Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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don't use excel also can you show me maths solving with equation by hand please....

5) A device is purchased for $10,000. It yields a $2,000 yearly net profit for first 4
years and $1,000 yearly net profit after that. The device is sold after 8 years. What
is its minimum price to break even with i=10%/yr?
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Transcribed Image Text:5) A device is purchased for $10,000. It yields a $2,000 yearly net profit for first 4 years and $1,000 yearly net profit after that. The device is sold after 8 years. What is its minimum price to break even with i=10%/yr?
Expert Solution
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Step 1

2000 for 4 years 

1000 for 4 years 

Required rate =10%

Step 2

Present value FACTOR =1-(1+r)^-n/r 

Present value FACTOR =1-(1.1)-4/0.1

present value FACTOR =3.17

Present value of 2000 YEARLY =2000×3.17

Present value of 2000=6340

Than 1000 after wards 

Present value of 1000=3.17×1000/(1.1)4

Present value of 1000=2165.15

Total present value =6340+2165.15=8505.15

Total present value =8505.15

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