is considering buying locked vend to replace open newspaper racks in the downtown area. The vending machines cost $45 each. It is expected that the annual revenue from sell- ing the same quantity of newspapers will increase $12 per vending machine. The useful life of the vending machine is unknown. (a) To determine the sensitivity of rate of return to useful life, prepare a graph for rate of return versus useful life for lives up to 8 years. (b) If the newspaper requires a 12% rate of retur what minimum useful life must it obtain from 9-75 A newspaper ing machines the vending machines? (c) What would be the rate of return if the vending machines were to last indefinitely? 6 Rental
is considering buying locked vend to replace open newspaper racks in the downtown area. The vending machines cost $45 each. It is expected that the annual revenue from sell- ing the same quantity of newspapers will increase $12 per vending machine. The useful life of the vending machine is unknown. (a) To determine the sensitivity of rate of return to useful life, prepare a graph for rate of return versus useful life for lives up to 8 years. (b) If the newspaper requires a 12% rate of retur what minimum useful life must it obtain from 9-75 A newspaper ing machines the vending machines? (c) What would be the rate of return if the vending machines were to last indefinitely? 6 Rental
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
Related questions
Question
Hello I'm completely confused on how to solve this sample problem (a b and c) ? Can a, b , c be solved so I can use this as a example.
Transcribed Image Text:9-75 A newspaper is considering buying locked vend-
ing machines to replace open newspaper racks in
the downtown area. The vending machines cost $45
each. It is expected that the annual revenue from sell-
ing the same quantity of newspapers will increase
$12 per vending machine. The useful life of the
vending machine is unknown.
(a) To determine the sensitivity of rate of return to
useful life, prepare a graph for rate of return
versus useful life for lives up to 8 years.
(b) If the newspaper requires a 12% rate of return
what minimum useful life must it obtain from
the vending machines?
(c) What would be the rate of return if the vending
machines were to last indefinitely?
-76 Rental
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