D. It is not likely that he will be able to match the sales volume of successful, established bakeries in his first six months.
A P E X
Answer:
1. Future value:
2. Present value:
The goal is to find the present value of the business: $198,254.33. The future value is calculated as an intermediate step to calculate the present value.
Explanation:
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<u>1. Future value in three years</u>
- Value today: $160,000
- Value in one year with grow at 16% ⇒ multiply by 1.16
- Value in two years with grow at 16% ⇒ multiply by 1.16²
- Value in three years with grow at 16% ⇒ multiply by 1.16³
- Future value in three years: $160,000 × 1.16³ = $249,743.36
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<u>2. Present value at rate of 8% compounded annually</u>
The present value is calculated discounting the future value at the given rate:
- Present value = $249,743.36 / (1.08)³ = $198,254.33
On basis of straight-line depreciation method,
Yearly depreciation expense = [Cost of investment - Salvage value] / life
In the current case, salvage vale is assumed to be $0 and the life is 7 years.
Total investment = $4 m + $ (15,000/1,000,000) m + $3 m = $7.015 m
Therefore,
Yearly depreciation expense = 7.015/7 ≈ $1.002 m
Answer:
equivalent annual cost = $224.27
Explanation:
given data
printer costs = $900
salvage value = $300
time = 5 year
Annual maintenance = $50
interest rate = 8%
solution
we get here uniform annual cost that is
equivalent annual cost = net present value ÷ [ 1 - ] + annual maintenance cost ..................1
here net present value =900-300 × = $408.35
put here value
equivalent annual cost =
equivalent annual cost = $224.27