Assignm

ent no.
01
MANAGEMENT
OF PROJECT
RESOURCES
PRMG 020

To : Dr. Ibrahim Abdul

Rashid
CONTENT

CONTENT PAGE NO.

Cover Page 1

Content 2

Problem 1 3

Problem 2 4

Problem 3 6

Student:
Zaki, Tamer Mohamed
Nabil

I D:2009
PRMG 020 / Summer 700020527
| ID 700020527 AUC - New 2
Cairo
PRMG 020 / Summer 2009 | ID 700020527 3
 PROBLEMS
P ROBLEM #1
A person buys a piece of equipment for $5000 down
payment and deferred annual payments for $500 a year
for 6 years starting 3 years from now. What is the present
worth of the investment if the interest rate is 8% per year?

Fn = A [(1+i)n-1/i]

F6 = 500 [(1.08)6 – 1/ 0.08]

= 500 [1.587 – 1/ 0.08]

= 500 * 7.34

= 3.670 $

P = Fn / (1+i)n

= 3670 / (1.08)8

= 3670 / 1.85

= 1.984 $

The present worth of the investment is = 5000+1984

= 6.984 $

PRMG 020 / Summer 2009 | ID 700020527 4

P ROBLEM #2
A person owning a valuable piece of land decided to sell it
to a housing company. His main objective was to obtain a
long - term investment income sufficient money to finance
the college education of his two children. Since the
children were 12 and 2 years of age at that time he was
negotiating the contract, he knew that the children would
be in college 6 and 16 years, respectively, from the
present.

He made a proposal to the company that it pay him

$20.000 per year for 20 years beginning one year from
now plus 10.000 six years from now and $15.000 sixteen
years from now.

If the company wanted to pay off its price immediately,

how much would it have to pay now if the interest rate is
16% per annum?

Fn = A [(1+i)n-1/i]

F1 = 20000 [(1.16)20 – 1 / 0.16]

= 20000 [19.5 – 1 / 0.16]

= 20000 * 115.625

= 2,312,500 $

PRMG 020 / Summer 2009 | ID 700020527 5

F2 = 10000 [(1.16)14 – 1 / 0.16]

= 10000 [7.99 – 1 / 0.16]

= 10000 * 43.67

= 436,700 $

F3 = 5000 [(1.16)4 – 1 / 0.16]

= 5000 [1.81 – 1 / 0.16]

= 5000 * 5.06

= 25,050 $

Fall = 2,312,500 + 436,700 + 25,050

= 2,774,250 $

P = Fn / (1+i)n

= 2774250 / (1.16)20

= 2774250 / 19.5

= 142,269.2 $

PRMG 020 / Summer 2009 | ID 700020527 6

P ROBLEM #3
Calculate the 20 years equivalent uniform annual worth for
the cash flow of problem #2

Fn = A [(1+i)n-1/i]

2,774,250 = A [(1.16)20 – 1 / 0.16]

= A * 115.625

A = 2774250 / 115.625

= 23993.5 $

PRMG 020 / Summer 2009 | ID 700020527 7

PRMG 020 / Summer 2009 | ID 700020527 8