A mine costs P21M, and will last for 20years. Its plant has a salvage value of PIM, at the end of the time. The mine will yield an equal dividend, if it is sufficient to pay interest annually at the rate 6% on the original investment and to accumulate a replacement fund, invested at 4%. Solution D (FC) + (RC - SV)i = (1+i)"-1 FC= 21M r= 6% = 0.06 SV= 1M i= 4% = 0.04
A mine costs P21M, and will last for 20years. Its plant has a salvage value of PIM, at the end of the time. The mine will yield an equal dividend, if it is sufficient to pay interest annually at the rate 6% on the original investment and to accumulate a replacement fund, invested at 4%. Solution D (FC) + (RC - SV)i = (1+i)"-1 FC= 21M r= 6% = 0.06 SV= 1M i= 4% = 0.04
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![A mine costs P21M, and will last for 20years. Its plant has a salvage value of
PIM, at the end of the time. The mine will yield an equal dividend, if it is
sufficient to pay interest annually at the rate 6% on the original investment
and to accumulate a replacement fund, invested at 4%.
Solution
D (FC) + (RC - SV)i
=
(1+i)"-1
FC= 21M
r= 6% = 0.06
SV= 1M
i= 4% = 0.04](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F34299ba6-42fb-4b1e-9c3c-c6d3e36d35d0%2F80252256-6efa-44be-bb1f-b506eb77a3bc%2Fnguhyko_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A mine costs P21M, and will last for 20years. Its plant has a salvage value of
PIM, at the end of the time. The mine will yield an equal dividend, if it is
sufficient to pay interest annually at the rate 6% on the original investment
and to accumulate a replacement fund, invested at 4%.
Solution
D (FC) + (RC - SV)i
=
(1+i)"-1
FC= 21M
r= 6% = 0.06
SV= 1M
i= 4% = 0.04
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