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Vanyuwa [196]
2 years ago
11

Assume that a machine has a useful life of 9 years, and it loses its real value at a constant rate (i.e. 1/9 of the original val

ue per year). At a 6% interest rate, and including depreciation in the calculation, over a 3 year period a $100,000 investment must earn at least approximately ____ to be economically viable.
Business
1 answer:
weeeeeb [17]2 years ago
7 0

Answer:

$52,435.00

Explanation:

After 3 years the future value of 100,000 at 6 percent will be

FV = PV × (1+r)n

=FV = 100,000 x (1 +0.06)3

FV = 100,000 x 1.191016

FV = 119, 101.60

The interest will be 119, 101.60 - 100,000

=19,101.60

The depreciation over 9 year period, per year will be

=1/9  x 100,000

=11, 111.11  per year

3 year depreciation = 33,333.33( 11,111.11 x 3)

The investment must generate at least

19,101.60 + 33,333.33

=$52,434.93

=$52,435.00

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