    5. VC=$25; S=$47; NI=$21,600; CR=46.81%; CM=$22
    6. S=$26; CR=50%; VC=$13; TVC=$39,000;TFC=$21,000
    7. n=1,250; S=$121.35; TR=$151,687.50; CM=$46.11; TFC=$77,137.50
    8. $1,034,400
    9. −$275
      1. $6.50 increase
      2. $125
    11. S=$46 (maximizes NI)
    12. CR=54.24%
    13. 4,667
    14. $262,000 increase
    15. Total CM = $2,800,000; CR=46.67%
    16. $13,750,000
    17. Increase price since NI rises
    18. Put dresses on sale since NI rises
    19. VC = $38.24; TR = $13,096,070; NI = $4,886,630; CM = $61.73; Total CM = $8,086,630; CR = 61.75%
      1. $4,556,630
      2. $4,019,410
      3. $4,969,078

    Section 5.2

    1. 229
    2. 6,452 units; TR = $14,839.60
    3. $122,000
    4. $50,000
    5. $300,000
    6. 1,200 pages
    7. $91,125
    8. $5
    9. $750
    10. 38%
      1. 918
      2. 1,124
      3. 1,101
      4. $11.04
    12. $25
    13. 2,301,277 barrels; TR = $382,006,032.77
    14. PepsiCo = $13,442,088,008.47; The Coca-Cola Company = $21,077,238,188.98; PepsiCo is 36.22% lower
      1. \(−0. \overline{9900} \%\)
      2. −1%
      3. lowering TFC always better
    16. 7,667 books
    17. $5,937,500
      1. $14.795 billion
      2. −30.2%
    19. n=6,250; TR=$625,000
      1. n=5,744; TR=$574,000
      2. n=5,707; TR=$570,700
      3. n=5,883; TR=$588,300
      4. n=5,868; TR=$586,600
      5. Option B

    Chapter 5 Review

    1. $420,000
      1. 11,361
      2. $698,800
      1. $240
      2. −$150
      3. 60
      4. 82
    4. 649
      1. 34.54%
      2. $179,829.40
    6. Toyota = $118,971.86 million; Honda = $94,456.94 million; Honda is 20.61% lower
      1. $3,181,818.18
      2. $2,727,272.73
      3. $300,000
      1. Svetlana = 200; Yoric = 200
      2. Svetlana = $9,075; Yoric = $4,000
      3. Svetlana = −$6,975; Yoric = −$4,000
      4. same b/e point; high CM dramatically impacts NI
      1. \(58. \overline{3} \%\)
      2. $2,500,000
      3. $3,100,000
      1. VC = $558.62; TFC = $10,572,000; CM = $190.38; CR = 25.42%; NI = $3,731,868; break-even n = 55,531; breakeven TR = $41,592,719
      2. NI=$3,591,467.95; Do not lower price.

    Chapter 6

    Section 6.1

    1. D$ = $411.60; N = $568.40
    2. L = $800; D$ = $200
    3. d = 42.625%; N = $1,133.16; D$ = $841.84
    4. d = 26.7904%; L=$500; D$ = $133.95
    5. $259.97
    6. $24.32
    7. 31.985%
    8. $19.99
    9. d = 43.972%; L = $51.76
    10. L = $24; N = $13.92
    11. d = 62.8%; L = $700; D$ = $439.60
    12. d = 26%; N = $303.99; D$ = $96
    13. $1,026
    14. d = 63.14%; N = $29.49
    15. $1,194,553.06
    16. 2 years 216 days
    17. Reduced by 17.4154%
      1. 3%
      2. $2.50
      1. 52.2328%
      2. $3,073.82
      1. $74.99
      2. $60.91
      3. L = $78.74; N = $63.96; D$ = $14.78

    Section 6.2

    1. S=$321.95; SBE =$236.95; M$=$133.53; MoC%=70.8683%; MoS%=41.4754%
    2. C=$653.59; SBE =$849.67; M$=$346.41; MoC%=53.0011%; MoS%=34.6413%
    3. C=$118.25; S=$301.53; E=$153.13; MoS%=60.7833%; SBE =$271.38
    4. M$=$96.25; P=$41.25; C=$178.74; SBE =$223.74
    5. C=$744.83; S=$1,284.83; P=$204.83; MoC%=72.5%; MoS%=42.0289%
    6. M$=81.60; S=$201.60; E=$51.36; MoS%=40.4762%; SBE =$171.36
    7. P=$175; S=$1,447.37; C=$1,172.37; MoC%=23.4568%; SBE =$1,272.37
    8. C=$220; S=$287.50; M$=$67.50; MoS%=23.4783%; MoC%=30.6818%
    9. $112.50
    10. 125%
    11. $27,996.79
    12. $57.05
      1. $733.03
      2. $219.91
      3. 53.3151%
      4. $698.03
      1. $119.95
      2. $40.85
      3. 51.6435%
      4. 34.0559%
      5. 28.8887%
    15. $20.82
    16. $102.40
    17. 42.8571%
    18. $488.09
      1. $40.47
      2. $21.79
      3. $62.26
      4. $14.51
      5. $12.20; $2.31 reduction
      1. $12.65
      2. $17.71
      3. $0.63
      4. MoS% = 28.5714%
      5. C = $15.18; S = $21.25; P = $0.76; MoS% = 28.5647%

    Section 6.3

    1. D$ = $153.95; Son sale = $285.90
    2. S = $299.95; d = 33.3389%
    3. D$ = $275; d = 26.1905%
    4. Son sale = $25,525; d = 11.2945%
    5. S = $19,701.42; D$ = $6,501.47
    6. S = $319.42; Son sale = $281.09
    7. Son sale = $53.99
    8. D$ = $45; d = 52.9474%
    9. d = 14.9%
    10. S = $133.30; D$ = $93.31
    11. Son sale = $384.99; S = $699.98
    12. d = 36.7893
      1. Pon sale = $2.59
      2. P = $74.55
    14. d = 10.9512%
      1. Son sale = $1,519.05
      2. Pon sale = $303.81
      3. S = $2,025.40
      4. P = $810.16
    16. Son sale = $367.20
      1. Son sale = $282.91
      2. d = 29.2637%
      3. MoS% = 23.8026%
    18. D = 32.4325%
      1. Son sale = $1,680
      2. MoS% when on sale = 32.8571%
      3. Pon sale = $192.00
      1. Son sale = $1,614.06
      2. S = $2,152.08
      3. M$ = $956.48; MoC% = 80%

    Section 6.4

    1. M$=$50; C=$50; P=$38; SBE = $62; D$ = $33; Son sale = $67
    2. S = $50; C = $20; E = $10; SBE = $30; MoC% = 150%; MoS% = 60%; d = 26%
    3. M$ = $18.75; S = $75; E = $11.25; SBE = $67.50; MoS% = 25%; D$ = $10.01; d = \(13.34 \overline{6} \%\)
    4. E = $35.50; M$ = $56.99; P = $21.49; MoC% = 132.5348%; D$ = $10; Sonsale = $89.99
    5. P = $3.46; Pon sale = $0.46
    6. P = $17; Pon sale = $3.50
    7. C = $2.30; Coupon Redemption = $1
    8. S = $74.95; Rebate Redemption = $15
      1. M$ = $10.45; S = $19.95; P = $2.99; E = $7.46; MoS% = 52.381%
      2. Son sale = $15.96; D$ = $3.99; M$on sale = $6.46; MoS%on sale = 40.4762%
      1. P = $1.36
      2. Pon sale = $0.51
      3. SBE = $1.48
    11. S = $425; Son sale = $225
    12. Pon sale = $1.17
    13. Pon sale = $0.08; The promotion is profitable and generates a total profit of $0.08 × 300,000 = $24,000
    14. Pon sale = −$1.10; The promotion is not profitable and generates a loss of $1.10 × 50,000 = $55,000
      1. E = $2,250
      2. M$ = $4,500
      3. S = $19,500
      4. MoS% = 23.0769%
      5. Son sale = $17,550
      6. D$ = $1,950
      7. Pon sale = $250
      8. MM = $3,768.75
      1. Use the coupon.
      2. Increase in profit = $3,980
    17. Choose Supplier 2 since $75.85 more profit is earned.
    18. Son sale = $720
    19. Pon sale = $6.06
      1. E = $16.00
      2. P = $27.99
      3. M$ = $43.99
      4. MoS% = 54.9944%
      5. MoC% = 122.1944%
      6. Son sale = $55.99
      7. D$ = $24.00
      8. Pon sale = $3.99
      9. MM = $41.59

