Suppose that a machine costing $9000.00 is to be replaced at the end of 7 years, at which time it will have a salvage value of $900.00. In order to provide money at that time for a new machine costing the same amount, a sinking fund is set up. The amount in the fund at the end of 8 years is to be the difference between the replacement cost and the salvage value. If equal payments are placed in the fund at the end of each quarter and the fund earns 8% compounded quarterly, what should each payment be?
Suppose that a machine costing $9000.00 is to be replaced at the end of 7 years, at which time it will have a salvage value of $900.00. In order to provide money at that time for a new machine costing the same amount, a sinking fund is set up. The amount in the fund at the end of 8 years is to be the difference between the replacement cost and the salvage value. If equal payments are placed in the fund at the end of each quarter and the fund earns 8% compounded quarterly, what should each payment be?
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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(b) Suppose that a machine costing $9000.00 is to be replaced at the end of 7 years, at which time it will have a salvage value of $900.00. In order to provide money at that time for a new machine costing the same amount, a sinking fund is set up. The amount in the fund at the end of 8 years is to be the difference between the replacement cost and the salvage value. If equal payments are placed in the fund at the end of each quarter and the fund earns 8% compounded quarterly, what should each payment be?
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