It is estimated that a specific piece of equipment can save $20,000 per year (as the money goes into your pocket) in maintenance. This equipment has an expected life of five years and no market value (meaning you cannot sell it for extra income) at the end of the fifth year. If the interest rate for this purchase is 8% per year, how much could be justified (money out of your pocket) now to purchase this piece of equipment? Please draw the cash flow diagram and use Excel macro to find the answer. Write down the known values in the blank area below.

It is estimated that a specific piece of equipment can save $20,000 per year (as the money goes into your pocket) in maintenance. This equipment has an expected life of five years and no market value (meaning you cannot sell it for extra income) at the end of the fifth year. If the interest rate for this purchase is 8% per year, how much could be justified (money out of your pocket) now to purchase this piece of equipment? Please draw the cash flow diagram and use Excel macro to find the answer. Write down the known values in the blank area below.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 5P

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