ACTSC231 Chapter 7: Chapter_7_solutions_-_Theory_and_Practice20120913_5051d312b694d.pdf

• School: University of Waterloo
• Department: Actuarial Science
• Course: ACTSC231
• Professor: Keith Freeland

Document Summary

Choose project b. b) at i (1) =7%: 1: npv (at i( 2) =10%) = 100,000 +17,000a. The company should borrow the money to buy the machine. Part b: find i per quarter such that (1+i)4 = 1. 095 i = 0. 022947935 a |28 + 14,000(1+i) 28 = . 81. The company should not borrow the money to buy the machine: find 1i per quarter such that (1+i1)4 = (1. 06)2 (1. 06) Find i2 per quarter such that (1+i2 )4 = (1. 06)2 i2. Investment 1 provides the company with the highest profit: npv of i = -100,000 + 30,000(1+ i) 1 + 30,000(1+ i) 2. Thus irr = 15. 5% (using the ti-baii plus calculator, irr=15. 47%) ( ) 100, 920. 17 i = ( ) 99,938. 439 f i = Thus, irr = 16. 5% (using the ti-baii plus, irr=16. 35%) ( ) 100, 506. 38 i = 100, 000: find i such that ( ) 15, 000(1 i.