ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.7 : An engineering investor purchases a $1000 bond that matures in 25 years. The coupon rate is 8 %. The purchase price is at 95 or 95 % of the par bond value. (a) What is the purchase price of the bond? (b) How much discount is enjoyed by the investor on average each year? (c) Find the income generated from coupon rate each year. (d) Find the overall interet rate or Yield to Maturity (YTM) by using the formula : YTM = [ Answer in (c) + Answer in (b) ] x 200 / [ par bond value + Answer in (a) ].
ACCOUNTING AND FINANCIAL ENGINEERING - ANSWER 34.7 : (a) Purchase price = 0.95 x par bond value = 0.95 x $1000 = $950. (b) Annual discount = (total discount) / (25 years) = (0.05 x par bond value) / 25 = 0.05 x $1000 / 25 = $2. (c) Annual coupon rate payment = par value x coupon rate = $1000 x 0.08 = $80. (d) YTM = [ Answer in (c) + Answer in (b) ] x 200 / [ par bond value + Answer in (a) ] = (80 + 2) x 200 / (1000 + 950) = 8.41 %. The answer is given by Kang Chuen Tat; PO Box 6263, Dandenong, Victoria VIC 3175, Australia; SMS +61405421706; chuentat@hotmail.com; http://kangchuentat.wordpress.com.
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ENGINEERING ECONOMY - EXAMPLE 7.2 : In the purchase of a machine with a period n = 8.5 years, the minimum attractive rate of return, i = 12 %, the cost P = $55000, F = $4000 is the salvage, annual maintenance A = $3500. The return of the investment or equivalent uniform annual benefit is $15000. The equivalent uniform annual cost is P (A / P, i, n) + A - F (A / F, i, n). The investment is considered acceptable only when equivalent uniform annual benefit is greater than the equivalent uniform annual cost. From the compound interest table, (A / P, i = 12 %, n = 8 years) = 0.2013, (A / P, i = 12 %, n = 9 years) = 0.1877, (A / F, i = 12 %, n = 8 years) = 0.0813, (A / F, i = 12 %, n = 9 years) = 0.0677. Prove by calculations whether the investment above is acceptable.
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Question 70 - According to Adolf Eugen Fick (1829 - 1901) : rate of diffusion v increases with less wall thickness t, increased area A and decreased molecular weight of a fluid M. The diffusion constant D decreased with increasing M. (a) By assuming v, t, dP, A, M and D changes proportionally of each other, find the equation of v as a function of t, dP, A and D. (b) The ratio of self diffusion constant D, at T = 273 K and P = 0.1 MPa, for gases B and C are 1.604 : 0.155. If only 2 gases exist in such a system : hydrogen and nitrogen, find the type of gas for B and C with reference to their molecular weights M. (c) By using the equation of kinetic energy 0.5 MV = constant where V = square of v, find the ratio of V for B and V for C, or V(B) / V(C), as a function of M(B) and M(C), where M(B) is molecular weight of B and M(C) the molecular weight of C : Graham's Law of Diffusion.
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ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.34 : A biochemical engineering company has stock P = 20,000 shares of M % preferred stock of Q = $100 par and N number of shares of $20 par common stock. In year 1 : $10,000 is distributed as dividend. In year 2 : $25,000 is distributed as dividend. Let (Total Dividend) = (Dividend for Preferred Stock) + (Dividend for Common Stock). (a) In year 1, calculate the amount distributed as dividend for preferred stock, when no dividend was distributed for common stock. (b) In year 2, the amount distributed for common stock was $5000. Find the values of M and N, when the dividend per share for common stock is $0.05.