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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Transcribed Image Text:An excavator is purchased now with a cost of
$200,000. The excavator will need major
maintenance every year, with the first
maintenance occurring at EOY 1. The cost of
maintenance at EOY 1 is $20,000, and the
cost increases by 2,000 each time it is
performed. The life of the excavator is 20
years. At EOY 20, the excavator will be sold for
$40,000. Nominal interest rate is given as
24% compounded monthly. Find the net
present worth of this investment.
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