7 A firm requires power shovels for its open pit mining operation. This mining equipment, with a first cost of $200,000, has an estimated salvage value of $50,000 at the end of 8 years’ service. If interest rate is 12%, calculate the amount of earning on an equivalent annual basis so that the firm recovers its investment capital plus earns a return on the capital committed to the equipment during its life time.
7 A firm requires power shovels for its open pit mining operation. This mining equipment, with a first cost of $200,000, has an estimated salvage value of $50,000 at the end of 8 years’ service. If interest rate is 12%, calculate the amount of earning on an equivalent annual basis so that the firm recovers its investment capital plus earns a return on the capital committed to the equipment during its life time.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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7
A firm requires power shovels for its open pit mining operation. This mining equipment,
with a first cost of $200,000, has an estimated salvage value of $50,000 at the end of 8
years’ service. If interest rate is 12%, calculate the amount of earning on an equivalent
annual basis so that the firm recovers its investment capital plus earns a return on the
capital committed to the equipment during its life time.
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