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LuckyWell [14K]
3 years ago
7

A local government awards a landscaping company a contract worth $1.5 million per year for five years for maintaining public par

ks. The landscaping company will need to buy some new machinery before they can take on the contract. If the cost of capital is 6%, what is the most that this equipment could cost if the contract is to be worthwhile for the landscaping company
Business
1 answer:
KIM [24]3 years ago
5 0

Answer:

The equipment should not cost more than  $6,318,545.68  

Explanation:

The most that the land scrapping equipment could cost is the present of the 1.5  million annuity discounted at 6% p.a.

Present Value of Annuity = A × ( 1- (1+r)^(-n))/r

A- 1,500,000, n- 5, r- 6%

=1, 500,000 × ((1.06)^(-5))/0.06

= $6,318,545.68  

The equipment should not cost more than  $6,318,545.68  

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LRQ Inc. issued bonds on April 18, 2006. The bonds had a coupon rate of 5.5%, with interest paid semiannually. The face value of
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8 0
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When only certain eoc team members or organizations are activated to monitor a credible threat, which activation level has been
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