    Chapter 6 Review

    1. N = $20.70
    2. N = $110.22
    3. d = 24.836%; N = $582.52 (for both)
    4. S = $5.99
    5. M$ = $22.17; MoC% = 79.6909%; MoS% = 44.3489%
    6. d = 11.7647%
    7. Profits reduced by $2.40; Pon sale = $1.60
    8. MM = $18.65
      1. N = $619.99; D$ = $155.00
      2. N = $526.99; $93 less
      3. d = 32%
      1. S = $1.19
      2. P = $0.69
      3. MoC% = 750%
    11. Pon sale = −$1.20; Do not proceed. The promotion is unprofitable.
      1. Son sale = $133.67
      2. D$ = $65.83
    13. d = 30%
      1. Pon sale = $63.29
      2. $31 less
      3. MM = $139.16
    15. d3 = 10.0167% (due to rounding, most likely 10%)
      1. Previous Day = 9,805.61; Current Day = 9,246.69
      2. Start of Year = 13,209.56
    17. Total profit = $42,240; MM = $129
    18. Regular: = $475,140; Scenario A = $484,807.75; Scenario B = $481,320; Recommend Scenario A
      1. P = $9.59
      2. P = −$3.91. Not a profitable approach.
    20. Offer #2 has lowest price of $101.14

    Chapter 7

    Section 7.1

    1. Stax = $682.49
    2. Stax = $750.74
    3. Stax = $747.49
    4. Stax = $727.99
    5. S = $796.45; HST Tax Amount = $103.54
    6. S = $818.17; GST Tax Amount = $40.91; PST Tax Amount = $40.91
    7. January Remit $5,471.40; February Refund $2,202.96
    8. Winter Remit $7,171.20; Spring Refund $1,025.25; Summer Remit $9,803.30; Fall Refund $1,191.65
      1. Alberta is best = $1,396.45
      2. Savings = $17.48
    10. S = $529.99; GST Tax Amount = $26.50
    11. Can't purchase at Stax = $3,050.94; Down Payment = $45.08
    12. Stax = $4,477.30; GST Tax Amount = $199.88; PST Tax Amount = $279.83
    13. Q1 Remit $17,865; Q2 Remit $35,370; Q3 Refund $8,105; Q4 Refund $24,210
    14. March Remit $951.15; April Refund; $1,257.15; May Remit $2,953.65
    15. Higher in Ontario by 1.5274%.
    16. Total PST = $13.02; Total GST = $52.46; Total HST = $13
    17. Remit $378,227.85
    18. PST Rate = 9.505%
      1. S = $352.72
      2. S = $1,682.81
      3. S = $19,465.09
      4. S = $4,736.57
    20. Remit $31,331.89

    Section 7.2

    1. AV = $176,000; Property Tax = $4,719.35
    2. Market Value = $247,272.73; Property Tax = $2,699.00
    3. Assessed Value = $400,000; Tax Policy = 80%
    4. Market Value = $1,300,000; Tax Rate = 0.675832
    5. Property Tax = $5,241.17
    6. AV = $9,000,000
    7. Property Tax = $2,250.05
    8. Municipal Property Tax = $1,975.97; Library Property Tax = $220.01; School Property Tax = $1,481.76; Total Property Tax = $3,677.74
    9. Tax Rate = 1.109305
    10. Mill Rate = 8.9929
    11. Increase the mill rate by 0.3626
    12. Mill Rate = 14.5412
    13. 10.0247 and 5.0124
    14. $192,318.89 and $179,524.86
    15. Mill Rates Under 70% Policy: 5.6872 then 5.6060; Mill Rates Under 75% Policy: 5.3081 then 5.2322

    Section 7.3

    1. 69,482.40 US$
    2. 130,500€
    3. 37,744.20 AU$
    4. 170,046 AU$
    5. 322,976.60 C$
    6. 8,780,200 ¥
    7. 0.0103 ¥ per C$
    8. 53,130 C$
    9. Purchase $518.75 less than before
      1. 2,784 £
      2. 4.6739%
    11. 649.44 C$
    12. Elena lost $29,489.81 on her investment
    13. The products cost $12,800 C$ less than before
    14. 3.5%.
    15. Buy in the U.S. to save $196.60
      1. Scotiabank’s sell rate fee is 2.3%; The kiosk’s sell rate fee is 4.5%
      2. The airport kiosk charges 2.52% more than Scotiabank
    17. Booking it themselves saves $1,824.98
    18. Currency fluctuations have decreased profits by $38,432.12
      1. 639.38 US$
      2. €15,153.19
      3. ¥166,983
      4. 140,447.70 MXN$
    20. Columbia Pesos = $1,084.71 C$

    Section 7.4

    1. $133,568.68
    2. $96,513.10
    3. $46,744.67
    4. Balance Remaining = $21,928.01
    5. Balance Remaining = $434,964.99
    6. Balance Remaining = $7,065.01
    7. $13,692.78
    8. $232,444.92
    9. $204,664.43
    10. $35,901.77
    11. $12,872.93
    12. $23,372.94
    13. $2,654.57
    14. $5,479.14
    15. $4,241.10
    16. $24,772.64
    17. $40,608.80
    18. N = $13,511.24; Late penalty amount = $519.66
      1. Choose Plan #2
      2. Savings = $724.92
    20. $250,214.41

    Chapter 7 Review

    1. $3,815.95
    2. 92,260 BEF
      1. $1,125.42
      2. $1,045.75
      3. $1,095.55
      4. $1,150.33
    4. $14,700
    5. Purchase $112.70 more than before
      1. 1st Quarter = $34,707.62 Refund; 2nd Quarter = $74,618.99 Remit; 3rd Quarter = $257,843.54 Remit; 4th Quarter = $36,129.04 Refund
      2. 1st Quarter = $90,239.80 Refund; 2nd Quarter = $194,009.38 Remit; 3rd Quarter = $670,393.19 Remit; 4th Quarter = $93,935.50 Refund
    7. Mill Rate = 20.0562
    8. $7,140.83
    9. GST Tax Amount = $85.16; PST Tax Amount = $169.90
    10. 150,188.69 SKK
    11. Mill Rate = 30.3740
    12. $4,319
      1. $0.950 per litre
      2. 30.42% more
    14. $10,584
    15. Increase by 5.9287%.
      1. GST =4.3488%; PST = 8.6758%
      2. GST =4.4643%; PST = 6.25%
    17. Banco do Brasil is better option. The traveller has 19.31 Euro more.
    18. $34,200
    19. $940.37 US$
    20. Remit $13,886.83

    Chapter 8

    Section 8.1

    1. $7,800
    2. $25,000
    3. 7.5%
    4. 11 months
    5. $3,802.50
    6. $80,000
    7. $1,619.18
    8. $349.86
      1. $1,315.07
      2. $2,630.14
      3. $3,945.21
      4. The amount of simple interest on the same principal over the same time frame is directly proportional to the interest rate.
    10. 5 months
    11. 6.25%
    12. $34,285.71
    13. $553.36
    14. March 20, 2011.
    15. The second interest rate is 1.25% higher.
    16. 460 units
    17. $416
    18. Recommend back-to-back 3 month investments resulting in $1.26 more.
      1. $1,421.78
      2. 7.3092%
    20. Recommend alternative #3 since it is 0.1283% more than the worst alternative #1.

