Posted by Gibbons on Monday, June 21, 2010 at 8:17am.
Please type your subject in the School Subject box. Any other words, including obscure abbreviations, are likely to delay responses from a teacher who knows that subject well.
If I understand the investment instructions correctly, this is how it works:
The company would invest an amount P which should yield net 8% return each year for 10 years.
The revenue generated is constant each year at $50,000, and includes profit and capital repayment. The capital is repaid from a sinking fund that pays 6% p.a. and should generate the original capital at the end of 10 years. The annual payment into the sinking fund (out of the revenue) is $x.
In short,
P=initial investment
x=annual investment into sinking fund
For the 8% profit over 10 years, we have
P*(0.08*10) = 50000*10 - 10x ...(1)
and that the amount x over 10 years at 6% p.a. should yield exactly P:
P = x*1.06^10/(1.06-1.0) ...(2)
Substituting (2) into (1)
x*1.06^10/(1.06-1.0)*(0.08*10) = 50000*10 - 10x
Solve for x to get $14758.85
and from (2)
P = $440514.32
Substitute the amounts into the scenarios and check.
Related Questions
Accounting - 1. A manager is considering the following investment: Initial ...
Economics - Isabella buys a $1,000 bond that matures in 10 years (that is, she ...
fin534 - In order to expand its business, Auto Parts Distributing, Inc., is ...
Mathematics - An investor wants to know the amount she should pay for an oil ...
finance please help - 1. Calculate the present value of an investment given the...
programming - 3. Your company needs to depreciate its assets. The accountant ...
Finance - Your company sponsors a 401(k) plan into which you deposit 12 percent ...
College Finance - Aunt Sally's Food Inc. is considering expansion. Sally has...
Finance - Bernie and Pam Britten are a young married couple beginning careers ...
Personal Finance Concept - Bernie and Pam Britten together earn $100,000 a year...
For Further Reading
