Consider an asset with upfront cost of $12,210. The cost associated with it during the first year of operation is $6,526. The cost associated with it during the second year of operation is $10,861. With an interest rate of 0.03, what is a levelized cost payment payable at the end of years 1 and 2, which has the same present value as the actual cost stream at the end of period 0. The annuity formula for an interest rate of 0.03 and t payments is given by -) = (1-(²+)-1) (1+0)
Consider an asset with upfront cost of $12,210. The cost associated with it during the first year of operation is $6,526. The cost associated with it during the second year of operation is $10,861. With an interest rate of 0.03, what is a levelized cost payment payable at the end of years 1 and 2, which has the same present value as the actual cost stream at the end of period 0. The annuity formula for an interest rate of 0.03 and t payments is given by -) = (1-(²+)-1) (1+0)
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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![Consider an asset with upfront cost of $12,210.
The cost associated with it during the first year of operation is $6,526.
The cost associated with it during the second year of operation is $10,861.
With an interest rate of 0.03, what is a levelized cost payment payable at the end of years 1 and 2, which has the same present value as the actual cost stream at the end of period
0.
The annuity formula for an interest rate of 0.03 and t payments is given by
(1+i)*
1-(1+i) t
=](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F78c45945-9d25-48a7-b4d1-f7e2658bc069%2F1a0ac4b9-9074-41d9-a53a-f64890efabea%2Fbn2b1u1_processed.png&w=3840&q=75)
Transcribed Image Text:Consider an asset with upfront cost of $12,210.
The cost associated with it during the first year of operation is $6,526.
The cost associated with it during the second year of operation is $10,861.
With an interest rate of 0.03, what is a levelized cost payment payable at the end of years 1 and 2, which has the same present value as the actual cost stream at the end of period
0.
The annuity formula for an interest rate of 0.03 and t payments is given by
(1+i)*
1-(1+i) t
=
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