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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Answer the following question. Use the given formula.
7. A machine cost P20,000 today and has an estimated scrap value of P2,000 after 8 years. Inflation is 2% per year. The effective annual interest rate earned on money invested is 8%. How much money needs to be set aside each year to replace the machine with an identical model 8 years from now?
Transcribed Image Text:7. A machine cost P20,000 today and has an estimated scrap value of P2,000 after 8 years. Inflation is 2% per year. The effective annual interest rate earned on money invested is 8%. How much money needs to be set aside each year to replace the machine with an identical model 8 years from now?
FORMULA (s) о 1 2 3...n o 1 2 3... n A[(1+i)"-1] Where: i = interest per period n =number of periods F = i A = uniform series compound A[(1+i)" – 1] (1+ i )" i P = amount factor PRESENT WORTH OF PERPETUITY: A P
Transcribed Image Text:FORMULA (s) о 1 2 3...n o 1 2 3... n A[(1+i)"-1] Where: i = interest per period n =number of periods F = i A = uniform series compound A[(1+i)" – 1] (1+ i )" i P = amount factor PRESENT WORTH OF PERPETUITY: A P
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