A new project is being planned for a study period of 8 years. It will require P250,000 for the start-up and after the end of the first year, P13,500 shall be paid for its innovation. The board then requires to add another modified technology which will cost P25,000 by the end of the second year. After the end of third year, the project will start to earn P57,500 annually. Calculate the annual effective interest rate using ERR method if the interest rate external to this project (ε) is 13.75%. Please solve using economics formula.
A new project is being planned for a study period of 8 years. It will require P250,000 for the start-up and after the end of the first year, P13,500 shall be paid for its innovation. The board then requires to add another modified technology which will cost P25,000 by the end of the second year. After the end of third year, the project will start to earn P57,500 annually. Calculate the annual effective interest rate using ERR method if the interest rate external to this project (ε) is 13.75%. Please solve using economics formula.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A new project is being planned for a study period of 8 years. It will require P250,000 for the start-up and after the
end of the first year, P13,500 shall be paid for its innovation. The board then requires to add another modified
technology which will cost P25,000 by the end of the second year. After the end of third year, the project will start
to earn P57,500 annually. Calculate the annual effective interest rate using ERR method if the interest rate external
to this project (ε) is 13.75%.
Please solve using economics formula.
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