With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 8% per year. Determine the RV (a) by hand solution, and (b) using a spreadsheet. Machine X Machine Y Market value, $ ? 80,000 Annual cost, $ per year −60,000 −40,000 year 1, increasing by 2000 per year thereafter Salvage value, $ 15,000 20,000 Life, years 3 5
With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 8% per year. Determine the RV (a) by hand solution, and (b) using a spreadsheet. Machine X Machine Y Market value, $ ? 80,000 Annual cost, $ per year −60,000 −40,000 year 1, increasing by 2000 per year thereafter Salvage value, $ 15,000 20,000 Life, years 3 5
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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With the estimates shown below, Sarah needs to
determine the trade-in (replacement) value of machine
X that will render its AW equal to that of
machine Y at an interest rate of 8% per year. Determine
the RV (a) by hand solution, and (b) using a
spreadsheet.
Machine X Machine Y
Market value, $ ? 80,000
Annual cost, $ per year −60,000 −40,000 year 1,
increasing by 2000
per year thereafter
Salvage value, $ 15,000 20,000
Life, years 3 5
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