    Section 8.2

    1. S = $17,278.25; I = $503.25
    2. P = $61,000; I = $915
    3. P = $22,223; t = 11 months
    4. S = $43,752.67; r = 8%
    5. S = $1,779.33; I = $79.33
    6. P = $3,371.78; I = $428.22
    7. Replacement payment = $2,009.82; I = $59.82
    8. Replacement payment = $3,767.81; I = $257.19
    9. $16,232.43
    10. P = $9,998; I= $269.21.
    11. 7.8%
    12. 32 weeks
    13. Replacement payment = $5,911.32
    14. Payment today = $8,512.50
    15. P = $778.10; S = $818.95
      1. Choose to buy the lawn mower on September 30 since the price of $399.75 is lower.
      2. Savings = $10.49
    17. 14.9454%
    18. $1,306.99
    19. $12,600
    20. $5,455.03

    Section 8.3

    1. $6.54
    2. $25,530.74
    3. $8.57
    4. S = $4,530.77; I = $30.77
    5. $3.63
    6. $30,636.49
    7. $31.63
    8. 200 day GIC is better than back-to-back 100 day GICs by $69.70
    9. $868.55
    10. The 3 back-to-back GICs are better than the 360 day GIC by $35.75
    11. $3,764.53
    12. $3,944.80
    13. 0.4995%
    14. $3.07
    15. Option 1 = $90,710.14; Option 2 = $90,666.99; Option 3 = $90,640.64; Option 4 = $90,636.36

    Section 8.4

      1. Borrower = Joan d'Arc; Lender = Candlelight Industries; Face Value = $13,500; Issue Date = January 7, 2010; Term = 9 months; Interest Rate = 9% annually
      2. October 10, 2010
      3. $14,418.74
    2. December 5, 2011
    3. 334 days
    4. December 10, 2011
    5. January 5, 2012; $34,156.93
    6. September 18, 2011; 6.75% annually
    7. October 29, 2011; $8,500
    8. 320 days; February 3, 2011
    9. Maturity Value = $4,908.37; Proceeds = $4,706.01
    10. Face Value = $14,995; Sale Date = September 1, 2011
    11. Maturity Value = $43,862.92; Discount Rate = 5.12% annually
    12. Interest Rate = 6.55% annually; Proceeds = $19,265.05
    13. $20,470.14
    14. $14,120.02
    15. $4,994.58
    16. 12.75% annually
      1. 186 days
      2. 6.7199% annually
    18. $27,000
    19. Choose Offer #2 since it realizes 0.136% more in proceeds.
      1. Pick 6 months; I = $273.70
      2. Pick 8 months; I = $284.22

    Section 8.5

    1. Total Interest = $2,040.70
    1. Total Interest = $1,990.76
    2. Total Interest = $774.46
    3. Total Interest = $2,590.56
    4. Total Interest = $3,852.20
    5. Total interest = $405.04
    6. Total interest = $858.58
    7. Total Interest = $3,197.08
    8. Option 1 = $218.93; Option 2 = $227.25; Option 3 = $251.45; Option 4 = $262.52; Option 1 is best by $43.59 over Option 4

    Section 8.6

    1. $99,570.35
    2. 3.89%
    3. $479,872.95
    4. 2.85%
    5. 182 days
    6. 90 days
    7. $200,000
    8. $89,691.85
    9. P (2000) = $98,604.41; P (2010) = $99,960.56; Amount more = $1,356.15
    10. P (2000) = $51,743.90; P (2009) = $54,770.59; Amount more = $3,026.69
    11. $488,907.82; Cannot purchase the commercial paper with $485,000. $3,907.82 more is required.
    12. $247,542.21
    13. $1,970.63
    14. 5.08%
    15. Amount earned = $133.24; r = 4.99%
    16. Amount earned = $1,710.69; r = 6.34%
      1. 6.74%
      2. 5.35%
      3. 6.10%
      4. Phillipe purchased at 6.74%. Damien purchased it from Phillipe at 5.35%. As a result, Phillipe earned a higher return on his investment of 6.74% since a lower future rate results in a higher price.
    18. 3.89% & 2.85%
    19. The purchase price is lower the longer the term; The purchase price is not a straight line.
      1. The difference in principal between the various rates continually decreases the closer the T-bill moves towards maturity.

    Chapter 8 Review

    1. $33.32
    2. $4.05
    3. Legal Due Date = September 19; S = $52,141.06
    4. $946.16
    5. $979,439.29
    6. $8,062.47
    7. The principal is $23,325 and the simple interest on the loan is $834.18
    8. -
    9. 2.96%
    10. $2.92
    11. Total Interest = $4,981.30
      1. 6.8%
      2. $476.85
    13. $17,614.33
      1. With $3,993.30, you are $6.70 short of meeting the goal
      2. 1.229%
    15. $0.67
    16. Total Interest = $198.60
    17. -
    18. 2.05% then 3.29% then 2.79% then 3.15%
    19. Savings Account Balance = $8,006.50; HELOC Balance = $24,000 20. Best: Back to back 60 day GICs with Maturity Value = $25,195.59; 2nd Best: 120 day GIC with Maturity Value = $25,193.15; Worst: 90 and 30 day T-bill with investment where Maturity Value = $25,188.99

    Chapter 9

    Section 9.1

    1. 0.6% per month
    2. 2.925% per half year
    3. 7.8% quarterly
    4. 29.2% daily
    5. Quarterly
    6. Monthly
    7. 14.375% annually
    8. 0.975% per quarter
    9. Daily
    10. 0.6458% per month
    11. Monthly
    12. 8.35% quarterly
    13. Monthly
    14. 0.0534% per day
    15. 7.9% monthly
    16. $50
    17. The lowest nominal rate is the 1.49% every quarter, equalling 5.96% quarterly
    18. 7.2% quarterly
    19. 5.2% per half year; 2.6% per quarter; \(0.8 \overline{6}\)% per month; 0.0285% per day
    20. 13.2% monthly; 4.4% quarterly; 2.2% semi-annually

    Section 9.2

    1. $9,511.81
    2. $68,351.02
    3. $27,465.13
    4. $4,804.20
    5. $18,218.24
    6. $33,638.67
    7. $987.24
    8. $8,397.45
    9. $2,235.82
    10. $15,017.33; There is enough money with $17.33 left over
    11. $5,254.44
    12. FV=$10,374.33; I = $1,374.33
    13. $12,171.92
    14. Jason has 274.5% more money
    15. $3,073.30
      1. $11.07 per unit
      2. −27.0066%
    17. $404,769.32 more
    18. $11,888.46
    19. Best: 19c with FV=$14,023.26; 2nd Best: 19d with FV=$13,999.47; 3rd Best: 19b with FV=$13,933.20; Worst: 19a with FV=$13,927.43
    20. Total FV = $29,270.56; Total Interest = $6,770.56

    Section 9.3

    1. $4,081.99
    2. $86,216.21
    3. $55,762.07
    4. $33,014.56
    5. $4,340.00
    6. $5,502.51
    7. $8,434.18
    8. $137,397.54
    9. $8,307.68
    10. $606,976.63
    11. $33,023.56
    12. $27,736.24
    13. $6,427.59
    14. Choose the 2 semi-annual payments saving $6.08 in today's dollars
    15. $18,788.24
    16. $85
    17. 40.315%
    18. $58,499.97
    19. $836,206.54
    20. Best Offer is 20b where PV = $993,846.61; 2nd Best Offer is 20c where PV = $993,391.12; 3rd Best Offer is 20a where PV = $987,884.82

    Section 9.4

    1. $10,501.28
    2. $10,714.59
    3. $43,045.16
    4. $9,966.25
    5. $102,495.17
    6. $9,564.76
    7. $22,975.60
    8. $29,488.31
    9. 1st payment = $15,498.71; 2nd payment = $30,997.42
    10. Payment plan is better by $9,388.40
    11. $5,201.24
    12. $7,465.59
    13. 1st payment = $11,105.19; 2nd payment = $2,776.30
    14. 1st payment = = $99,675.19; 2nd payment = $199,350.38; 3rd payment = $149,512.79
    15. $8,160.07
    16. $14,900.01
    17. The first alternative is better by $735.14
    18. 1st payment = $7,232.96; 2nd payment = $3,616.48
    19. $30,703.92
    20. Genstar's offer is better by $1,422,325.78

