San Francisco State University Finance Questions

1.Today, you deposit $1,000 in an interesting bearing account earning a generous 6% p.a. compounded monthly. Determine a) the monthly rate (put this answer in the box below), b) the effective yearly rate, c) the future worth after 5 years using the monthly rate, and d) the future worth after 5 years using the effective yearly rate.

2.A new section of highway has been built in your town at a cost $10M. O&M costs is $150,000 per year starting at the end of the first year. In addition, every 5 years, there is a major overhaul (resurfacing, striping, painting, etc.) at a cost of $750,000. Both O&M and overhaul costs will go on forever. Using a discount rate of 6%, calculate the capitalized cost.

3.You are considering two industrial hydraulic presses which provide the same performance. Select the best press based on a) PW analysis (put this answer in the box below) and b) AW analysis at a MARR of 6% p.a.

4.You have purchased a food truck for $50,000 and plan to make and sell Vietnamese banh mi sandwiches. O&M costs are $10,000/year. In addition, food costs are estimated to be $20,000/year to prepare the 10,000 sandwiches that you anticipate selling annually. You want to make $1 on the cost of food for every sandwich sold. Using a life of 10 years, a salvage value of $10,000, and an ROR of 8%, at what price should you sell each sandwich (round to the higher whole dollar) to cover your costs and ensure you earn your ROR. Use AW to conduct your analysis.

5.You celebrated the birth of your first child today and want to start saving for their education. The full cost of tuition plus room and board for four years at a local university is $80,000 today. This cost is expected to grow at 7.5% annually. Assuming your child goes off to college 18 years from now, how much will you need to save every year (starting at the end of the first year) at an ROR of a) 0% and b) 8% to have enough to pay for college?