Tamarack Aerospace is buying a used Cessna Citation CJ1 jet for $850,000 which they expect to fly for 3 years before it needs to be replaced. The Cessna’s annual operating cost is $10,000. If Tamarack’s required rate of return is 10%, what is the jet’s EAC? (Round your answer to whole dollars) a. $-346,221 b. $-357,221 c. $-351,798 d. $-353,565 e. $-331,432

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Tamarack Aerospace is buying a used Cessna Citation CJ1 jet for $850,000 which they expect to fly for 3 years before it needs to be replaced. The Cessna’s annual operating cost is $10,000. If Tamarack’s required rate of return is 10%, what is the jet’s EAC? (Round your answer to whole dollars)

a. $-346,221
b. $-357,221
c. $-351,798
d. $-353,565
e. $-331,432
Expert Solution
Step 1

The present value is the value of the sum received at time 0 or the current period. It is the value of the sum that will be received in the future period.

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