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Rainbow [258]
3 years ago
6

The maintenance expense (paid at the end of the year) on a machine, with 6 years of useful life, is expected to be (in constant

dollars of year 0) $5,000 during the first year and to increase (in constant dollars) $500 each year for the following five years. The average inflation rate for the next 6 years is calculated to be 3%. What is the equivalent equal annual maintenance cost (in actual dollars) for the machinery if the interest rate is 8%
Business
1 answer:
Amanda [17]3 years ago
7 0

Answer: $1387.5

Explanation:

Given data:

Useful life of the machine = 6years

Inflation for the 6years period = 3%

Interest rate = 8%.

Cost of maintenance = $5000

Yearly increments = $500 for five years.

Solution:

Total cost of maintenance for five years

= cost of maintenance + yearly increments x 5

= $5000 + $500(5)

= $5000 + $2500

= $7500.

Interest rate on the machinery = 8%

= 0.08 x $7500

= $600

Inflation rate

= 0.03 x 7500

= $225

Equal yearly maintenance cost

= $7500 + $600 + $225/ 6

= $8325/6

= $1387.5

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3 years ago
How does tactical adoption of cloud services differ from a coordinated cloud strategy?
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6 0
2 years ago
Coronado University sells 5,900 season basketball tickets at $210 each for its 12-game home schedule.
katen-ka-za [31]

Answer:

Explanation:

The journal entries are shown below:

a. Cash A/c Dr $1,239,000     (5,900 seasons × $210)

          To Unearned basket ball tickets revenue $1,239,000

(Being the sale of the season tickets are recorded)

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7 0
4 years ago
A high growth software company will pay its first dividend of S0.30 next year. This dividend of . After that, the growth will $0
bija089 [108]

Answer:

The price of the stock today is $3.49. The right answer is A.

Explanation:

In order to calculate the price of the stock today, we need to calculate first Value after year 5 with the following formula:

Value after year 5=(D5*Growth Rate)/(Required return-Growth Rate)

To find D5 we need to make the following calculations:

IF D1=0.3 , hence D2=(0.3*1.1)=0.33 , D3=(0.33*1.1)=0.363 , D4=(0.363*1.1)=0.3993 and D5=(0.3993*1.1)=0.43923

Therefore, Value after year 5=(0.43923*1.05)/(0.15-0.05) =$4.611915

Therefore, now we can calculate the the price of the stock today with the following formula:

current price=Future dividends and value*Present value of discounting factor(rate%,time period)

=0.3/1.15+0.33/1.15^2+0.363/1.15^3+0.3993/1.15^4+0.43923/1.15^5+$4.611915/1.15^5

=$3.49

3 0
3 years ago
What is a premium. pls help fast!!!111
Alecsey [184]
Premium is like a better version of something else
6 0
3 years ago
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