The initial investment to an equipment is $400,000 and annual revenues are expected to be $190,000 over the six-year life of the furnace. Annual expenses will be $50,000 at the end of year one and will increase by $10,000 each year thereafter. The resale value of the furnace after six years is $20,000. The MARR is 20%. Determine the simple payback period.
The initial investment to an equipment is $400,000 and annual revenues are expected to be $190,000 over the six-year life of the furnace. Annual expenses will be $50,000 at the end of year one and will increase by $10,000 each year thereafter. The resale value of the furnace after six years is $20,000. The MARR is 20%. Determine the simple payback 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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The initial investment to an equipment is $400,000 and annual revenues are expected to be $190,000 over the six-year life of the furnace. Annual expenses will be $50,000 at the end of year one and will increase by $10,000 each year thereafter. The resale value of the furnace after six years is $20,000. The MARR is 20%. Determine the simple payback period.
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