Anthony owns and operates an electronics shop. A new instrument, called RAT, which facilitates faster diagnosis of the items to be repaired, has been marketed recently. Being technologically new, it is however expensive. Based on the past, the costs of such instruments decline fast. Anthony predicts that RAT would sell for Php 500,000 in the next 5 years. He decides to retain a fixed sum each year from annual profit to raise this capital 5 years hence. The retained sum will be invested regularly in the local bank at 6.5% annually compounded interest rate. How much should be retained each year?
Anthony owns and operates an electronics shop. A new instrument, called RAT, which facilitates faster diagnosis of the items to be repaired, has been marketed recently. Being technologically new, it is however expensive. Based on the past, the costs of such instruments decline fast. Anthony predicts that RAT would sell for Php 500,000 in the next 5 years. He decides to retain a fixed sum each year from annual profit to raise this capital 5 years hence. The retained sum will be invested regularly in the local bank at 6.5% annually compounded interest rate. How much should be retained each year?
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
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1. Anthony owns and operates an electronics shop. A new instrument, called RAT, which facilitates faster diagnosis of the items to be repaired, has been marketed recently. Being technologically new, it is however expensive. Based on the past, the costs of such instruments decline fast. Anthony predicts that RAT would sell for Php 500,000 in the next 5 years. He decides to retain a fixed sum each year from annual profit to raise this capital 5 years hence. The retained sum will be invested regularly in the local bank at 6.5% annually compounded interest rate. How much should be retained each year?
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