    Section 9.5

    1. 6.44% monthly
    2. 8.26% quarterly
    3. 4.99% semi-annually
    4. 9% annually
    5. 28.5% daily
    6. 6.3177% annually
    7. 4.3486% quarterly
    8. 4.8464% monthly
    9. 18% monthly
    10. 8.35% quarterly
    11. 6.9% monthly
    12. 5.6933% annually
    13. $24,225 investment earned 4.5138% quarterly
    14. BoM earns 0.0753% semi-annually more over the five years
    15. 13.9433% monthly
    16. 9.7361% annually
    17. 3.8127% annually
    18. 6.9183% monthly
    19. Ranking:
      City Growth
      Calgary 3.6326%
      Vancouver 2.8998%
      Toronto 2.8031%
      Halifax 1.3860%
      Montreal 1.3269%
      Winnipeg 0.9465%
      Regina 0.8276%
    20. Ranking:
      Company EAR
      GIC Max 3.1971%
      Laurentian 3.1820%
      MGI 3.0149%
      Affinity 2.9686%
      CIBC 2.8240%

    Section 9.6

    1. 4.8352% effectively
    2. 7.4424% effectively
    3. 3.989% effectively
    4. 9.7618% semi-annually
    5. 11.3866% monthly
    6. 7.7706% quarterly
    7. 6.0755% semi-annually
    8. 4.4832% monthly
    9. 7.9216% quarterly
    10. 7.1544% semi-annually
    11. 29.9% effectively
    12. 2.0151% effectively
    13. 19.7164% effectively
    14. 3.832% monthly; 3.8442% quarterly
    15. Competitor growth = 0.434% per month; Your growth is higher by 0.016% per month
    16. Ranking:
      Rank Company Rate
      1 ING 8.6285%
      2 TD Canada 8.6231%
      3 Conexus 8.6045%
    17. 9% effectively
    18. 49.3642% effectively
    19. 19.8905% daily
    20. Ranking:
      Investor Rate
      3 8.0976%
      1 8.085%
      2 8.0841%
      5 8.08%
      4 8.0573%

    Section 9.7

    1. 5 years, 6 months
    2. 12 years, 9 months
    3. 40 years
    4. 25 years, 6 months
    5. 27 years, 6 months, 28 days
    6. 1 year, 88 days
    7. 12 years, 44 weeks, 4 days
    8. 21 years, 79 days
    9. 6 years, 11 months
    10. 2 years, 3 months
    11. 1 year, 6 months
    12. 8 years, 44 weeks, 5 days
    13. 3 years, 6 months, 66 days
    14. 5 years, 8 months, 11 days
    15. 1 year, 10 months, 15 days
    16. Rule of 72 = 8 years, 188 days; Actual = 8 years, 6 months, 14 days; The Rule of 72 is 8 days less than the actual amount of time
    17. 15 months from today
    18. 3 years, 1 month, 5 days
    19. Final Rankings:
      # Length
      1 A 5 Years, 3 Months, 0 Days
      2 B 5 Years, 0 Months, 127 Days
      3 C 4 Years, 11 Months, 0 Days
      4 D 4 Years, 9 Months, 18 Days
    20. 1 Year, 6 Months, 27 Days After Start Of Loan

    Chapter 9 Review

    1. $21,524.50
    2. $67,313.13
    3. $5,450.83
    4. 27.7516% effectively
    5. 4.0604% weekly
    6. 18 years, 6 months
    7. $70,432.59
    8. $21,600
    9. $3,817.05
    10. 13.5131% annually
    11. 7.5% quarterly and 7.7135% effectively
    12. 1st payment = $5,256.23; 2nd payment = $6,307.48
    13. 21 years, 3 months, 2 days
    14. RBC: 5.9% quarterly and 6.0318% effectively; CIBC: 5.54% monthly and 5.6829% effectively
    15. $25,596.53
    16. 1st payment = $29,886.09; 2nd payment = $59,772.18; 3rd payment = $119,544.36
    17. PV = $4,957.60
    18. 1 year, 3 months, 70 days from today
    19. Rankings
      Opt. Nom. Eff.
      B 5.83% annually 5.83%
      A 5.6469% weekly 5.8062%
      D 5.715% semi-annually 5.7966%
      E 5.639% monthly 5.7871%
      C 5.65% quarterly 5.7708%
    20. 1 Year, 3 Months, 16 Days from today

    Chapter 10

    Section 10.1

    1. I = $645; Total interest = $10,320
    2. I = $209.55; Total interest = $5,029.20
    3. FV = $20,627.96; I = $3,227.96
    4. FV = $26,751.28; I = $1,751.28; 3.3997% quarterly
    5. FV = $61,961.27; I = $10,961.27;
    6. FV = $78,974.91; I = $6,599.91; 2.2057% annually
    7. FV = $2,784.43; 1.2824% annually; I = $104.43
    8. FV = $157,900.58; 3.3096% semiannually; I = $23,900.58
    9. FV = $95,347.54; 3.0259% annually; I = $10,717.54
    10. FV = $18,144.75; 2.567% annually; I = $2,159.75
    11. $41.76
    12. RBC earns $13.60 more
    13. FV = $7,792.07; 1.6791% monthly
    14. Best option = 4.83% quarterly; Worst option = 4.845% semi-annually; Extra interest earned = $21.96
    15. FV = $45,679.23; 2.6909% annually
    16. Stepper = $2,661.06; Fixed = $2,598.54
      1. $174.11, $298.63, $499.60, $756.88, $1,113.40
      2. 3.5017% annually
    18. $733.59
    19. Stay with the original 5-year GIC; switching earns $659.52 less interest
    20. Ranking
      Rank Option Interest
      1 A $3,503.14
      2 B $3,498.3
      3 C $3,375.00
      4 D $3,201.54

    Section 10.2

    1. $8,013.31
    2. $15,078.59
    3. $25,500
    4. 5.35% monthly
    5. $60,402.69
    6. $22,289.64
    7. 12.5% semi-annually
    8. 18.3503% monthly
    9. $11,125.50
    10. 2 years and 2 months
    11. $1,180.12
    12. $15,800
    13. $6,972.52
    14. $1,716.10
    15. 5.4499% monthly
    16. $9,194.41
    17. PV = $25,874.62; I = $5,924.62
    18. 10.25% quarterly
    19. $101,890
    20. Ranking
      # Sell Proceeds
      1 2 Years From Today $128,941.02
      2 Today $125,256.22
      3 1 Year From Today $124,764.20

    Section 10.3

    1. $2,475
    2. $916.70
    3. $2,196.60
    4. $1,336.88
    5. FV = $22,250.70; I = $3,350.70
    6. FV = $87,278.81; I = $10,878.81
    7. FV = $32,709.45; I = $2,809.45
    8. FV = $2,848.12; I = $348.12
    9. FV = $7,255.61; I = $1,055.61
    10. FV = $48,320.12; I = $2,620.12
    11. $3,289.29
    12. FV = $75,165.44; I = $9,665.44
    13. FV = $105,203.70; I = $2,103.70
    14. $8,294.40
    15. $4,220.78
    16. FV = $25,027.93; I = $2,827.93
    17. $35.51
    18. $4,100
    19. Ranking
      Rank Series Maturity Value
      1 S92 $11,294.18
      2 S96 $11,235.67
      3 S97 $11,225.71
      4 S93 $11,207.07
      5 S94 $11,181.48
      6 S95 $11,159.34
    20. $41,480.30

    Section 10.4

    1. PV = $84,475.66; I = $73,024.34
    2. PV = $176,595.71; I = $73,404.29
    3. PV = $3,626.26; I = $8,423.74
    4. PV = $38,941.67; I = $42,433.33
    5. IY = 9.4403% semi-annually; I = $90,912.87
    6. IY = 8.9241% semi-annually; I = $32,462.61
    7. IY = 5.1856% semi-annually; I = $50,052.03
    8. IY = 3.5447% semi-annually; I = $6,056.11
    9. IY = 10.7437% semi-annually; I = $1,947.67
    10. IY = 6.5444% semi-annually; I = $144,783.43
    11. PV = $4,124.24
    12. PV = $80,156.75
    13. IY = 6.0102% semi-annually
    14. IY = 5.165% semi-annually
      1. IY = 4.95% semi-annually
      2. IY = 4.5155% semi-annually
      3. IY = 5.9226% semi-annually
      1. $22,170.05
      2. $30,699.38
      3. 4.3874% semi-annually
      4. $8,529.33
    17. Yields on the date of purchase were 0.3817% semi-annually higher than on the date of sale.
    18. $133,000,000
    19. 158 bonds
      1. When the yield remains constant, the purchase price follows a straight line trend. When the yield rises, the purchase price drops creating a line that is flatter initially and rising faster closer to maturity. When the yield decreases, the purchase price increases creating a line that is rising fast initially and becoming flatter as it nears maturity.

