How to compute Equivalent Annual Annuity on financial calculator: The old combine is good for 2 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new combine that can last for 10 years and should require maintenance costs of only $2,000 a year. Old machine has no scrap value when fully depreciated (after 2 years). a. If the discount rate is 4% per year, should you replace it? b. What if the discount rate is 14% per year? Does your answer change and why?
How to compute Equivalent Annual Annuity on financial calculator: The old combine is good for 2 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new combine that can last for 10 years and should require maintenance costs of only $2,000 a year. Old machine has no scrap value when fully depreciated (after 2 years). a. If the discount rate is 4% per year, should you replace it? b. What if the discount rate is 14% per year? Does your answer change and why?
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
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How to compute Equivalent Annual
The old combine is good for 2 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new combine that can last for 10 years and should require maintenance costs of only $2,000 a year. Old machine has no scrap value when fully depreciated (after 2 years).
a. If the discount rate is 4% per year, should you replace it?
b. What if the discount rate is 14% per year? Does your answer change and why?
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Equivalent annual annuity (EAA) is an approach which is used to select best alternative between two options having unequal life.
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