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# Economic Study: Problems 3

1. In a Midwestern area, water damage from a major flood resulted in damage estimated at \$108 million. As a result of the claimant payouts, for each of the 160,000 households in the affected area, insurance providers increased homeowners’ insurance premiums by an average of \$59 per year. If a 20-year study period is considered, what was the rate of return on the insurance companies’ \$108 million paid?

In one stage of its chili canning operation, Ashley Foods, Inc. has decided that any of five devices can be used. The costs of the machines are calculated below, and it is calculated that all machines will have a useful life of 4 years. Determine which computer should be chosen based on a rate of return study if the minimum attractive rate of return is 20 percent per year.

1. To enhance security at a county jail in Travis County, New York, the two alternatives shown are under consideration. Determine will one, based on a B / C review, an interest rate of 7 percent per year and a 10-year study duration, should be chosen.