    Section 10.5

    1. $50,914.14
    2. FV = $54,662.21
    3. $9,840.05
    4. 7.1993% annually
    5. 19 years
    6. 1983 PPD compared to 1978 is 63.0032%
    7. 1994 PPD compared to 1989 is 87.7189%
    8. 138,238.68
    9. 249,207.20
    10. 61,386.88
    11. 3.3075% annually
    12. $1.1024
    13. $357,000
      1. $289,929.94
      2. 2057 PPD compared to 2012 is 13.7964%
    15. 1975 dollar had its purchasing power decreased by 54.5297%
    16. 63 years
    17. Do not launch, forecasted annual sales after 15 years are only 20,035.405 units
    18. $6,729.71
      1. 2017
      2. 2045
      3. 2072
      1. a-c.
        Age Income Range
        65 $97,514.17 to $359,400.31
        70 $107,663.52 to $458,695.9
        75 $118,869.23 to $585,425.24
      2. Since the future is uncertain, developing a range of best-case to worstcase scenarios helps develop a complete understanding of what may be required and aids in the development of a savings plan.

    Chapter 10 Review

    1. $8,914.50
    2. $27,173.48
    3. $1,019.20
    4. $3,982.49
    5. FV = $65,105.42; I = $15,105.42
    6. $1,475.64
    7. $13.81
    8. 9,378
    9. FV = $6,817.80; 2.5885% annually; I = $817.80
    10. $6,503.10
    11. FV = $22,195.71; I = $1,695.71
    12. $4,274.90
      1. FV = $38,248.50; I = $4,248.50
      2. $20.64
      1. 9.7003% semi-annually
      2. 4.2141% semi-annually
      3. 13.4394% semi-annually
    15. 19.1%
    16. 1933 PPD compared to 1930 is 129.5585%
    17. 4.3435% semi-annually
    18. From 2004 to 2008, after-tax annual earnings decreased by $280.57
    19. Bond yields must increase by 0.3464% in order to achieve the goal.

    Chapter 11

    Section 11.1

    1. Annuity
    2. Not an annuity - unequal payments
    3. Not an annuity - non-periodic
    4. Not an annuity - discontinuous
    5. General annuity due
    6. Ordinary simple annuity
    7. Simple annuity due
    8. Ordinary general annuity
    9. Ordinary simple annuity
    10. General annuity due
    11. Ordinary general annuity; N=20
    12. General annuity due; N=60
    13. Simple annuity due; N=36
    14. General annuity due; N=24
    15. Ordinary simple annuity; N=12
    16. Ordinary simple annuity; N=48
    17. Ordinary general annuity; N=10
    18. General annuity due; N=312
    19. General annuity due; N=12
    20. Simple annuity due; N=13

    Section 11.2

    1. $116,471.46
    2. $250,457.58
    3. $305,305.23
    4. $272,152.25
    5. $56,486.35
    6. $22,278.17
    7. $267,678.52
    8. $198,708.14
    9. $683,712.33
    10. $8,612.62
    11. $306,680.93
    12. $984,888.25; No, the fund is $15,111.75 short.
    13. $24,035.26
    14. $18,452.55
    15. $3,680.30
    16. $61,718.23
      1. $79,687.12301
      2. $159,374.246; The maturity value increases proportionately to the size of the contribution.
      3. $163,263.6827; Given the same amount of total annual contribution, the maturity value increases exponentially to the increase in the frequency of contributions.
    18. $1,827,832.95
      1. The longer the money is invested, the interest earned exponentially increases.
      2. Increasing the interest rate results in exponential increases in both the maturity value and interest earned. The interest change is always greater than the change in the interest rate.
    20. The more time that an investment is allowed to compound, the maturity value increases exponentially. Start RRSP contributions as early as possible.
      20a $1,508,179.91
      20b $590,417.31
      20c $259,410.60

    Section 11.3

    1. $58,189.26
    2. $89,707.35
    3. $310,189.42
    4. $28,870.80
    5. $92,181.19
    6. $89,676.72
    7. Balance Owing = $14,438.98; I = $5,046.68
    8. Balance Owing = $12,999.13; I = $13,452.01
    9. $8,721.96
    10. $44,184.00
    11. $387,444.19
    12. $28,166.41
    13. $128,398.17
    14. Balance Owing = $22,786.85; I = $3,639.92
    15. $2,117.16
      1. $13,340.93
      2. $11,745.07
    17. $45,898.34
    18. $88,880.80
    19. Less money is required to fund a longer term annuity (all else held equal) since it has more time to earn compounding interest. Also, the change in time is not directly proportionate to the reduction of principal.
      19a $43,610.57
      19b $63,942.03
      19c $105,221.32

    Section 11.4

    1. $335.72
    2. $12,580.41
    3. $5,652.40
    4. $6,953.76
    5. $4,013.56
    6. $1,044,548.68
    7. $261.57
    8. $802.70
    9. $571.60
      1. $5,133.93
      2. $5,054.93
      1. $713.95
      2. Balance Owing = $22,569.38; I = $8,271.58
      3. $898.88
    12. $42.29
    13. $500
    14. $1,084,268
    15. $3,943.82
    16. $6,810.60
    17. $1,796.23
    18. $364.88
    19. $62.65
    20. With each 1% increment in the interest rate, the monthly payment rises by an amount that is constantly increasing with each interest rate change. The amount of the increase is a percent increase that is substantially higher than just 1%, ranging from approximately 9% to 10.5%.

    Section 11.5

    1. 6 years, 9 months
    2. 22 years, 11 months
    3. 20 years
    4. 18 years
    5. 11 years
    6. 15 years
    7. 12 years, 9 months
    8. 9 years, 3 months
    9. 8 years, 3 months
    10. 6 years, 1 month
    11. 2 years
    12. 1 year, 11 months
    13. 8 years, 2 months
    14. 3 years, 2 months
    15. 3 years, 6 months
    16. 3 years, 9 months
      1. 9 months
      2. The regular payments of $250 requires $2,250 less principal to reach the goal
      1. 48 fewer monthly payments
      2. $26,521.44
      1. The total amount of money required to pay off a loan increases with each increase in the compounding frequency (while holding all else the same).
      1. The total amount of money required to pay off a loan increases with each decrease in the payment frequency (while holding the nominal annual payment the same).

    Section 11.6

    1. 17.4719% monthly; 18.9412% annually
    2. 3.1172% quarterly; 3.1538% annually
    3. 9.044% semi-annually; 9.2484% annually
    4. 7.8981% monthly; 8.1904% annually
    5. 9.7591% semi-annually; 9.9972% annually
    6. 4.2704% annually
    7. 6.657% monthly; 6.8639% annually
    8. 3.769% monthly; 3.8226% annually
    9. 8.6063% monthly
      1. 4.525% monthly; 4.62% annually
      2. $16.89
    11. 3.9019% semi-annually
    12. 8% annually
    13. 6.5014% semi-annually
    14. 11.5556% annually
    15. 7.2474% monthly
    16. 5% semi-annually
    17. Monthly payments: 9.6535% annually; Quarterly payments: 10.6223% annually; Semi-annual payments: 9.541% annually
    18. 7.6118% monthly; Decision rule: If you can obtain a loan from the bank for less than 7.6118% monthly, your payments are lower and you borrow from the bank. If unable to obtain a rate lower than 7.6118% from the bank, forego the cash rebate and use the dealership financing.
    19. Option Effective Rate
      $299 4.7080%
      $319 18.2370%
      $334 29.0693%
      $349 40.5145%
      1. Choose the $319 payment plan with an effective rate of 18.237%
      2. Choose the $334 payment plan with an effective rate of 29.0693%
    20. Risk Effective Rate
      Low 5.0001%
      Medium 9.0002%
      High 13.9998%

