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lana [24]
3 years ago
7

pany is considering the purchase of a new bubble packaging machine. If the machine will provide $15,000 annual savings for 12 ye

ars and can be sold for $48,000 at the end of the period, what is the present value of the machine investment at a 15% interest rate with savings realized at year end
Business
1 answer:
finlep [7]3 years ago
4 0

Answer:

Present Value= $74,018.97

Explanation:

Giving the following information:

The machine will provide $15,000 annual savings for 12 years and can be sold for $48,000 at the end of the period.

Interest rate= 15%

<u>To determine the present value of the savings, first, we need to determine the future value at the rate provided.</u>

We need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual save

FV= {12,000*[(1.15^12)-1]}/ 0.15

FV= 348,020 + 48,000= $396,020

Now, we can calculate the present value:

PV= FV/(1+i)^n

PV= 396,020/1.15^12= $74,018.97

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Answer:

e. does not always lead to high prices.

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Profit maximization pricing objective <u>does not always lead to high prices</u>.

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