A company is considering buying a CNC machine. In today's dollars, it is estimated that the maintenance costs for the machine (paid at the end of each year $29,000, $31,000, $34,000, $37,000, and $39,000 for years 1 to 5, respectively. The general inflation rate (7) is estimated to be 4% per year, and the compa receive 13% return (interest) per year on its invested funds during the inflationary period. The company wants to pay for maintenance expenses in equivalen payments (in actual dollars) at the end of each of the five years. Find the amount of the company's payments.
A company is considering buying a CNC machine. In today's dollars, it is estimated that the maintenance costs for the machine (paid at the end of each year $29,000, $31,000, $34,000, $37,000, and $39,000 for years 1 to 5, respectively. The general inflation rate (7) is estimated to be 4% per year, and the compa receive 13% return (interest) per year on its invested funds during the inflationary period. The company wants to pay for maintenance expenses in equivalen payments (in actual dollars) at the end of each of the five years. Find the amount of the company's payments.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter2: The One Lesson Of Business
Section: Chapter Questions
Problem 2.6IP
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