    Chapter 11 Review

    1. $110.36
    2. $652.42
    3. $3.00
    4. $429.84
    5. 16 years
    6. 7.9% semi-annually; 8.056% annually
    7. 1 year, 2 months
    8. $19,695.13
    9. 2.9% monthly
    10. $29,894.24
    11. $394.14
    12. $52,351.32
    13. 8 years
    14. PMT = $1,799.23; I = $2,196.92
    15. $1,551.14
    16. 9 years
    17. 5.575% monthly
    18. $131.36
    19. (i) Each increment in the interest rate results in a proportionately larger increase in the payment regardless for all lengths of the mortgage. (ii) Each increment in the length of the mortgage results in a proportionately smaller decrease in the payment, and the decrease is smaller at higher interest rates.
    20. Starting Lump-Sum Monthly Contribution
      $5,000 $360.92
      $10,000 $324.06
      $15,000 $287.19
      $20,000 $250.32
      Each equal increase in the present value results in an equitable decrease in the contribution required (in this case about $36.87 per $5,000 increase)

    Chapter 12

    Section 12.1

    1. $44,667.03
    2. 12 years, 9 months
    3. 17 years, 6 months
    4. $12,101.52
    5. 25 years, 6 months
    6. 8 years, 6 months
    7. $106,142.91
    8. $897.51
    9. $39,070.09
    10. 13 years, 5 months, 9 days
    11. 19 years
    12. $21,609.06
    13. July 13, 2024
    14. $752.78
    15. $964.29
    16. 1 year
      1. Scully’s higher = $1,216,489.09
      2. Scully’s deposits = $56,100; Mulder’s deposits = $99,000
      3. The earlier the deposits are made, the exponential power of compound interest occurs. Each doubling of money is a large double compared to a small double.
    18. $37,571.53
    19. $6,895.79
      1. Interest Rate Present Value
        6% $41,098.34
        8% $31,080.66
        10% $23,689.97
      2. Interest Rate Annuity Payment
        6% $12,165.94
        8% $16,087.17
        10% $21,105.98
      3. Interest Rate Term
        6% 6 years
        8% 8 years
        10% 11 years
      4. The interest rate in a deferred annuity situation has exponential implications on any amount calculated. The higher the interest rate, the less present value is required, the higher the annuity payments, and the longer the term.

    Section 12.2

      1. $186,267.92
      2. $102,682.49
      1. $339,630.53
      2. $102,702.93
      1. $266,532.98
      2. $22,541.90
      1. $418,925.39
      2. $96,472.02
      1. $2,074,882.90
      2. $56,814.45
      1. $984.40
      2. $1,057.83
      1. $27,600.21
      2. $31,996.21
      1. $1,205.23
      2. $2,449.39
      1. $1,117.87
      2. $5,235.46
    10. $399,390.56
    11. $1,761.99
    12. $318,918,112
    13. $3,761,909.60
      1. $2,001.15
      2. $1,242.06
      3. $767.82
    15. $22.93
      1. $4,897.29
      2. $8,129.90
      3. $1,301,174.06
      1. $327,005.73
      2. $5,367.68
      3. $2,394,027.27
      1. $731,157.19
      2. 30.32%
    19. $27.99; The difference from 35 years of payments is $4.06. This is because today’s money becomes worthless so far into the future (what would a penny today buy thousands of years from now?).
      1. Increasing the growth rate from 1% to 5% (a 400% increase) results in total contributions that increase approximately 250%, however the benefit is a maturity value and the interest earned both increasing by approximately 50%.
      2. Increasing the growth rate from 1% to 5% (a 400% increase) results in a present value that only increases by approximately 33%. As a result, the individual receives approximately 37% more income which accrues almost 50% more interest.

    Section 12.3

    1. $515,463.92
    2. $496,190.48
    3. $37,999.04
    4. $26,400
    5. $371,348.38
    6. $13,207.62
    7. $38,371.42
    8. $503,025.11
    9. $300,884.96
    10. $60,000
    11. $283,224.19
    12. $222,589.59
    13. $3.75
    14. $52,942
    15. $25.89
    16. $12,791.51
    17. $45,757,082.97
    18. $602.12
    19. Rate Principal Required
      2% $500,000.00
      3% $333,333.33
      4% $250,000.00
      5% $200,000.00
      6% $166,666.67
      The percent decrease in the principal required to fund the perpetuity is inversely proportionate to the percent change in the interest rate expressed as a change of the new interest rate.
    20. Rate Perpetuity Payment
      2% $2,000
      3% $3,000
      4% $4,000
      5% $5,000
      6% $6,000
      The percent increase in the payment made by the perpetuity is proportionate to the percent change in the interest rate expressed as a change of the old interest rate.

    Section 12.4

    1. $29,978.35
    2. $14,874.88
    3. $2,345.21
    4. 11% annually
    5. $6,250.03
    6. $404,770.95
    7. 7.75% quarterly
    8. $9,506.92
    9. $29,506.30
    10. $5,208.61
    11. $1,900,645.54
    12. $592,137.21
    13. 5.72% quarterly
    14. $70,193.84
    15. $5,198.45
    16. $18,507.31
      1. 1,593.06% annually; $1,538.12
      2. PMT = $20.74; $118.76
    18. Go with the lease, savings = $1,370.45
    19. $212,283.48
    20. Rank Dealer Present Value
      1. #3 $15,999.92
      2. #1 $16,000.05
      3. #2 $16,249.79

    Section 12.5

    1. Choose bank loan with payments of $729.24 monthly
    2. Choose dealership lease with payments of $406.02 monthly
    3. Choose dealership lease with payments of $1,147.62 monthly
    4. Choose bank lease with payments of $185.03 bi-weekly
    5. Choose dealership lease with payments of $616.13 monthly

    Section 12.6

    1. $4,921.95
    2. $369.60
    3. $2,333.22
    4. $3,164.27
    5. $8,146.44
    6. $872.66
    7. $806.57
      1. Rate RRSP Contribution
        2% $352.16
        3% $570.3
        4% $921.31
        5% $1,484.27
        Each percentage increase in the inflation rate results in a higher percent change required for the RRSP contribution.
      2. Rate RRSP Contribution
        0.5% $462.08
        0.7% $414.82
        0.9% $369.60
        1.0% $326.70
        Each change in the growth rate results in a smaller negative percent change for the required contribution.

    Chapter 12 Review

    1. $9,082.22
    2. $699.28
    3. $1,018,577.58
    4. $6,391.62
    5. $29,459.49
    6. $1,447.48
    7. 8.2651% monthly
    8. $50,505.32
    9. 26 monthly payments
    10. $1,081.79
    11. 4 years, 101 days
    12. $69.07
    13. Choose bank loan with payments of $579.78 monthly
    14. 75.0229%
      1. $761.45
      2. $57,360.07
      3. $354.52
      4. $46,899.39
    16. $672,390.21
    17. $13,512.24
    18. 37 months
    19. Company PV of lease offer
      #1 $951,255.03
      #2 $973,809.83
      #3 $967,954.15
      #4 $976,442.25
      Recommendation: Choose Company #1 with lowest PV = $951,255.03
    20. Option PV of offer
      #1 $4,289,771.59
      #2 $4,417,189.74
      #3 $4,253,639.42
      #4 $4,350.150.00
      Recommendation: Choose Option #2 with highest PV = $4,417,189.74

    Chapter 13

    Section 13.1

    1. PRN = $135.79; INT = $20.27
    2. PRN = $710.78; INT = $194.14
    3. PRN = $2,588.13; INT = $448.81
    4. PRN = $14,464.64; INT = $1,452.26
    5. PRN = $4,633.70; INT = $914.02
    6. PRN = $3,567.70; INT = $911.66
    7. PRN = $7,772.80; INT = $1,303.60
    8. PRN = $8,574.79; INT = $1,711.33
    9. PRN = $77,544.60; INT = $13,576.08
    10. PRN = $157,242.37; INT = $42,967.93
      1. PMT = $328.79
      2. PRN = $291.70
      3. INT = $25.22
      4. INT = $556.26
      5. PRN = $3,598.25
      1. PMT = $2,359.13
      2. PRN = $1,792.76
      3. INT = $257.53
      4. PRN = $8,109.20
      5. INT = $2,618.23
      1. PMT = $604.25
      2. PRN = $533.03
      3. INT = $253.73
      4. NT = $3,332.61
      5. PRN = $4,241.39
      1. PMT = $1,392.37
      2. INT = $238.65
      3. PRN = $4,991.29
      4. INT = $2,704.16
      1. PMT = $781.07
      2. INT = $3,179.72
      3. PRN = $7,303.28
    16. INT = $1,342.93
      1. PRN = $408.13; INT = $460.70
      2. INT = $5,250.65
      3. PRN = $5,796.37
      1. 3 years, 1 month
      2. PRN = $270.84; INT = $29.16
      3. INT = $403.33
    19. Note that the percent increase in interest is always larger than the percent decrease in the payment. Although payments get continually lower, the amount of interest paid is continually higher.
    20. Note that in both the payment and the interest paid that the percent change is constantly decreasing due to the larger base upon which it is calculated. However a look at the nominal dollar changes reflects that the both the payment and interest paid increase at a relatively constant amount for each percent increase in the interest rate.

