Chapter 4

Excel Functions

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 Example 4.2
 Dave has been offered a credit card deal that should not be refused—at least that is
what the Chase Bank offer letter implies. The balance transfer APR interest rate of
14.24% is an annual rate, with no compounding period mentioned. Therefore, we
should conclude that the CP is 1 year, the same as the annual interest period of the
APR. However, as Dave and we all know, credit card payments are required monthly.
 (a) Determine the effective interest rates for compounding periods of 1 year and 1 month
so Dave knows some effective rates he might be paying when he transfers the $1000
balance from his current card.
 (b) Assume that immediately after he accepts the card and completes the $1000
transfer, Dave gets a bill that is due 1 month later. What is the amount of the total
balance he owes? Assuming the balance transfer fee is 3% of the balance transferred.
 (c) Help Dave by determining the effective daily interest rate that may be used to calculate
interest due at the end of 1 month, provided the CP is 1 day.

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 Example 4.4
 Dave is planning to accept the offer for a Chase Bank credit card that carries an APR
(nominal rate) of 14.24% per year, or 1.187% per month. He will transfer a balance of
$1000 and plans to pay it and the transfer fee of $30, due at the end of the first month.
Let’s assume that Dave makes the transfer, and only days later his employer has a 1-year
assignment for him in the country of the Cameroon in northwestern Africa. Dave
accepts the employment offer, and in his hurried, excited departure, he forgets to send
the credit card service company a change of address. Since he is now out of mail touch,
he does not pay his monthly balance due, which we calculated in Example 4.2 to be
$1041.87.
 (a) If this situation continues for a total of 12 months, determine the total due after 12
months and the effective annual rate of interest Dave has accumulated. Remember, the
fine print on the card’s interest and fee information states a penalty APR of 29.99%
per year after one late payment of the minimum payment amount, plus a late payment
fee of $39 per occurrence.
 (b) If there were no penalty APR and no late-payment fee, what effective annual
interest rate would be charged for this year? Compare this rate with the answer in part
( a ).
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 Example 4.4

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 Example 4.10
 The Scott and White Health Plan (SWHP) has purchased a robotized
prescription fulfillment system for faster and more accurate delivery to
patients with stable, pill-form medication for chronic health problems, such as
diabetes, thyroid, and high blood pressure. Assume this high-volume system
costs $3 million to install and an estimated $200,000 per year for all
materials, operating, personnel, and maintenance costs. The expected life is
10 years. An SWHP biomedical engineer wants to estimate the total revenue
requirement for each 6-month period that is necessary to recover the
investment, interest, and annual costs. Find this semiannual A value both by
hand and by spreadsheet, if capital funds are evaluated at 8% per year, using
two different compounding periods:
 Rate 1. 8% per year, compounded semiannually .
 Rate 2. 8% per year, compounded monthly .

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 Example 4.10

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 Example 4.13
 Engineers Marci and Suzanne both invest $5000 for 10 years at 10% per year.
Compute the future worth for both individuals if Marci receives annual
compounding and Suzanne receives continuous compounding

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 Chapter 5
Excel Functions

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 Example 5.4
 Ultrapure water (UPW) is an expensive commodity for the semiconductor
industry. With the options of seawater or groundwater sources, it is a good
idea to determine if one system is more economical than the other. Use a
MARR of 12% per year and the present worth method to select one of the
systems based on life cycle and based on study period.
Where
Costs Seawater (Millions) Ground Water (Millions)

First Cost -20 -22

Annual operation cost, $ -0.5 -0.3
UPW Cost per year, $ -1.44 -1.80
Life,Years 10 10

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 Introducing “Goal Seek” Function
 Given that you have to cell product A, B and C to generate contribution for
the charity. The total goal for the charity is $150000. The table below shows
the revenue, % contribution and contributions by each product except
product C.

Product Revenue %Contribution Contribution

A $150000 20% $30000
B $240000 25% 60000
C 15% -
Total $390000 90000

 We need to find how much revenue we have to make for product C to

generate a target of $150,000 in contribution.

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 Introducing “Goal Seek” Function
Must contain a formula

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 Example: "Goal Seek” Function
 Calculate a Monthly Loan Amount where
 Amount borrowed $15000, interest rate 8% and number of payment 60
months.
 Calculate the payment amount.
 If the goal is to make the monthly payment to $275.00 what can be done.

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 Example: "Goal Seek” Function
Amount Borrowed 15000
Rate 8%
Number of Payments 60

Monthly Payments $304.15

Amount Borrowed 13562.569 Amount Borrowed 15000 Amount Borrowed 15000

Rate 8% Rate 4% Rate 8%
Number of Payments 60 Number of Payments 60 Number of Payments 68.0235

Monthly Payments $275.00 Monthly Payments $275.00 Monthly Payments $275.00

Goal is to $275.00

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 Example 5.8
 The State Legislature has mandated a statewide recycling program to include
all types of plastic, paper, metal, and glass refuse. The goal is zero landfill by
2020. Two options for the materials separation equipment are outlined below.
The interest rate for state-mandated projects is 5% per year.
 Contractor option (C): $8 million now and $25,000 per year will provide
separation services at a maximum of 15 sites. No contract period is stated;
thus the contract and services are offered for as long as the State needs them.
 Purchase option (P): Purchase equipment at each site for $275,000 per
site and expend an estimated $12,000 in annual operating costs (AOC).
Expected life of the equipment is 5 years with no salvage value.
 (a) Perform a capitalized cost analysis for a total of 10 recycling sites.
 (b) Determine the maximum number of sites at which the equipment can be
purchased and still have a capitalized cost less than that of the contractor
option.

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