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75. A machine has been bought for $65,000. It is expected to remain in service for seven years and will have a scrap value of
75. A machine has been bought for $65,000. It is expected to remain in service for seven years and will have a scrap value of $3,500 on the basis of the current costs. After being scraped it will be replaced by an identical machine. To accumulate the money required to replace the machine, the company will make seven annual deposits of equal amounts in a fund earning 8.2 % per annum, with the first deposit being made one year after the purchase date of the machine. If the inflation rate during this 7-year period is expected to be 4.5 % per annum, what must be the amount of the periodic deposits. (8) (b) Also calculate the real interest rate given the nominal interest rate of 8.2% and the inflation rate being equal to 4.5%? (2)
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