    Section 13.2

    1. PMT = $1,462.27
    2. PMT = $1,273.03
    3. PMT = $4,822.82
    4. PMT = $1,765.68
    5. PMT = $1,546.70; PRN = $5,889.27; INT = $297.38
    6. PMT = $1,329.49; PRN = $29,720.92; INT = $2,183.15
    7. PMT = $1,537.79; PRN = $5,472.70; INT = $678.55
    8. PMT = $1,650.26; PRN = $41,339.04; INT = $1,548.22
    9. PMT = $6,343.90; PRN = $17,636.35; INT = $1,395.32
    10. PMT = $2,007.05; PRN = $7,555.71; INT = $472.16
      1. PMT = $585.50
      2. PRN = $6,697.62; INT = $328.50
      1. PMT = $7,016.43
      2. PRN = $25,619.32; INT = $2,446.01
      1. PRN = $53,459.54; INT = $54,952.06
      2. PMT = $1,805.72
      3. PRN = $96,004.52; INT = $12,405.95
      1. PMT = $5,662.21
      2. PRN = $15,849.42; INT = $1,137.16
      1. PRN = $14,820.95; INT = $10,606.57
      2. PMT = $1,059.89
      3. PRN = $23,193.79; INT = $2,234.15
      1. PMT = $6,248.88
      2. PRN = $133,465.32; INT = $16,505.73
      1. PMT = $636,117.25
      2. PRN = $11,095.973.76; INT = $1,626,345.59
      1. PMT = $14,045,354.50
      2. PRN = $59,748,845.61; INT = $10,477,930.69
      1. PMT = $512.66
      2. PRN = $5,366.34; INT = $146.32
      1. Although the exact impact on the final payment adjustment is a factor of the rounding difference in the annuity payment, generally the longer the term (and hence more payments made), the larger the difference required in the final payment.

    Section 13.3

    1. Interest Saved = $3,572.25
      1. Interest Saved = $695.40
    3. Total interest for first 12 months = $3,866.97 Total interest for next 12 months = $1,394.09
    4. Total Interest = $83,091.67 Total Principal = $$24,439.61

    Section 13.4

    1. $3,906.35
    2. $1,251.96
    3. $286.12
    4. $2,370.32
    5. $2,410.35
    6. $985.74
    7. $2,079.35
    8. $601.52
    9. Balance = $284,498.75; PMT = $1,945.52
      1. $508,947.54
      2. PRN = $19,252.46; INT= $99,737.98
      3. $3,211.32
      4. $475,372.69
      1. $758,979.36
      2. PRN = $75,020.64; INT = $386,368.68
      3. $1,280.56
      4. $639,406.26
      1. $361,847.62
      2. PRN = $18,152.38; INT = $30,523.46
      3. $580.30
      4. $290,670.41
      1. $97,557.39
      2. PRN = $83,142.61; INT = $96,137.39
      1. $129,370.79
      2. PRN = $166,529.21; INT = $150,786.43
    15. $207,331.02
    16. Balance = $234,944.63; PRN = $30,055.37; INT = $63,250.83
      1. $270,417.34
      2. $1,487.42
    18. -
    19. Start of 3rd term principal = $299,756.24; Remaining balance at end of 3rd term = $220,328.74; Total interest = $411,499.50; Total principal = $188,321.26
      1. Comments: Each one percent increase in the mortgage rate upon renewal results in an exponentially larger increase in the payment required. In this case, it is approximately a 9% increase in the required payment.
      2. Comments: While an increase in income is needed just to pay for rising costs of taxes and heating, the percent increase required in the income becomes quite significant if the interest rate rises by 2% or more.

    Chapter 13 Review

    1. PRN = $1,504.27; INT = $501.75
    2. PRN = $6,810.95; INT = $1,786.45
    3. $917.82
    4. PRN = $26,763.03; INT = $1,187.52
    5. -
    6. -
    7. $95,615.95
    8. $1,735.84
      1. $7,604.85
      2. $4,771.37
      3. $4,026.56
      4. $35,827.23
      5. $47,183.46
      1. $3,118.35
      2. $2,465.45
      3. $266.96
      4. $8,480.07
      5. $1,866.95
      1. PRN = $4,687.84; INT = $1,750.40
      2. $268.13
      3. PRN = $6,097.71; INT = $340.41
      1. $263.47
      2. $53.85
    13. -
    14. -
    15. $750.22
      1. $829,698.12
      2. PRN = $41,301.88; INT = $229,441.65
      3. $4,779.82
      4. $797,181.08
      1. $146,200.92
      2. $928.70
      3. $1,511.58
      1. Worker = $2,649.62; Supervisor = $5,299.25; Manager = $10,598.49

    Chapter 14

    Section 14.1

    1. $4,622.62
    2. $10,122.56 increase
    3. $9,480.97 decrease
    4. $10,000
    5. Date Market Price Cash Price
      June 1, 2006 $14,722.88 $14,722.88
      July 1, 2006 $14,711.11 $14,776.69
      August 1, 2006 $14,699.15 $14,832.49
      September 1, 2006 $14,687.41 $14,888.50
      October 1, 2006 $14,676.24 $14,942.91
      November 1, 2006 $14,664.91 $14,999.34
      December 1, 2006 $14,654.15 $14,654.15
      Comments: The Market Price constantly gets closer to the face value as the bond moves closer to its maturity date. The Cash Price equals the Market Price on an interest payment date and then constantly rises in between the interest payment dates only to decrease to the Market Price on the next interest payment.
      1. Market Rate Market Price
        3% $12,991.58
        4% $11,367.77
        5% $10,000.00
        6% $8,844.26
        7% $7,864.49
      2. The market prices do not change equally for each 1% change in the market rate. A bond's price is calculated through present value compound interest calculations. This results in exponential changes in the present value when an interest rate changes.
      3. A 1% change does not result in the same change. For discounts, the bond is growing at 6% but paying out 5%. Since this percentage is calculated on a smaller value, it results in a smaller increase in the price over time. The market price rises slowly in small increments to its redemption price. For premiums, the bond is growing at 4% but paying out 5%. Since this percentage is calculated on larger value, it results in a larger decrease in the price over time. The market price moves rapidly downwards in large increments to its redemption price.
      4. Market Rate Market Price
        3% $11,716.86
        4% $10,817.57
        5% $10,000.00
        6% $9,256.13
        7% $8,578.76
      5. The time decreased by half, but the prices did not decrease by half due to the compounding nature of the calculations. Therefore, the more time to maturity, the more signif
      6. icant the change in the bond price.

