SAMPLE PROBLEM A new concrete road has been constructed in line with the government's Build-Build-Build Program which needs no maintenance until the end of 2 years when P85,000 will be required to cover the repair and maintenance costs. For the succeeding 5 years, P105,000 will be required at the end of each year to cover the same costs and after this, P135,000 will be needed at the end of each year for the next 5 years. If the interest rate is found to be 14% compounded annually, determine the equivalent annual cost (Annuity Cost) for the 12-year period.
SAMPLE PROBLEM A new concrete road has been constructed in line with the government's Build-Build-Build Program which needs no maintenance until the end of 2 years when P85,000 will be required to cover the repair and maintenance costs. For the succeeding 5 years, P105,000 will be required at the end of each year to cover the same costs and after this, P135,000 will be needed at the end of each year for the next 5 years. If the interest rate is found to be 14% compounded annually, determine the equivalent annual cost (Annuity Cost) for the 12-year period.
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:SAMPLE PROBLEM
A new concrete road has been constructed in line with the government's Build-Build-Build
Program which needs no maintenance until the end of 2 years when P85,000 will be required to
cover the repair and maintenance costs. For the succeeding 5 years, P105,000 will be required
at the end of each year to cover the same costs and after this, P135,000 will be needed at the end
of each year for the next 5 years. If the interest rate is found to be 14% compounded annually,
determine the equivalent annual cost (Annuity Cost) for the 12-year period.
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