suppose that the united nations is to undertake a project to remove land mines f

Question

suppose that the united nations is to undertake a project to remove land mines from district korea. the project will last for two years and is expected to have the follow expenditures: rental of equipment to be paid at the begining of the month that will be $200,000 each month for the first year, but $100,000 each month for the second year;material costs to be paid at the end of each month that will be $50,000 for the first month , but then shrink at a monthly rate of 2 percent;personnel costs of $80,000 to be paid at the end of each month;and clean up costs of $40,000that will be paid at the end of last month. suppose that the united nations allocates funds for the project to an account that pays interest at a stated annual rate of 12 percent, compounded monthly.the united nations makes two allocations for this project: the first allocation is of $4000000and is made at the begining of the first year;the second is made at begining of second year. calculate the value of this second allocation that would be necessary to cover the expected expenditures of this project

Explanation / Answer

First lets find how much our costs for the first year are compared to how much we received in the first allocation.

Equipment Rental 200,000 * 12 = 2,400,000
Materials Costs 50,000 * 12 = 600,000
Personnel Costs 80,000 * 12 = 960,000
3,960,000

So we received 40,000 at the beginning of the first year than we didn't use. So lets put this 40k in the bank and save it up for 12 months.

40,000 * 1.12 = 44,800

Now for year 2
Equipment Rental 100,000 * 12 = 1,200,000
Material cost ? 50,000 * 0.98^t between t = 1 and t =12 Lets use a calculator

go to 2nd stat (list) > math > sum

go to 2nd stat (list) again >ops > seq

50,000 * 0.98^t , t , 1 , 12, 1 ))

=527,444.0268

Personnel Costs = 960,000

Final Month Cleanup = 40,000

Second Allocation - 44,800

= $2,682,644.03

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