    Section 14.2

    1. 2.91%
    2. 8.25%
    3. 10.5%
    4. 3.25%
    5. 6.8363%
    6. 8.2713%
    7. 11.8364%
    8. 5.8774%
    9. 4.2%
    10. 8%
    11. 3.69%
    12. 5.6742%
    13. 3.8687%; Original yield to maturity is the market rate on the date of purchase = 4%. Do not sell the bond since Usama will yield only 3.8687%.
    14. 5.2091%
    15. 10.1617%
    16. 3.7018%
      1. 4.16%
      2. 4.07%
      3. IY = 4.5041%; ∆% = 8.2716%
      1. Purchase price = $73,809.92; $1,190.08 discount
      2. Purchase price = $75,263.06; $263.06 premium
      3. IY = 4.6701%; ∆% = 11.1927%
      4. 4.2441% & 4.7246%; ∆% = 11.3216%
    19. Bond Yield Rank
      I 4.85% 2
      ii 4.83% 3
      iii 4.89% 1
    20. Held Yield Rank
      5 years 8.413% 1
      10 years 8.0936% 4
      15 years 8.2734% 3
      20 years 8.3886% 2
      25 years 7.9518% 5
      30 years 7.55% 6

    Section 14.3

      1. After 48th payment (4 years), balance in account is $12,670.56. 5% down payment on $250,000 home is $12,500. The home can be purchased.
    2. -
    3. -
      1. 664 bonds
    5. -
      1. Total interest earned = $74,788,928.85; Total payments = $25,211,070.60
      2. Total interest earned = $6,851,889.63; Total payments = $4,201.845.10

    Section 14.4

      1. $128,239.72
      2. $216,400.17
      1. $161,290.28
      2. $1,844,903.68
      1. $102,952.34
      2. $248,468.94
      1. $101,110.08
      2. $448,898.62
    5. -
    6. -
    7. -
    8. -
    9. $1,222,300
    10. $40,175,431.68
      1. $9,844,581.28
      2. $66,498,231.56
      1. $17,144,400
      2. $153,840,884.09
    13. Nominal Net Income = $7,964.98
    14. Nominal Net Income = $17,793.48
    15. Capital Gain = $916.15
    16. Capital Loss = $48.68
    17. $2,078,051.88; No, do not proceed with project as ACD is $78,051.88 higher than the maximum budget.
    18. Do not purchase bond since fifth year capital gains tax exceeds $150.

    Chapter 14 Review

    1. $107,523.91
    2. $64,614.18
    3. 3.8501%
    4. 10.9376%
    5. -
    6. -
    7. $2,480,127.02
    8. -
    9. 10.9414%
    10. $411,697.06 $136,697.06 premium
    11. -
    12. ACD = $3,615,638.66; BVD = $35,493,436.28
    13. -
    14. 7.3211%
    15. 15. ACD = $79,055.96; BVD = $121,371.58
    16. -
    17. 17. Fourth year taxes deducted are $123.41.
      1. $37,087,119.77
      2. $3,992,153.70
      3. $61,351,698.69
      1. Investor’s Yield = 7.5423%
      2. Yield to maturity = 4.18%
      1. Investor’s yield = 4.9669%
      2. Yield to maturity = 4.3798%

    Chapter 15

    Section 15.1

    1. NPV=$149,603; NPVRATIO = 0.29
    2. NPV= −$66,518.47; NPVRATIO = −0.07
    3. NPV= −$125,893; NPVRATIO = −0.17
    4. NPV= $187,245; NPVRATIO = 0.62
    5. Projects Chosen in order = Project #3, Project #1; Total NPV = $600,500; Budget Used = $450,000
    6. Projects Chosen in order = Project #3, Project #1; Total NPV = $735,500; Budget Used = $640,000
    7. NPV of Purchase=−$10,794; NPV Of Lease = −$10,857; Choose Purchase, saves $63 in current dollars
    8. $1,703,103; Pursue the project since NPV is positive.
    9. Projects Chosen in order = Project #4, Project #2; Total NPV = $460,000; Budget Used = $475,000
    10. NPV Project A = $575,516; NPV Project B = $739,933; Choose Project B, NPV is higher by $164,417.
    11. $181,282; Pursue the project since NPV is positive.
    12. NPV Of Farmer A = $185,860; NPV Of Farmer B = $187,147; NPV Of Farmer C = $188,701; Choose Farmer C with highest NPV.
      1. $68,289; Pursue the project since NPV is positive.
      2. $14,632; Pursue the project since NPV is positive.
      3. −$32,290; Do not pursue the project since NPV is negative.
    14. Projects Chosen in order = B, D, A, E; Total NPV = $4,345,000; Budget Used = $4,270,000
    15. −$54,401; Do not pursue the project since NPV is negative. Since the cost of capital is much higher than question 11, inflows farther in the future are significantly discounted.
    16. Projects Chosen in order = B, C, D; Total NPV = $55,861; Budget Used = $100,000
    17. $15,496; Purchase the machine since NPV is positive.
      1. Capital NPV Rank 7.5% $224,764 1 13.5% $69,341 2 17.5% −$11,245 3
      2. $236,009
      3. The cost of capital plays a significant role in the NPV decision. As the costs of achieving the initial funding rise, the future cash flows are discounted by larger amounts meaning that larger cash inflows in the future are required to cover the costs.
    19. Machine A NPV = $40,950; Machine B NPV = $46,269; Purchase Machine B since NPV is higher.
    20. Projects Chosen in order = 1,2,4,6; Total NPV = $10,237,500; Budget Used = $9,700,000

    Section 15.2

    1. $2,956
    2. $3,839
    3. $9,482
    4. −$9,546
    5. 19.5945%
    6. 30.1215%
    7. 19.8435%
    8. 11.3079%
    9. Walmart=$115; HD-$112; CT=$113; Choose Sno-Tek model at Home Depot
    10. EC120 = −$475,529; Eurocopter= −$472,838; Choose Eurocopter model
    11. 7.9136%; Do not pursue project since IRR 7.9136% < 12% cost of capital.
    12. 26.7790%; Pursue the project since IRR 26.7790% > 21% cost of capital.
    13. Product A = $73,014; Product B = $65,716; Choose Product A
    14. New Flyer = −$48,355 per bus; Motorcoach = −$50,809 per bus; Choose New Flyer. This saves $185,550 annually.
    15. 22.7842%; Invest since the IRR of 22.7842% exceeds the cost of capital of 20%.
    16. 22.9124%; Do not purchase licence since the IRR of 22.9124% is below the cost of capital of 25%.
    17. 16.4736%
      1. Project A = $48,532; Project B = $53,792; Choose Project B, NPV is higher by $5,260.
      2. Project A = $11,804; Project B = $13,084; Choose Project B, Equivalent Annual Cash Flow is higher by $1,280.
      3. Both the NPV method and the Equivalent Annual Cash Flow method arrive at the same decision when the timelines are of equal length between various investment decisions.
      1. Project EACF
        A $31,207
        B $28,293
      2. $2,914
      1. Project IRR Recommend
        A 16.5438%
        B 32.0026% Yes
      2. Project NPV Recommend
        A $15,201
        B $43,103 Yes
      3. Project NPV Recommend
        A $73,945 Yes
        B $61,645
      4. NPV makes more sense since it is the actual value being added to the company today using the actual cost of capital involved.

    Chapter 15 Review

    1. NPV Of Purchase = −$105,932; NPV Of Lease = −$106,491; Choose Purchase, saves $559 in current dollars
    2. $16,241; Pursue the venture since NPV is positive.
    3. Projects Chosen in order = Projects B, C, A; Total NPV = $329,000; Budget Used = $295,000
    4. New Car = −$28,117; Used Car = −$30,209; Choose New Car saving $2,092 in current dollars.
    5. 17.4712%; Pursue project since 17.4712% IRR exceeds 15% cost of capital.
    6. Vanilla is better with a highest equivalent annual cash flow that is $9,501 higher.
    7. $4,017; Pursue the automation since NPV is positive
      1. $61,263; Take the course since NPV is positive.
      2. The maximum cost of capital is 22.2581%, which is the break-even.
      1. FR#1=$133,721; FR#2=$145,079; Choose Fishing Rights #2 since NPV is higher.
      2. FR#1=$45,984; FR#2= $49,792; Choose Fishing Rights #2 since Equivalent Annual Cash Flow is higher.
    10. Projects Chosen in order = Projects #1, #5; Total NPV = $680,000; Budget Used = $658,000
      1. Best Project is Project B with equivalent annual payment of $1,326. Project B is better than worst Project A by $2,713 annually.
      2. Project C is the best with equivalent annual payment of $21,558.
      1. Best Project is Project B with equivalent annual payment of $5,539. Project B is better than worst Project C by $5,960 annually.
      2. Best Project is Project B with equivalent annual payment of $19,912
    13. The maximum cost of capital is 16.0722%.
    14. NPV = $108.240; IRR = 16.0722%; Equiv. Annual Cash Flow = $24,121
    15. Projects Chosen in order = Projects #3, #4, #5; Total NPV = $1,229,000; Budget Used = $966,000

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